Guelph is a great place to invest in real estate. With a vacancy rate that is consistently hovering around 2% and an influx of 20,000 - 30,000 University of Guelph students coming to the City of Guelph each year, it's rarely an issue to find good tenants.
We want to dig into a specific type of rental for this blog. Student rentals!
We asked our own Guelph realtor, Joe MacDowell, to share some tips for why you should invest in Guelph student rentals.
Some people may have a stigma about renting to students… When you look at the points below, you'll see that the benefits of student rentals outweigh the negatives.
There are four main benefits of owning a student rental in Guelph:
- Mult-Year Leases
- Healthy Turnover
- Higher Cashflow Opportunity
- Guarantors
Check out the mortgage calculator in our website.
Potential for Multi-year Leases
It's common for students to commit to 2-4 year leases (24 to 48 month lease terms) while they are studying at the University of Guelph. Multi-year leases are beneficial to investors because it creates consistency and stability for their investment. It's fair to expect some volatility when investing in any market or asset class, so 2-4 year leases provide peace of mind and guarantee that you investment will be generating cash flow. Along with that, multi-year leases allow the investor to project future income over many quarters.
Healthy Turnover
As previously mentioned, you can secure a 2-4 year lease with a student rental. As students graduate from post-secondary education, they are highly likely to end their lease. This is greatly beneficial to landlords because it allows the rental property to stay in line with the current market rental rates.
For example:
In 2019, Jim purchased a 5-bedroom investment property with the intention of using it as a student rental. Jim rented the 5th bedroom house to a group of students for $600.00 per room per month (Total $3000.00/month). The group of students graduated from the University of Guelph in 2022 and signed an N11. An N11 is an Agreement to End the Tenancy form. Jim was then able to offer the house to a new group of students for the beginning of the September 2022 semester. Based on rental rates in September 2022, Jim was able to lease the property for $900.00 per room per month (Total $4,500.00/month). He was able to keep the rental rates updated with the current market trends by earning an additional $18,000 annually and optimizing the cash flow potential of the property.
Higher Cashflow Opportunity
Student rentals are typically rented per room. This means you're able to garner much higher rent rates from individual students than from other non-student demographics. Based on the Guelph statistics, rooms in a student rental are likely to be rented at $700-900 per room. If you have a 6-bedroom house, you could generate approximately $4,800 + utilities per month (based on January 2023 rental rates).
Guarantors
It is typical for students to apply for a rental with a guarantor. A guarantor or co-signer is an individual who agrees to pay the rent for the occupant in case the occupant is unable to pay. It is likely to see at least one guarantor on a student rental application.
Characteristics of a Student on a Rental Application:
- Unlikely to have built credit / offer a high credit score
- Do not have a previous rental history
- Do not have credible references
- Do not have a stable, full-time occupation with a high monthly salary
Guarantors offer financial security as students are often still supported by parents and/or guardians. They also ensure student responsibility. With parents/guardian involvement, students are more likely to be respectful and appropriately maintain the property during the lease term.
In conclusion, Multi-Year Leases, Healthy Turnover, Higher Cashflow Opportunity, and Guarantors provide benefits to investors owning and operating student rentals.
Are You a Real Estate Investor in Ontario?
Finding a trusted realtor is the most crucial step in finding an investment property. From there, they can guide you and create a realistic plan and timeline.
If you have any questions about the student rental investment experience, please reach out. Andra Arnold & Associates Guelph real estate team is here to help!
