Parentnomics 101 – 5 Reasons Why Student Condos are Essential to Any Real Estate Portfolio
For years, REITS, pension funds, and other institutional investors have understood that student housing close to colleges and universities provide a consistent high performing investment. The proposition is simple: buy near a major post-secondary institution, rent to students who require accommodations, and then sell when the market is primed for the largest margins.
Student housing has traditionally consisted of bachelors, dorms, or student houses – all of which perform exceedingly well in terms of investments. But in the last decade, a new asset class for student housing has emerged in metropolitan areas that’s more in-demand and more lucrative than the other options combined. I’m talking about the “student condo.”
CONNECT asset management has personally invested in over 30 student condo units and we continue to enjoy tremendous appreciation in our overall investments as well as substantial rent increases year over year. (It’s one of the reasons why I was awarded Investor of the Year by Canadian Real Estate Wealth.)
Compared to other buyers and renters, parents are an absolute hidden gem. The strength of the rental and resale markets has surprised even our most optimistic forecasts – parents have no problem shelling out CA$1000-$1600 a month in rent or paying a premium to buy the units outright.
So without further ado, here are the top 5 reasons why 1 to 2-bedroom pre-construction student condos are the best way to capture the lucrative student housing market – and essential to any investment portfolio.
1. PARENTONOMICS: During the pre-construction phase, student condos are marketed to investors who are looking for typical investors returns. But when the suites are ready for occupancy, parents will scramble and pay a premium above the regular ROI’s that investors are looking for. Parents want the best for their children – they do not focus on lower price points and have little interest in being landlords. They just want a place for their child (and sometimes a roommate) to live in. By paying down their investment mortgage instead of someone else’s, parents can dramatically reduce the overall cost of their child’s education.
2. LIMITED SUPPLY OF 1-2 BEDROOM UNITES: In a market like say, Waterloo, less than 2% of housing inventory is made up of 1- and 2-bedroom units. While there are lots of places for students to live, there are very few options for one or two people. IN8 Development’s Sage Platinum I and II, for example, recently completed two buildings almost exclusively of 1-bedroom units and leased them in record time due to high demands.
3. CONFORMING USE: Houses with multiple bedrooms are not typically built as student rentals and often do not meet all zoning and code requirements. In many markets, they are subject to rooming house licenses and additional regulations. All of this makes condos much more attractive than houses for parents and the savvy investor.
4. EASE OF OWNERSHIP: Like any condo, cleaning the halls, taking out the garbage, and shovelling the snow are all taken care of by the condo corporation. There is no need for a property manager or any time commitment on the owner’s part. They are much easier to finance than larger units and houses because banks look at them more favourably. Often sold fully furnished, all the student must do is move in their clothes and personal items. No moving vans or heavy lifting! For investors, property management costs are also lower because one manager normally controls the whole building.
5. DIVERSIFICATION: When sold with full property management and rental guarantees, these student condos offer exposure to different markets. After all, universities drive economic activity and often become neighbourhood hubs. And even if there is an economic downturn, enrolment (and thus, demand for your student condo) will increase as people go back to school to upgrade their skills.
Word to the wise: make sure you do not have your student condo rented when it is time to sell. Every parent will reach the point when it is finally time to stop investing in their children as they become self-sufficient and they can exit these positions at the right time. Since inventory is so low and demand is so high, tenants may not want to move out if they have a valid lease.
Want to know more about what makes student condos so lucrative for rentals and resales? Or interested in strengthening and diversifying your portfolio?
Then Sage Kingston may be for you – this turnkey condo investment is steps away from Queen’s University and offers incredible rental guarantees incentives including FREE furniture packages (and more!)
Here’s what you need to know:
- All star developer: In8 Developments has successfully built more student condos than any other developer in the country
- Demand far outnumbers supply: Queen’s has over 33,000 students and faculty members – but only 4,500 campus beds
- The Kingston real estate market is HOT: Kingston has the 3rd highest rents and one of the lowest vacancy rates in Ontario at 0.7% (and only an incredible 0.3% vacancy rate for units built after 2005!)
Or reach out to us to find out what hot properties and markets could be a potential investment for your future student rental investment.
We help investors build their wealth through real estate.
CONNECT Asset Management is Canada’s leading real estate investment brokerage specializing in pre-construction sales and investments. Our team consists of award-winning condo investors/realtors who negotiate directly with the industry’s leading developers to secure discounts and incentives for our clients.