Student rental
Student-rental
investment
hotspots
Shane Buckingham examines two above-average markets
for student-rental investments
Edmonton achieves the mark
I
nvestors seeking a stable market
for student rentals, with plenty of
cash flow potential, should check
out downtown Edmonton. The
extensions to the light rail transit (LRT)
system in past years have opened up
a number of new investment areas in
this burgeoning market, while recent
softening in real estate activity across
the city has provided a number of
opportunities to get a deal ahead of the
Edmonton’s next energy boom.
U of A
The University of Alberta, founded
in 1908, is a leader in health, science
and agriculture. More than 37,500
students attended the university during
the 2009/2010 school year, with nearly
4,500 coming from other provinces and
more than 5,000 coming from outside
of the country.
The key indicator of this market,
however, is that roughly 15% of all
30
students enrolled live in off-campus
housing. That’s a market with more
than 5,600 students.
The university’s Edmonton campus
in particular is drawing an increasing
number of students with its expanded
medical facility, the Edmonton Clinic.
The clinic, which opened in 2008,
was part of a more than $900-million
joint effort between the university,
Alberta Health Services and the
province to construct a learning centre
for nursing, dentistry and medicine
that would increase health-student
enrolment by 80%.
In four years, the university has seen
the number of medicine and dentistry
students steadily rise to more than
1,800 in 2009, up from 1,500 in 2005.
In addition, nearly 1,500 students had
enrolled in the university’s nursing
program in 2009.
But by far, the most popular area of
study at the university is the sciences.
Nearly 6,200 students enrolled in
science programs during 2009.
The solid reputation of the
university should translate into even
more growth, which puts investors
offering student housing around its
campuses in a good position.
The student market
The vacancy rate in the area
surrounding the Edmonton campus
has been feeling some upward pressure
since last year, rising to 2.6% in 2010,
up from 2% in 2009. But that trend
doesn’t mean demand in the area won’t
remain steady, says Brent Davies, a
broker at Davies Management and
Realty Ltd. in Edmonton.
Neighbourhoods like Garneau,
Strathcona, Parkallen and Queen
Alexander will always be in demand
because of their proximity to the
university and Whyte Street, he says.
“Whyte Street in Edmonton is like
Yonge Street in Toronto. It’s the trendy
area where all of the younger people
want to live,” he adds.
Still, the LRT has taken some
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Student rental
Due
diligence
While Edmonton does
not have specific regulations for
student-rental properties, it’s always
important to check with the city
before buying any rental property,
says Paul Kozak, a planning official
for the City of Edmonton.
“You want to do some careful
investigation to make sure you’re not
making a bad investment. It’s one
thing to buy a house and rent it out
based on the number of bedrooms,
but if there have been any structural
changes or any construction to
create new bedrooms, as a prudent
investor you should be looking
carefully at whether those changes
were ever appropriately approved.”
Investors should also be aware
that they can only have seven
occupants in a single-family
home and that the city has been
investigating accessory suites to
make sure they meet building and
fire code, he says.
students farther away from the
university in the search for more
affordable housing. But that’s not a bad
trend for investors, Davies says.
“The development of the LRT
has opened up new opportunities
for investors in other parts of the
city where the housing stock is more
affordable. Now they can get properties
in Clareview Campus, for instance,
for less than $300,000 and still get
competitive rents,” he says.
On the fringes
Clareview Campus has experienced
a surge in demand in recent years, as
more and more students comfortable
with a little commute move to the area,
says Monica Wilcox, a Realtor with 1st
canadianrealestatemagazine.ca
Choice Real Estate Inc. Many students,
she says, are even renting trendy
apartment condos in Point North and
Clareview Court.
“The Clareview Campus area is
a great place to invest because of its
closeness to the LRT and proximity to
amenities students need, such as WalMart, Superstore and restaurants, as well
as a recreation and medical centre, all
within walking distance,” she says. “Plus,
it’s relatively affordable. Investors can
find apartments for as little as $179,000
and newer duplexes in the Clareview
Campus area for as little as $300,000.”
In some cases, Wilcox says, investors
can find detached homes for about
$200,000, and rent each bedroom out
for $500 a month. But a property at
that price will require a fair amount of
renovations, she says.
Back to the centre
Wilcox’s colleague Lovette Zacharuk,
also a Realtor at 1st Choice Real Estate
Inc., says investors wanting to buy closer
to the university can still find good deals
in the surrounding neighbourhoods. In
fact, at the time of writing, Zacharuk
was showing a duplex in the Garneau
area for $434,000, down from $500,000
last year.
She says investors may also be able to
find bungalows for as little as $375,000,
and rent each bedroom to students for
as much as $650.
