Should I rent to students? Insights for investors.

If you own an investment property in downtown Toronto or near a college or university campus, you may have thought about renting it out to students. So is that actually a good idea? Well, there are definitely a few pros and cons to consider. 

The cons are probably the first thoughts that come to mind – students are young, don’t have much income or a credit history, may not take care of the place, and will only stay until they’re done school, so you’ll need to keep finding new tenants every couple of years. In my experience, however, the pros can really outweigh the cons. 

Pro #1: They don’t stay long-term. 

This is actually the biggest plus. So even though it may be a pain to find new renters, you can raise the rent to market value with every new tenant, which often isn’t possible when they’re sticking around for more than a couple of years. 

If your property was built before November 2018, it’s subject to rent controls, and you can only raise the rent by a certain percentage annually. If it was built after, you’re not as constrained, but you are limited by the fact that a steep rent hike could mean your clients will leave – or worse, won’t be able to pay. And getting non-paying tenants out of a unit can be very difficult. 

With students cycling through every couple of years, however, it’s easy to keep your rent at market rates, no matter when your property was built. And that goes a long way towards creating the positive cash flow you want.

Pro #2: They’re often backed by the Bank of Mom and Dad

People assume students are risky tenants because they don’t have credit histories. But a lot of young people use their parents as guarantors. That makes many of the investors I work with a lot more comfortable. 

For international students whose parents don’t have Canadian credit histories, it gets a little more complicated. But what I’ve been seeing lately – especially in this super-hot rental market – is parents offering 6 months or even a year of rent payments up front. Landlords can’t ask for that legally, but you can certainly accept it if it's offered. 

Pro #3: Students can split the rent with roommates

If you have a 2-bedroom unit or even a 1+1, having two students with separate budgets in there means they may actually be able to afford more than a couple with a shared budget. 

Ultimately, despite the added wear and tear on a property that tends to come with student living, I think students can be some of the most lucrative tenants around. It really comes down to how you feel about having students in your place. 

I recently helped a couple of my clients buy their first investment property – we landed a nice-sized 2-bedroom in a great older building in the Church Street corridor. After a bidding war with several potential tenants, we rented it to two U of T students whose parents wanted them to live in a safe building close to school, and agreed to act as their guarantors. All in all, a pretty ideal situation – my investor clients are happy and the students are thrilled to have snapped up a great rental property in a good location. . 

Are you thinking about investing in Toronto real estate? I can help you find a great place that will appeal to a solid renter demographic and advise you on the kinds of tenants that will get you the best outcome. Let’s talk!