Hamilton Rent to Own: Top 4 Things You Should Know About Student Rentals

Hamilton Rent to Own:
A Focus On Student Rentals

Hamilton Rent to Own: Student Rentals Examined

We own ‘em, we like ‘em and we’re asked about ‘em often so we thought it would be a good time to share your questions with everyone. 

Here’s a list of questions that have come our way from several Rock Star Inner Circle Members and our thoughts on them…

#1 Where is the best place to buy them?

Well, aside from the obvious (close to schools) we prefer Universities over colleges because the population base of the students is often much larger at Universities. Hamilton rent to own can work quite well, either for students or for single family homes. When it comes to student rentals, for example, the last time we checked McMaster University had a student body of approximately 20,000 undergraduates and 2,000 graduate students. 22,000 is larger than some cities in Ontario and creates a strong demand for your property. Hamilton rent to own is also a great option for this reason. In comparison, Sheridan College’s Oakville Campus has approximately 9,000 students.

In the interest of full disclosure, we own student rentals next to Universities and Colleges… we just prefer Universities.

The next thing to consider is any local by-laws.

For example, in Waterloo and in the Durham region there are local by-laws that limit the number of bedrooms a single home can have for students.

We prefer schools in communities that don’t have these rules in place. We want to be able to maximize our revenue from each property and we’ve found that properties with six or seven bedrooms cash flow extremely well.

Next, we like to own them as close to the school as possible. We’ve learned that we can fill rooms faster and for more monthly rent the closer we are to the school.

This may seem obvious but we’ve seen many investors buy a slightly cheaper property that is further away from the school only to struggle to fill each of the rooms. Pay more and get one close to the school is our advice.

We’ve also learned that if the property is a bit further away from the school, e.g. more than 0.5 km, then it’s best to own the property on a slightly busier road that gets lots of visibility and is close to bus stops.

The visibility helps when advertising vacancies and the bus stops are a selling feature. This goes against what we would recommend for Single Family rent-to-own properties.

#2 How Difficult Are They To Manage?

OK, where do we start with this!?! We’ve had groups of boys that caused no trouble but thought cleaning only needed to be done when their pizza boxes reached the ceiling. We’ve had girls who kept the place spotless but had Vodka and Guitar Hero parties where the entire school body would somehow show up.

We’ve had other guys build an honest to goodness extreme mountain bike course in the backyard.

Chairs, ramps, tires, planks, tables were all dragged into the backyard to make the course just

like the X-Games.

Although it looked amazing and we secretly wanted to ride on it ourselves it’s horrible for the

grass and for relations with the neighbours.

We’ve had students break the glass on the door to let themselves in after losing keys, we’ve had water tanks blow up in the middle of the night, we’ve had students who knew more about their Tenant rights than we thought humanly possible and we’ve also had to fight a nasty case of bed bugs that is etched in our memories forever.

So the bottom line is that you definitely get more calls from Student Rentals with various issues that need handling, however, overall, when you spread this issues out across years of owning these properties they’re not that difficult to manage. The most common management issue is small repairs.

Door handles, holes in walls, appliance repair, leaky faucets, electrical issues.

To handle these a relationship with a local handyman is key. Amazingly, we regularly find great handymen by calling the local used appliance shop and asking for referrals.

And the cash flow makes up for the ongoing stream of minor issues. The lowest cash flow we’ve had on a Student Rental is $600 per month and the highest has been $1,800. On average, if you have a property that can fit six or seven bed- rooms, you can expect around $800 in cash flow per month.

The bottom line with management is this… These properties involve more work than regular hamilton rent to own single family rentals, but if you maintain the property and respond to requests in a timely manner, students will respect you and the property. Establishing a firm but friendly relationship is key.

#3 How Do You Handle Vacancies?

Different schools have different rules. For example, at McMaster in Hamilton, Ontario... Every January, groups of students aggressively hunt for student rentals for the next school year. Some students may even be interested in Hamilton rent to own.

They’ll sign 12 month leases starting on May 1st even though they may not need the property until Sept 1st. Sounds crazy but it’s true. You’ll want to learn how the student body of each school works.

Other schools, like York University in Toronto have students looking at all times of the year and its busiest times are August and January. Knowing the trends of each school will greatly enhance your ability to fill rooms quickly.

Here’s what else you need to know. Some students will leave mid way through the school term. The rest of the students in house will quickly move into that vacant bedroom if it’s larger than the one they’re currently in. This always leaves the smallest room in the home as the vacant room. It’s not impossible, but it’s difficult to avoid this situation. You’re then left trying to fill the smallest room in your property mid-term when the fewest students are looking.

And sometimes you may have two or three rooms in this situation. You need to plan for this. We have a property right now that has had two of its smallest rooms vacant for six weeks. That basically eats up all the positive cash flow. We’ll likely have them filled soon but it means you may be down at the property filling vacancies more often than with single family rentals. If this is something you don't think you can handle, you can also check out other avenues of investing, such as Hamilton rent to own, or single family homes.

#4 How Do You Finance Them?

Most banks will require 25% to 30% down for student rentals. Shocking but true. We have had success with local branches offering lower down payments on these properties. For example, if there’s a local bank branch in the middle of a student rental population often that particular branch will have better mortgage options because they’re comfortable with the properties and understand the market.

So if you’re set on acquiring student rentals it may be worth while visiting local branches close to the schools instead of dealing with the branch closest to where you live. This goes for Hamilton rent to own as well, or any other investment venture you choose.

We did this once with TD Canada Trust but learned that there are other financing curve balls to be aware of. This particular TD Branch was willing to lend us the money for a Student Rental at 10% down but years later when we went to refinance the property to extract equity from it they told us that they would simply renew the mortgage “as is” but weren’t interested in giving us a new mortgage at a higher amount (allowing us to pull out equity).

So we were stuck for almost a year before we found another bank that would accept our Student Rental and allow us to extract a large lump sum of cash from it. Single family homes typically do not have this problem.

So Student Rentals cash flow extremely well but can be somewhat trickier to refinance and sell because you'll need banks and buyers that can navigate through financing speed bumps.

You’ll definitely have more management to deal with and sometimes an angry parent or two but overall they create stable cash flow when purchased properly.

Again, Hamilton rent to own may be another option for you and your portfolio if you do not think student rentals are necessarily for you. Hamilton rent to owns may provide a home for graduates of McMaster, nurses, teacher's assistants, etc., looking to purchase a home but have student debt.

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