5 Advantages and Disadvantages of Student Rental Properties

We often have investors come to us and ask which is better; student investment properties, multi unit buildings or single family properties.  Our answer is always the same- it really depends on the individual investor.  Each has its own advantages and disadvantges.  Below  we outline 5 Advantages and Disadvntages of Student Rental Properties.

5 Advantages of Student Rental Properties

1Increased Income–  student rental properties are often rented by the bedroom.  This greatly increases the potential income of a property.  For example in Waterloo you can typically get  on average around $500 per bedroom (depending on proximity to the school and condition).  Therefore a 4 bedroom house has the potential to generate $2000 in gross monthly income.  This far exceeds the average rent for your typical single family four bedroom home.  Important to note there are new Rental Bylaws in Waterloo that can impact the abilty to rent a single family home-  for more info please read post titled “Waterloo Rental Bylaws”

2. Parent Guarantors– in most cases you can get students to sign parent guarantor forms.  If the student is in arrears for rent you can go after the parents.  This provides an extra level of safety from rent delinquency.

3. Low Vacancy rates– each year there is a steady supply of new students attending the local schools.  It is estimated that the student population in Waterloo is increasing approx 1000 student per year.  For more info on student population see post titled “Can Waterloo support the Student Housing Boom?”

4.  Less Knowledgeable Renters– typically students are not as knowledgable on Rental Legislation and the Landlord Tenant Act.  This helps to avoid costly “professional tenants” who can take advantage of landlords costing them many months in lost revenues.

5. No pets, Non-smokers, No Kids– student renters rarely have pets and are far less likely to smoke than your average renter for single family homes.  This results in less damage to your property- these are three very common problems when renting single family properties

 

5 Disadvantages to Student Rental Properties

1. Higher Turnover– there is often a higher turnover rate with student rentals.  Sometimes you will get lucky and have a tenant stay for their entire undergrad degree but in most cases things change- they may change schools, drop out, a friendship with a roomate might dissolve.  This results in more time trying to market/find/screen new tenants.

2.  Increased Managentment/Maintenance Costs– along with the increased turn-over in our experiece there is increased management and maintenace costs.  Remember most if not all students have never lived on their own.  Their parents are no longer there to help them with routine maintenace items-that now fall on the landlord.  We have recieved calls for basic things like changing light bulbs, removing hair from clogged drains and even flipping breakers.   Your typical single family renter can usually manage these types of things on their own.

3. Wear and Tear– Parties!  We all know that a big part of University life is partying.  This can have signifcant wear and tear on your property.  Many of our investor cleints do regular inspections to ensure the propery in being well maintained and any damages are addressed immediately.

4. Subletting -many students go home for the summer and typically want to sublet to another tenant for these months- a landlord or Investor does their due diligence and screening process on the initial tenant but a subletter is sreened by someone else.  This can present problems for the landlord.

5.  Location-location is key for student rentals.  Students prefer to be within walking distance to schools or on a transit route. It is also vital that students have acess to amenities such as shopping (groceries) gyms, nightlife etc.  These factors will all come into play when a student is considering a rental property.  This dramatically impacts the available inventory when looking to purchase a student rental.  Be mindful of this when looking at potential properties.

As we said above every investment property has its own advantages and disadvantages.  It really comes down to the individual investors needs.  For example if you are retired and have plently of time on your hands than a student rental might be a good fit becuase you can manage the proeprty and address any maintenance items yourself- if you have a larger portfolio and have the needed cashflow than professional management might be a good option to combat some of the disadvantges in student rentals.