Davies, who owns two triplexes
in the Garneau neighbourhood, says
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Student rental
University of Alberta
HOTBUYS
• Duplexes near U of A
$400,000 to $500,000
• Detached homes in Clareview
Campus $200,000 to $300,000
SNAPSHOT
• U of A undergoing
expansion and
drawing large number
of students
• LRT expansion opening up
new investment opportunities
• Average per bedroom rents
ranging from $500 to $650
• Average apartment rent near
U of A $947
investors looking to go to the next level
may want to purchase homes near the
university and redevelop the land to
build multi-unit buildings – something
he’s planning to do once he purchases
the lot next to his triplexes. He expects
his project will receive approval without
difficulty given the City of Edmonton’s
stance on high-density development.
“Edmonton recognized several
32
years ago that affordable housing
was going to be an issue, and
so it allowed residents to add
accessory suites in most residential
neighbourhoods, while Calgary has
done the opposite,” he says. “Now,
our mayor is very pro-development.
The city has approved a lot of
development around the university.”
Considering the multi-unit option
According to the Canada Mortgage
and Housing Corporation (CMHC),
an average one-bedroom apartment
near the university rents for $947
a month.
That’s why buying an apartment
building around the university just
makes good financial sense, says
Raphael Yau, a partner within the
investment division of Cushman &
Wakefield in Edmonton.
The average price of apartment
buildings per unit was $112,300 last
year. At $947 a month for each unit,
there’s a tremendous opportunity for
cash flow, especially in an area with
growing student demand, Yau says.
“The student demand is why the area
is so popular,” he says. “There are a lot
of more affluent parents who will get
there child a one-bedroom apartment
and sign on the lease for them.”
It’s a little tougher for investors to
make good cash flow by renting out
apartment-condos in the area, however.
Investing in apartment-condos is
typically only a good strategy for
parents sending their children to the
university, Yau says.
“In a lot of cases, parents are buying
apartment-condominiums for their
children and then holding it over
the next four to five years. And it
serves as a way to store some of their
money. And hopefully they’ll get some
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Student rental
appreciation in the future.”
No matter which way investors
approach it, Edmonton’s university
district and other student
neighbourhoods offer plenty of
opportunities to make solid returns.
Only
2,200
of 16,9
Halifax: makes the grade
Prices in South Halifax may be a little
high, but that doesn’t mean a solid
investment can’t be made around
Dalhousie University. There are plenty
of great investment properties in the
area, yet there aren’t nearly enough to
meet the growing demand for student
housing, says Halifax Investor Richard
Killeen-Payne.
Killeen-Payne, a chartered
accountant, owns a triplex in the
Hydrostone neighbourhood near
Dalhousie. His investment has been
nothing short of stellar. His onebedroom unit rents for $795 a month,
while the other two two-bedroom
units, rent for $1,700 each, leaving him
with $1,100 a month in cash flow.
The second reason Killeen-Payne
touts this investment is the considerable
price appreciation it’s experienced
since he bought it in October 2008. He
purchased his triplex for $475,000, but
in just a little more than two years, the
property’s value rose to $595,000.
Still, Killeen-Payne, like any studentrental investor, has had to deal with a
fair amount of tenant turnover, yet he
says he’s never had to deal with any
vacancies. “That’s another reason this
property is so attractive,” he adds.
The success of Killeen-Payne’s
first investment has given him all the
incentive he needs to find even more
multi-unit properties, which he’ll most
likely purchase and manage with jointventure partners.
Understanding the local market
Killeen-Payne says investors must at
least buy duplexes or triplexes to see
a good return on their money, since
the price point in South Halifax is
much higher, with detached homes
and duplexes ranging on average from
$500,000 to $650,000.
“But don’t discount the area just
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studen 00
t
on cams live
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Dalhousie University
because of the price,” he says. “It’s very
stable in terms of the economy; we
don’t experience the peaks and troughs
like other provinces, such as Alberta,
and Halifax keeps growing.”
Plus, investors have a large market
near Dalhousie since most students
live off campus. In fact, only 2,200 of
the university’s 16,900 students live on
campus. The university was unable to
provide CRE with a figure pinpointing
how many students live specifically
in off-campus student housing and
how many still live with their parents.
But the university did say that nearly
45% of their students are from other
provinces, and nearly 11% are from
abroad. That means more than 9,450
students studying at the university
come from out of the province. So
even if all 2,200 residence units were
occupied by students coming from
other areas of the country and world,
there would still be about 7,250
students who would need housing.
One might think this thriving
market for student rentals would be
short on supply, but that’s not the
case. Killeen-Payne says there’s a
good supply of duplexes and triplexes
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Student rental
University parents can still
invest in Toronto
Toronto home prices may have pushed
cash-flow investors out of the downtown
core, but for parents sending their children
to the University of Toronto or Ryerson,
there’s still an investment strategy they can
use to make decent returns.
Many parents automatically accept
they’re going to be losing a significant
amount of money paying for their
children to go to university. There’s
the tuition, books, necessities and, of
course, the rent – something that has
many parents looking in downtown
Toronto grimacing.
