# Student housing rental vs purchase.



## 2mchtx (Sep 8, 2017)

We’re looking at the option of purchasing a house near the university for our daughter who is planning on going there for 5 years of courses.

The university is located 8 hours away so either a property manager or contracts with dependable trades people for any repairs as required. 

Some of the houses listed for sale in the vicinity are presently listed as ‘student rental’ and are divided up into separate units for this.

Any suggestions, pros and cons from others who have done this?

thankyou
too much.


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## Jimmy (May 19, 2017)

Just some ideas. One dilemma I recall was because it is for such a short period you have to weigh the cost of the realtors fees, CMHC insurance and other fees etc vs the house appreciation. The market may not be growing enough to make this worth the while

Another is many of these houses are in pretty rough shape and could be $ pits. Recall our house had pest, plumbing issues etc. Past students haven't exactly been careful to maintain these houses either.


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## OnlyMyOpinion (Sep 1, 2013)

I'd echo Jimmy's cautions.
To clarify - you are thinking of buying with a minimum down (to provide leverage), renting a room to your daughter, and havimg house mates whose rent would mostly cover the mortgage and other costs?
If so, you'll want house mates to be answering to you - not expectng your daughter to chase them for monthly rent.
Will occupancy from June through August be a problem? 
RE appreciation might work in the right city and area, but how certain of that do you feel? 
Five years would be a pretty short hold - are you comfortable being a longer term, long distance landlord?


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## heyjude (May 16, 2009)

I wouldn’t do it. Too short a time frame, plus the rental risks that others have mentioned. Many years ago I inherited a house close to a University and sold it into a strong property market. The purchaser was a parent whose kids were gearing up to attend the University. He did a lot of work on it. After his kids had graduated he had trouble selling it in a down market. I think the selling price was only about 60% of what he paid me for it. So he lost megabucks on market timing.


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## Just a Guy (Mar 27, 2012)

It usually takes about 7 years to break even on real estate in a normal market. As stated before students can be a nightmare tenant, but not always. Grad students tend to be more focussed on their studies than undergraduates...but there are always exceptions. 

Depending on the city, finding reliable contractors can be tough. As for property managers, many aren't very good and don't put much emphasis on a single unit. The profit for the work just isn't there. 

University properties also tend to command a premium when it comes to prices, which means it's difficult to get a cash flow property. If this is your first and only property, I wouldn't recommend it. Rental ownership is a business, hard to run a remote business.


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## ian (Jun 18, 2016)

Don't rush into this. What if your daughter decides to transfer out after a year? Wait a while and see if you really are looking at a 5 year commitment.

Think about your purchase and sale costs should you decide to sell. RIght of the bat the sale will probably cost 4-5 percent, perhaps more.

I would be cautious the rental aspect should you buy and she goes elsewhere. In my mis-spent college year at Concordia (Montreal) I went to a two day lease breaking party. Why two days? That is how long it took the landlord to tell the lessee to get out instaed of insisted that the rent be paid until the end of the lease. That plus a few visits from the police early in the both mornings!


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## Mortgage u/w (Feb 6, 2014)

I would only consider purchasing if you plan on keeping the property as a rental way beyond the 5 year time-frame.


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## Fain87 (Jan 20, 2018)

2mchtx said:


> We’re looking at the option of purchasing a house near the university for our daughter who is planning on going there for 5 years of courses.
> 
> The university is located 8 hours away so either a property manager or contracts with dependable trades people for any repairs as required.
> 
> ...


If your daughter can network and act as property manager then sure. If not then no. 5 years of Rent is pretty expensive also. 

Assuming price is right also.


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## Numbersman61 (Jan 26, 2015)

Bad idea to buy a house for daughter to attend university. First, it’s never a good idea to mix landlord and tenant in same building. Even though the parents are the landlord, everyone will consider the daughter as landlord. There’s a lot of drama occurring when students are attending university - pressures of being away from home, anxiety over marks, relationship issues etc. Who will maintain the grounds? 
If you afford it, consider buying a small condo for your daughter.


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## Fain87 (Jan 20, 2018)

Numbersman61 said:


> Bad idea to buy a house for daughter to attend university. First, it’s never a good idea to mix landlord and tenant in same building. Even though the parents are the landlord, everyone will consider the daughter as landlord. There’s a lot of drama occurring when students are attending university - pressures of being away from home, anxiety over marks, relationship issues etc. Who will maintain the grounds?
> If you afford it, consider buying a small condo for your daughter.


