Having a child in university is an undeniable source of pride. You have all worked hard, and now the moment has arrived. At least, the moment will arrive as soon as you find accommodations. For many post-secondary students, that is the tricky part.
On-campus residence tends to be in short supply. Even if your son or daughter gets a spot, it comes at a price. At the University of Guelph, it could be anywhere from approximately $8,000 to $12,000, and that’s not even including the mandatory meal plan. All in, accommodations could be as much as $18,800 – plus tuition.
These growing expenses have some parents and savvy students looking in a different direction. Today, we’ll talk about when and how to buy an investment property with student rentals in mind.
Do you want customized guidance to help make your real estate investments a success? Learn more about how our team works with investors in Guelph and the Tri-Cities.
Jump to Section:
- Why A Student Rental?
- Reasons To Buy A Student Rental In Guelph
- How To Buy A Rental Property
- What To Look For In An Investment Property
- Analyzing The Profit, Expenses, And Risks Of A Property
- What Real Estate Investment Strategies Should You Choose?
Why a Student Rental?
If you’re like many people, the thought of a student rental might make you nervous. Endless images of keg parties, music blaring until four in the morning, and noise complaints from neighbours run through your mind.
In reality, the opposite is true. Most students are respectful and conscientious. In many ways, they are an absolute dream tenant. Most are serious about their studies and tend to be very diligent about taking care of the property and paying their rent on time. If ever there’s a shortfall, the parents step in to help.
Here is another benefit of student rentals that some investors don’t consider: If you rent to a family who later decides to leave, your unit is vacant until you can find another tenant.
If you rent to four university students separately and one leaves, you still collect rent from three people as you search for a replacement. Or, depending on the terms of your lease, the other tenants may be required to make up the shortfall.
Note: if you rent to five or more separate tenants, your unit becomes a “lodging house” under Guelph by-laws. This means more stringent guidelines for fire safety and compliance with other municipal codes. Be sure you and your child understand all of your responsibilities, including those under the Residential Tenancies Act.
Buying a house and renting out part of it is one of the best-kept secrets for getting on the property ladder at a young age. Learn more in the posts below:
Reasons to Buy a Student Rental in Guelph
If you and your soon-to-be university student decide to buy an income property together, a strategic location is one of your first decisions. Ontario is home to several cities that have proven to be fantastic for investors. Guelph is one of the top locations, for several reasons.
Every year, nearly 30,000 full-time students enroll at the University of Guelph. Only a small percentage will live in residence. This makes for a large pool of tenants who don’t just want to find a suitable rental; they need to, and soon. Demand is high, especially in the south end.
Most major cities in Canada are facing a rental shortage, but vacancy in Guelph is extremely low. You’ll be able to be more selective about who stays in your home.
Looking for more information before deciding on the right location? You’ll find plenty of insight in the posts below:
- Five Best Cities in Ontario to Buy Recession-Proof Investment Properties
- Best West Ontario Cities for First-Time Buyers
How to Invest in Rental Property as a Beginner
Go Wylde works with real estate investors at all levels, including those at the beginning of their journey. In nearly every case, the earlier someone starts investing, the better.
Getting into the market sooner rather than later opens up more potential in terms of equity growth. Plus, it instills smart habits and strategies early on, and those skills will help your child build financial stability for a lifetime.
Buying an investment property now, while they are in university, is the perfect time because you are here to guide and support them. Real estate investing for beginners is never as daunting when there’s someone you trust to advise and guide you every step of the way.
Just getting started as a real estate investor in Canada? Check out Our Complete Guide to Real Estate Investing in Guelph.
How to Buy a Rental Property
Buying any property has its share of challenges. With the first purchase, it’s even more critical to analyze the situation and ensure the investment is aligned with the market and your resources. However, you don’t want to be so cautious that you never move forward. There is a delicate balance that must be struck.
To give your investment the best possible chance of success, it’s a good idea to connect with a local real estate team with investment experience. An expert will be able to guide you through the process and even advise you on whether to proceed in the first place.
We’ll begin with an assessment of your goals and resources. For example, will you go on title with your child or just provide guidance and financial support? There are implications either way.
How will you finance the purchase of your rental property? As an existing homeowner, you might be able to tap into your equity to fund the down payment. In addition, your child will benefit from obtaining a mortgage pre-approval now.
Searching for the right income property in Guelph or the Tri-Cities? Start here by browsing our featured listings.
What to Look for in an Investment Property
As your plan and budget take shape, you can talk about what type of housing structure is best. A condo may be more accessible for a first-time buyer, while a larger townhouse or detached home offers more income potential.
