4 reasons not to invest in student properties

investing in student properties

There is a 2019 follow up to this blog post here.


As far as real estate investing goes, except for big commercial projects, investing in student rental properties has long been at the top of the food chain. Renting to students has traditionally been a money maker, the only place I know where the expectation of a 8% return on investment is attainable. But times change. Maybe that was a generation ago. Maybe you should reconsider buying that place for your son or daughter while they are in Waterloo to do their undergrad. Maybe, Mr and Mrs First Time Investor should think again about plunking down $50,000 on a pre-construction, guaranteed income-producing, “luxury student living” place.

As an aside, I know what luxury living is like and I know what student living is like, but what exactly is luxury student living?

It’s oxy-monoric.

It’s marketing.

It’s a $12 gourmet hamburger.

What is happening in the student rental market?


A new report suggests the City of Waterloo has more student housing than it needs around its campuses and that surplus is set to grow faster than student enrolment at the city’s two universities.

Part of the problem is that the number of new units coming onto the market is growing faster than enrolment. According to the report, Waterloo has more than 32,000 student housing units available now. This is already 1,200 more than it needs and there are more than 7,000 “new beds” becoming available over the next several years.

At the same time, because of demographics, universities in Canada are expecting smaller cohorts over the next seven or eight years. There have already been layoffs and talks of layoffs at our universities.

The developers have a “build it and they will come” attitude. But I don’t agree with this. I know from working in local real estate and as a real estate investor that there are both lots of dormant off campus dorms and that they aren’t luxurious by my fairly pedestrian standards of luxury.

Price deflation

High condo fees brought on by extensive repairs and/or increasing maintenance costs is to blame for the selling price of units in many near-university condos (both townhouse and high-rise) going down.

There are a couple of notorious buildings close to the university where once a small-time investor could buy, hold and sell and make a profit. Now, I’m not so sure.

There are currently 11 units for sale at 255 Keats Way. The condo fees are on average near $400.00. That is pretty high for a 12 year old building that is currently under repair.

There are six units for sale at 375 King Street North. The condo fees there are over $700/month.

Further Reading:

Rental carnage feared

Glut of student housing

The troubled ICON 

Income myths

Guaranteed Income

Some of the big developers are selling student units with the promise of guaranteed income. For two years, they say, they will promise to have the place rented and will remit to you, Mr Investor, a guaranteed amount.

It doesn’t take a genius to see what they are doing. They are overcharging you for the real estate and then giving some of your money back to you over the first two years you own it. What do you think is going to happen when all the buyers come to the end of their two year guaranteed income period. That’s right, they will try to sell.

When the investors all rush to sell, there will be a glut of units on the market and the laws of supply and demand tell us that prices will drop.

Then they will find out that the “rents” they have been receiving are not true market rents. They have been padded by the developer. If it is risk free and too good to be true, there has got to be a catch.

Passive income 

There is nothing passive about renting to students. Longtime landlords will tell you not to give them the key to the garage or come May it will be filled with garbage bags that did not make it to the curb for weekly pick-up.

An investor I know had to do an extensive repair to a ceiling and wall because a problem with a leaky toilet was never reported to him and thus addressed. It just leaked and leaked and leaked until it became an issue for the guy who lived in the bedroom below.

Students don’t care. If you think they are going to take care of your place, they aren’t. They can walk right past recycle bins siting at the curb all week. The dishes get done when they run out of dishes. They are half-formed adults without common sense.Maybe some are different, but I was the same.

Landlords are partly to blame. As they try to squeeze as much money out of their investments as possible, things quickly go from bad to worse. Eventually with the intention to sell, the owners will tart things up and unload the investment on the next guy who has read a book or two on property investment and is ready to jump in.

NOTE: There are some excellent investment opportunities (even some that will fit the bill for the student in your household) TOP 9

source one

source two

There is a 2019 follow up to this blog post here.


  • Phillip says:

    “Students don’t care…They are half-formed adults without common sense.”

    Student and real estate investor here. I very much do enjoy following your blog.

    However I cringed when I read this, on your behalf.

  • NAJIB says:

    Hello Keith,

    Very much like your blog.
    is it a good time to invest in student rental property? or would I be better off investing in non student rental property. Which areas are good as I am new to Kitchener. Thanks

    • Keith Marshall says:

      I think the time that investing in the student market is behind us. Fifteen years ago, ten years ago –> those investors did very well!!
      There are other (better) investment vehicles in KW.
      What sort of property should you invest in? It really depends what sort of investor you are (turnkey? buy and hold? reno and flip?)

  • Hi Keith!

    Some bad information. Don’t believe everything you read. Instead, search for properties for sale within 1 KM of WLU or UW – and see how many are vacant.

    If you were scared off of the “glut” or the “Armageddon” of student housing you would have missed two years of positive cash flow and continued appreciation. Instead, look to the CMHC Fall Housing report that looks at vacancy in The City. Student condos are not captured in this analysis. But what happens is that tenants tend to move to newer opportunities. If there was vacancy, you would see it in the CMHC fall rental market first.

    Here’s a good article about Northdale. It was published the day after the student housing Armageddon story: https://kitchener.ctvnews.ca/census-2016-which-local-cities-and-neighbourhoods-grew-the-most-1.3276525

    With population increasing 147 percent in the neighbourhood around the universities, that is the reason why you don’t see vacancy.

    • Keith Marshall says:

      Hello Mike
      Thanks for your comment. I disagree with much of what you say.
      I went ahead and did a search for condos in the university district and found that we currently have 39 listed on our local MLS. They make up a total of more than 22% of condos currently listed for sale in Kitchener-Waterloo. More than 22% of all condos are within 1 KM of WLU or UW! Investors certainly have many to choose from.
      Thought we do not have statistics on the vacancy rates of purpose built student accommodations, I do concede your point that the vacancy rates are likely pretty low. When I’m showing units to potential investors, I am also impressed with how well managed and how much improved these units are compared to the bad old days of “student ghetto” houses and absentee landlords. I think the city did a good job of turning things around for the benefit of both Waterloo’s permanent residents and for our student population.
      I also agree that the units have remained cashflow positive although when I wrote the blog post back in 2015, the numbers looked dubious. It is hard to make predictions, especially in regard to the future. Perhaps because the developers have managed to keep the rental rates artificially inflated by controlling the bulk of the market, or maybe because the general value of our local real estate rose so quickly and rents always follow real estate price appreciation, the cashflow has stayed high.
      Regarding your link, I suggest you take your own advice and don’t believe everything you read. Northdale’s population surely grew at 147 per cent. How wouldn’t it when bungalows are being replaced with condo towers?
      Finally, because I would like to end up on a positive note I have two things to add.
      1) The future is hard to predict but hindsight is 20/20. One thing the reporting from 2015 did not consider (in terms of the coming glut in student housing) is that much of the then current student housing market, further from the university shifted back into the residential market, in my uptown neighbourhood especially. Where once were student houses, now are family houses again.
      2) My overall opinion of investing in student accommodations has improved considerably. I give full credit to the developers, the early investors and the city planners for their successes. As a long time investor, I see purpose-built strident units (currently) as a good investment vehicle.

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