I've seen it done successfully a bunch of times. Its easier to handle with the daughter there than being a long distance landlord. . . Maintain the grounds??? daughter mows the lawn, daughter calls carpenter for carpentry, electrician for electrical. etc etc. Small stuff. He's getting her a house to manage, not a restaurant.


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## AltaRed (Jun 8, 2009)

My take is finances aside (issues already well articulated by others), if I was 18, the last thing I'd want is the burden of home ownership. Condo perhaps but even then, I'd feel like I was 'pinned down' by decisions made by parents. At that point in my life, I wouldn't want ANY baggage. I'd go rental.


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## OhGreatGuru (May 24, 2009)

I agree with Altered and others. University will be enough challenge without making your daughter your defacto property management rep.

I did notice in your original post that you recognize "... either a property manager or contracts with dependable trades people for any repairs is required." But I agree with others that your daughter will be caught in the middle, and her co-tenants will be complaining to her to get things done.

It seems to me this is fulfilling your desire to expand your property portfolio, and not your daughter's need to concentrate on her studies and adjust to university life.

PS. It is also not clear to me who is going to own this house. You say you are thinking of buying it "for your daughter". Will she be the owner? Or will you be the owner, and she will be a tenant in it? This has all kinds of implications for : taxes; first-time home buyer's benefits; "Principle Residence"; arms-length relationship between landlord and tenant; and other matters.


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## OnlyMyOpinion (Sep 1, 2013)

It appears that OP was casting a line and has moved on. No reply to questions asked of them in this thread, no other posts.

Our kids bought a house jointly when they ended up post-secdnary in the same city (they lived in it a separate times). We had gifted them the money to buy it. They sold 7 years later and really only recovered costs re CG's. One attemped to have some 'friends' share in costs, but as noted, they aren't there to be rent-collecting landlords or do repairs. They subsequently took their proceeds and each bought their own places. In a different market I suppose they might have done better.
Overall, it was not worth the effort.


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## 2mchtx (Sep 8, 2017)

OK, I was just putting out feelers to see if anyone has actually done this. Pros and cons.
Residential costs are ~$8500/yr (+ mandatory meal plan), ballpark figure $11k/yr.
Houses in the neighbourhood average $150k + all the taxes & costs of running & maintaining the building.

To add to this, there are the moving/storage costs the beginning and end of every school year.

Up here in cottage country some of the nieghbours rent out their cottages to basically break even. Rentals for a few weeks in the summer are enough to cover the (high) taxes. And yes, there is the gamble of getting bad tenants, we've seen it all. A good part of this is cash so there's less paperwork.
Reverse this, buying a place in the city with the rent to cover the costs and aiming for a break even scenario. Yes, here too there's the gamble of good and bad tenants. This would be a remote landlord scenario. What are the potential tax implications of this? Travel costs, hiring a property manager etc. 

Again, hoping to hear from someone with experience. 
thanks
2much


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## Just a Guy (Mar 27, 2012)

I own properties all over the place, including some by post secondary schools. The main problem with these locations is they tend to be overpriced to begin with because people think they are cash cows because of their location. That's not true when you actually run the numbers in a lot of cases. There are many ways to fudge the numbers and make yourself feel like it's a good investment (oh I bought a place for $500k, put down a 50% deposit, ignore the vacancy, maintenance, and other expenses and it cash flows).

If you can get a property that cash flows in a poor economy, unlike today where rents are generally quite high, then you have a safe investment. If you're a starting landlord, remote management is very difficult comparatively speaking. Not the best way to start out. Remote management needs a support team or network which you can rely on. Things like a local contractor, plumber, management company (many of which won't prioritize you if you only have a single property), someone to monitor your property, etc.

Also, it takes on average about 7 years to break even on real estate (when you factor in realtor, legal, financing costs, etc) if you plan to just sell it later when your kid is done. 

Finally, real estate investing is work. Don't ever think it's a passive income where you just sit back once you put in the money. You'll always get calls and have something to worry about. It may not be a lot of work if you know how to properly screen tenants and have a little luck, but there will always be issues coming up. Not many renters treat the properties the best, and places by post secondary education institutions tend to be on the older side to begin with. You may find it a lot more costly than you think and any "savings" you imagine you'll make may not come to fruition. 

It's the same as the rent vs. Buy debate...a good arguement can be made both ways, yet many people still have an ownership bias going in and refuse to look at the huge potential downsides.


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