Is Waterloo university housing being over built?

[Violinfather]

I am looking to buy a house as a student rental in Waterloo, Ontario. I am a little concerned though with the number of large projects, anywhere from 100 to 500 units, which are currently under construction in the Waterloo area. Does anyone think that there will be more rooms available than potential occupants?

I thought that maybe purchasing a house within a 5 to 10 minute walk of both Waterloo University and WLU would still provide good cash flow given that some students prefer to live in a house versus an apartment/condo. I do wonder though if the number of projects is also going to cause a reduction in how much a landlord can ask for rent.

I am a newbie investor who is ready to make it happen

 

[housingrental]

New construction is a concern. Each new apartment vs it not have being built will result in:
Increased vacancy
Lower rents
A superior product your are competing against re often good location and new condition

HOWEVER

This process has been playing out for many years and the result:
Rents have increased
Vacancy rates are still low - I have no vacancies and hundreds of student tenants in Waterloo

Would and will rents be higher if there`s no further building - absolutely!
However life becomes easier when you purchase at the right price (this is tough to do with minimal supply) purchase a quality product, manage it well, and intend to own it for the long term.

For my investment portfolio I`ve purchased 39 student bedrooms in 2010. Most investors I work for have also been looking to purchase more - there`s very few student landlords in Waterloo not making good $$$.

What has happened is that most of the bedrooms from new constructed have been absorbed into the market from increased enrollment growth at the schools.

The properties that have, and will be the worst off from new supply are:
Outlier locations
Smaller or choppy setups
Higher bedroom per unit setups
Poor condition
Landlords slow to schedule rental showings

Most new projects are needing $500-$600 rent per bedroom to make sense to get off the ground... There is a large (10,000++) strong market of student renters who either:
Can`t afford to pay that high of a rent
Prefer to no live in an apartment - and want noise freedom, a back yard, more parking than 1 space per unit, etc...

The best way for a small investor to play the market is purchase a detached house a fast walk to the universities and then upgrade it to offer a comparable level of finishing and features (dishwasher, AC, laundry, two fridges, individual door locks, tv+cat5+phone wiring) that new construction provides.

 

[Violinfather]

Thanks Adam. I really appreciate the opinion of someone like yourself who has direct experience in the student rental business in Waterloo.

As you mentioned the quantity of available houses for sale at present is very low and the quality is not any better. Are streets like High and Tamarack close enough. They seem relatively close to both WLU and Waterloo.

I get the impression that it is better to grab a detached house that has not been converted and split it into a 3 up and 3 down situation. Do you have any opinion about whether or not the City of Waterloo is trying to prevent the creation of new accessory suites around the universities? I know that there is a specific bylaw surrounding the lodging house end of things.

Mark Pauline

 

[housingrental]

"Thanks Adam. I really appreciate the opinion of someone like yourself who has direct experience in the student rental business in Waterloo.
" Thank you!

As you mentioned the quantity of available houses for sale at present is very low and the quality is not any better. Are streets like High and Tamarack close enough. They seem relatively close to both WLU and Waterloo.
Those are not prime locations but still doable. Some of my places are farther out than those areas (some double+ the distance) and I`ve been able to keep the filled. You just need to budget prior to purchase appropriately - ie slightly lower rents than if you were on a closer street. The biggest issue though is most for sale recently in that area haven`t had much of a discount in price to reflect - Personally I`d rather pay a few thousand more per bed and be a 2 minute walk than 15 minute walk. At current pricing I`m a seller not a buyer in that area. If discounted enough though so that you`re provided with a higher return than alternative purchase than they could become worthwhile...


I get the impression that it is better to grab a detached house that has not been converted and split it into a 3 up and 3 down situation. Do you have any opinion about whether or not the City of Waterloo is trying to prevent the creation of new accessory suites around the universities? I know that there is a specific bylaw surrounding the lodging house end of things. If you can find a property that is possible and economical to legalize yes great idea... the problem is you likely won`t find this... if you are looking to purchase a property that doesn`t currently have any registration and your hoping to convert it into two apartments you`ll need to purchase a house that has either:

a) Zoning that allows a duplex - The challenge with this strategy is that properties that allow this will often be priced higher than they`ll be worth for you as a duplex. Redevelopment will be the highest and best use of property.

b) That has an accessory apartment that isn`t currently registered with the city and purchase it at a discount from what it`d be worth if the apartment was registered - These are very hard to find. I have done this once and only found one other property that this made some sense to do this on (in terms of location and pricing) but ultimately couldn`t get current owner on the second one to agree to a low enough price to make it happen. Waterloo does not allow new accessory apartments. However Waterloo will allow you to register one that isn`t currently registered if it meets certain criteria - the main issue being has it been in operation since apx. 1995 and can you have someone sign documents (like current owner who has owned the property since that time) confirm this. Please consult with development services for exact current requirements. From there you`ll also want to confirm fire and esa compliance - and if property wasn`t currently registered there`s a good chance $$ will be needed to be spent on this. So lots of work finding a suitable property, rare chance of being able to get owner to agree to a low enough price to make it worth doing, than need long enough conditional period to assess issues to register and legalize + costs of doing this.