Don't overpay. The house (I presume?) or the small 5-plex needs to be priced THE SAME as if not a student rental. Some cities are now cracking down on zoning, and as such may disallow such multi-unit "rooming" houses in established areas. Check with local experts or the city as each is different.
If you say "5 unit student rental" what is that ? A house ? a 5 plex ? How big is each unit ? How much do similar properties that are not student housing sell for ?
As such, I suspect you are asked to pay too much, and the seller will gladly foreclose on the property in a few years when you can't pay the VTB back. A preferred selling strategy: sell once, collect twice ! Don't be a too motivated, and uninformed buyer !
Thomas is not quite correct here. In Waterloo, as an example, properties are valued based on price per LEGAL rentable bedroom. A legal, licensed property for, as an example, five bedrooms, will trade for less than an unlicensed property.
You will find a good example of this on my website,
www.teammilovick.com. I have two listings in the same complex - 2-451 Albert which is licensed for five bedrooms ($239,900) and 9-453 Albert ($189,900) which has no license, and with work can be legal for a maximum of four students (and probably worth around $215,000 when licensed for four).
In other municipalities like Hamilton, there are no by laws that proactively regulate student housing. As such a carved up home for five students with no respect to zoning, fire, electrical and property standards SHOULD trade for the same money as, say, a three bedroom home next door that hasn't been carved up.
Mike