Should I buy a student investment property or a condo as a real estate investment?

Should I buy a student investment property or a condo as a real estate investment?

Should I buy a student investment property or a condo as a real estate investment? I was out yesterday with a family from Toronto. I showed them some student investment property currently for sale in Waterloo. These folks have three kids attending, or about to be attending, universities in Waterloo. They’ve done a good job. They have smart kids. They are thoughtful. The plan is to buy a student property for their kids to have as a home base. It will also do two things for them:


1. Save student housing expenses. Not only will the three kids not have to pay rent, they will have roommates that will (help) pay the mortgage.

2. Solid investment. The parents can hang onto the rental unit after the kids have graduated. They can become professional property investors and landlords.


It’s a good plan. The father said that he wants to diversify his portfolio. He said, if they don’t buy a student place in Waterloo, he’d consider buying a condo in downtown Toronto.


“Whoa, whoa, hold the phone”, I said. 

I think buying property is a great investment. I’ve been a property investor longer than I’ve been a realtor and I’ve always made money along the way with my rentals and when I sell. I like real estate because you can see it and touch it. It’s a long term investment and its price slowly moves up. (Yes, real estate prices are still going up in KW). Stocks, on the other hand, are just promises. They are not real. When Blackberry stock started falling from $70 a share to $7 a share, investors choice was only:


“How much am I going to lose?”


But buying a condo now is not a real estate game plan I’d recommend. The market is saturated. We built a lot of condos in the past ten years but we don’t have enough people who actually want to live in the ones they’ve bought. investors have bought the bulk of the condos. Condos are empty or are housed by renters. There are dozens more units being completed every week.

In Toronto, where there are bidding wars for single family homes, condo developers are giving away BMWs to entice condo buyers. Here is an article from the Huffington Post.


Buy This Condo, Get a New Car! (and Other Crazy Incentives)


By contrast, the new licensing bylaws that the City of Waterloo have put into place are effectively controlling the supply of legal rental property available for investment. As such, student rental property values are stable and going up. It’s simply the law of supply and demand.


In terms of solid real estate investing, I’d rank investor choices in order:

1. Student investment properties
2. Single family homes in great school zones (or other positive influences)
3. Recreational properties (cottages and ski lodges)
4. Florida and Arizona, Costa Rica
5. Condos
6. Reits
7. Timeshares

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