Student rental properties: Where to start and how to make a good investment
To many, the new year brings on resolutions and new habits.
But for investors, in particular investors of student rental properties, the new year brings new opportunity to create, build or expand their real estate portfolio. The student lease cycle typically runs from May 1 to April 30, so many investors begin their search early in January in hopes of closing on a property around the timing of the new cycle.
Those considering a student rental in Guelph don’t necessarily need to be a large investor adding another property to their current portfolio. Often times parents purchase a home for their child as an investment while they attend post-secondary education, with the child then renting out the remaining rooms to friends to cover costs. As an investment, the goal is over the time the student lives there, the property will appreciate in value and the parent would then sell when the residence is no longer needed. Or, hold onto the property as another means of producing income.
There are many metrics used by investors to determine the investment value of a home and determine if the asking price is reasonable. But in the end, the true way to understand if a home is a good investment is to ensure that it cashflows (brings in more money in rent than it costs to own) out of the gate.
Finding cashflow rentals is challenging
Finding a property that cashflows is becoming increasingly difficult in Guelph, although these properties do still exist. The challenge is that as prices of Guelph homes have increased significantly, to the point that the market rent is not enough to cover the expenses to own it. Landlords are often forced to decide - either lose money every month, look to another city with stronger rental financials or find an alternative investment outside of real estate.
If you are considering buying a student rental property in Guelph, here are a few student developments worth considering, as well as their performance over the past year:
302 College Ave.
Located within a walking distance to the University of Guelph, 302 College Ave. is a townhome development built in the early ‘90s with a high student population. College Ave. townhomes range in size from 1100 to 1300 square feet, have 3-4 bedrooms with an average price of $411,000 in 2019, which is a 6% increase over 2018.
1155 Gordon St.
Built in 2006, this development is located south of the university directly on Gordon St. and conveniently part of high-frequency bus routes travelling to the university. Also, highly student-populated, the average price here in 2019 was $469,000, a decrease of 2% from 2018.
142 York Rd.
This development was built in 2004 and is almost 100% student exclusive. With 4 bedrooms and 2 bathrooms, this dorm-like setup is a convenient walk across York Rd. Park to Gordon St. There are only 24 units in this development and they are hard to come by. Only one unit sold in 2019 at $324,000.
A few notes before you invest
Generally, students will gather a few friends to move in together and split the rent. The going rate per room can anywhere between $450 to $650 per month, with some exceptions. Some landlords will require the tenants to pay utilities and sometimes they are included.
If you live outside of Guelph and are considering a student rental property, ensure that you have a plan in place for yard maintenance, snow removal and general upkeep. This could be with the tenant, or with a property management company.
It’s wise to work with a real estate agent who understands the legalities and by-laws of student rentals to be sure the property you are considering is compliant with the City of Guelph.
Source: GDAR, 2018-2019, City of Guelph single family residential homes. The authors do NOT have any personal interest in any properties mentioned in this article.