Jamie Johnston, broker of record
and owner of Re/Max Condo Plus, says
parents can expect to pay $1,300 a
month for a studio apartment and as
much as $2,000 a month for a twobedroom apartment near Toronto’s
downtown universities. That simply
amounts to a lose-lose scenario, he says.
The better strategy for parents,
Johnston says, is to purchase an
apartment-condo for their children and
put the money they’d be wasting on
rent towards a mortgage.
“Parents should be buying condos
for their children going to school. That’s
the strategy. Rather than them paying
$1,300 to $1,500 a month to rent a
around Dalhousie.
“Recently, we’ve certainly seen
more duplexes and triplexes listed
than I would have expected for this
time of the year. A lot of it, I think
as well, is that people are starting to
see mortgage rates change a bit and
the uncertainly has caused them to
want to cash out now, as opposed to
hanging onto it for a little bit longer.”
Ensure it’s legal
While the multi-unit strategy shines as
one of the best, investors must make
sure each suite in the property is legal.
Killeen-Payne says investors
can log on to the Halifax Regional
Municipality’s (HRM) website to
determine the zoning of the property.
HRM District 13 Councillor Sue
Uteck warns that the municipality
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place for their child, they can buy a
place, and the way the market’s going,
the condo’s going to appreciate in value
over the four or five years that they own
it,” he says.
In fact, Johnston says condo-owners
in the downtown core can expect to
see 5% to 7% annually, which definitely
adds up in a few years.
By working with a good Realtor,
parents may still be able to find
apartment-condos in the downtown
area for $250,000, Johnston says
Unfortunately, there really are
no opportunities to buy detached
homes in downtown Toronto and rent
them out to students, Johnston says,
especially since many of them are as
much as $600,000.
“If you do the math, the math
doesn’t work. Given the ratio of
rentals to prices this is not a good
market for North American investors
because non-residents are buying
up the market. They’re paying cash,
and they’re prepared to accept lower
yields,” he says. “I think the student
rental market is an excellent market,
but in small towns.”
He suggests investing near
McMaster, Brock or Windsor University.
actively investigates multi-unit
properties it suspects do not meet
zoning requirements and has been
“very aggressive” in prosecuting
landlords with illegal suites.
So before buying any properties,
it’s first important to look at the
home’s zoning, but also, Uteck says,
it’s equally important to check the
history of the property.
“What we call history could be
how many times bylaw enforcement
have been at the property or how
many times regional police have been
there,” she says. “The chances are if
you want to do something to improve
your property or further subdivide it,
you won’t get any agreement from the
neighbours or the city if the property
has a bad history.”
While the legalities are important,
Uteck does not want to give the
impression that the HRM is not
accommodative to investors. In fact, she
says it’s one of the best municipalities
in the country for accommodating
students’ housing needs while
addressing the interests of the local
residents and property investors.
For one, the municipality, unlike many
Ontario cities and towns, has no specific
restrictions on student-rental properties.
Landlords must only adhere to the
HRM’s minimum standards bylaw.
Uteck says investors’ freedom
to purchase properties in the
neighbourhoods surrounding
the university has produced an
“eclectic mix” of students living
alongside average homeowners,
unlike universities, such as
Queen’s and Bishops, where whole
canadianrealestatemagazine.ca
Student rental
SNAPSHOT
• Duplexes and
triplexes near
the university $500,000 to
$650,000
• With average rents between
$600 and $650
• Growing demand for student
housing
• No restrictions specific to
student-rental properties
HOTBUYS
• Detached homes
in outlying
neighbourhoods $300,000 to
$400,000
• With the average rent at $600
neighbourhoods have been taken
over by student-rental investors.
This diversity has contributed
to sustained price levels, making
Halifax a prime destination for
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investors looking to build equity and
make cash f low.
Investing farther out
Steve Ritchie, an associate broker with
Keller Williams Realty of Halifax, says
that the elevated price levels near the
university have some of his investorclients looking a little farther away
from Dalhousie to find value.
“Due to the high average sale
prices in the south end of Halifax, we
find that investors in these types of
property often gravitate to other areas
of the Halifax Peninsula that are also
reasonably close to the universities,”
he says. “The west end of Halifax,
for instance, has also seen marked
increases in property values over the
last few years, and student-rental
demand definitely drives the bus a good
part of the time.”
The average price of a detached
home near the university is about
$650,000 and the average per-bedroom
rent is typically $600 a month, or $650
a month for a fully furnished bedroom,
Ritchie says.
But if investors look in other
neighbourhoods on the peninsula
outside the south end, or in areas like
Armdale, Timberlea, Clayton Park,
Rockingham and Fairview, they may
be able to find houses listed between
$300,000 and $400,000 and still get
as much as $600 a month in rent for
each bedroom.
“Demand is always strong for
rentals in these areas – which is why
property values stay higher there. It
is also why there are always buyers
and investors looking for income
properties in these areas. Strong rental
demand equals low vacancy rates and
higher rental amounts.”
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