While narrowing down your choices, remember that many lenders will approve you for a higher amount when purchasing a property that generates income. This can open up possibilities that you may previously have considered out of reach.
An experienced, well-established real estate agent can help you assess each candidate to ensure its investment potential. In addition, we can often give you access to more listings by networking with other professionals in our database. You’re not necessarily limited to what you see during an online search.
What makes for a good investment property? You want to go beyond surface appearances.
- A house could look worn and out-of-date when all it needs is a deep clean and a fresh coat of paint.
- On the other side of the spectrum, a home could be beautifully presented while hiding structural flaws or even invisible title issues.
During your search, it’s important that you don’t automatically dismiss what would otherwise be an excellent property and avoid anything that would cause headaches later on. An established team of real estate agents, a lawyer, and a good home inspector will all help you and your child secure a suitable home.
Do you want even more tips to grow your investments? The posts below can help:
- Could Buying During A Recession Be A Genius Investment?
- When Is The Best Time To Buy An Investment Property?
- Is Buying an Income Property Still Worth It for Small Investors?
Analyzing the Profit, Expenses, and Risks of a Property
Before going any further, an in-depth conversation about the pros and cons of owning rental property in Canada is in order. An investment property in Ontario comes with numerous advantages.
The potential for equity and passive income are the primary tangible benefits. Arguably, the skills and financial savviness your child will develop could be even more valuable.
However, we would be remiss if we didn’t talk about some of the risks and disadvantages that could be involved. Before agreeing to buy a property, be sure that you and your child both know exactly what you’re getting into.
No investment is guaranteed.
Even in today’s uncertain market, real estate is considered relatively safe and profitable. However, there are risks, especially in the short term. If you commit to a purchase and the market drops, you could lose some equity, at least in the short term.
You will need access to significant financial resources.
Real estate in Canada comes at a cost above and beyond the purchase price. A down payment is required, plus funds for mortgage insurance (if applicable), legal fees, and land transfer taxes.
Finding the right tenant can take longer and be more challenging than you anticipated.
Extensive vetting will help to ensure the right fit. Once you have tenants, your child will need to learn to manage and maintain the property. Working with a property management company can bring peace of mind, but there is a cost involved.
Looking for even more resources to help with your investments? We’ve got it all, spreadsheets, calculators, expense trackers, maintenance schedules and more right here in the GoWylde Vault.
What Real Estate Investment Strategies Should You Choose?
Real estate investing involves more than buying a property and renting it out. Depending on your level of expertise, there are different strategies to choose from.
House hacking is ideal for beginners.
This is exactly what we’ve been talking about so far, where you help your child buy a house to live in and rent out the remainder. Since it is technically their primary residence, they can buy with as little as 5% down, depending on the price of the home.
The rental income can help them qualify for a larger income. At the same time, carrying costs are lower because they are shared among more people. With enough tenants, your child might even have a surplus. Compare that with the thousands of dollars gone forever when paying for residence!
Upon graduation, your child has a decision to make. They can sell the property and keep any profits. They can keep the property, either on their own or still with tenants to earn extra income. Or, they can move onto a more intermediate real estate advanced strategy.
Is house hacking the best path right now? Find out in House Hacking in Ontario: A Guide to Living for Less.
Buy and hold for long-term equity growth.
Real estate values tend to grow over time. Thus, the longer your child holds on to the property, the more equity they stand to build.
Normally, buying a home for investment purposes requires a 20% down payment. However, your child is ahead of the game because they are already on title. Now, they can find a permanent tenant and keep earning rental income – all while growing their net worth every time housing prices rise.
What happens next? If you want to carry on, here’s How the BRRR Method Can Fast-Track Your Real Estate Portfolio.
Level up to the BRRRR method.
For some people, real estate investing can be addictive! In that case, you or your child might grow into more advanced methodologies. Strategic use of the BRRRR method can lead to significant equity and financial net worth. Here’s how it works.
- Buy: Find a property that meets all metrics and negotiate the best possible terms.
- Renovate: A few upgrades can add substantial value, both from a resale and rental perspective.
- Rent: The monthly income covers a significant portion of your mortgage, if not all of it.
- Refinance: Between having a tenant and your recent upgrades, your property will be worth more. Now, you pull out some equity to put a down payment on a new property.
- Repeat: Keep adding properties as your purchasing power and equity grow.
If you or your child has ever wondered how to build a real estate portfolio, the BRRRR method is how! Go Wylde real estate has worked with many investors using this exact strategy to build a sizable nest egg.
Wherever you are starting from, and whatever your goals may be, our experienced Guelph real estate agents are happy to guide you through it all. Reach out today at info@gowylde.ca or call 519-826-7109 for more information.
