Table of Contents - Student Rentals during COVID with Jared Henderson
Dave Debeau [00:00:09] Everybody, Dave Debeau here with another episode of the Property Profits Real Estate podcast, zooming in all the way from beautiful Kamloops, British Columbia. And our special guest, Jared Henderson, is zooming in all the way from one of my favorite cities in this whole planet, Montreal. So how are you doing today, Jared?
Jared Henderson [00:00:30] Fantastic. Thanks for having me.
Dave Debeau [00:00:32] My pleasure. So, Jared, you're in Montreal, but your investments are all in Ontario. So completely for those international folks watching or listening. This Montreal is in the province of Quebec. It's primarily French and then the rest of Canada primarily English. Jared is doing most of his investing in the next province over Ontario. So, Jared, first of all, what kind of what is your main focus when it comes to investing these days?
Jared Henderson [00:01:03] So my main focus is student rentals in Peterborough. It's a strong student rental market. We've got Flemyng College as well as Trent University. So both schools combined are approximately 15, 16 thousand students total.
Dave Debeau [00:01:19] All right. Very cool. But I'm thinking and correct me if I'm wrong, I'm thinking there's a couple of schools in Montreal. McGill pops into my mind, a few other big ones, probably boppin as well. Why have you picked a smaller city in Ontario versus doing this in your own backyard?
Jared Henderson [00:01:37] That's a great question. Going back to how I began real estate investing, I started in Niagara Falls. I lived in Ottawa for a brief period of time six, seven years ago where I started getting into real estate investing and from a friend of a friend heard of a way of investing passively where I could invest in condos that were being converted from an apartment to a condo type of ownership. And what really attracted me to that deal was that I didn't have to find tenants and manage them, which was my big fear in beginning the process. I always knew that real estate kind of worked. But you hear about buying a place and then not being able to fill it up. And what are you going to do? Right. So I didn't want to involve myself on the property management end. And this was a way of getting into the market and dipping my toes into the real estate world. And since then, since I started noticing the surrounding markets. Appreciate, like in St. Catherine's and then Hamilton, I started out branching off and buying single family homes there. So if we're going to start my journey and continue along, sounds like I started in Niagara Falls and I kept moving east. So how I ended up in Peterborough is I bought a couple of single family homes in Hamilton and all of a sudden tenants aren't paying me rent for five or six months into the lease. And I had to go through a couple of evictions and I said, we have
Dave Debeau [00:03:13] one in Ontario. Right? That's definitely no water.
Jared Henderson [00:03:16] Yeah, just definitely not fun for anyone. And I really dislike the number zero in terms of how much rent I was collecting. There's no worse number. And what really attracted me to the student rental model is that I have multiple leases in these houses and so I would never be without any revenue altogether. So worst case scenario is these days I'm perhaps half full or four out of six students are there. So I'm always receiving a steady flow of cash, which is which provides my business stability.
Dave Debeau [00:03:51] And yeah, that makes a lot of sense. All right. So your progress from from condos, single family homes to student rentals, in a way, it's almost like having the benefits of a multifamily in the sense that you've got multiple sources of income. And except instead of apartments, you've got individual rooms that are that are getting rented out to students. But again, you're in Montreal, your properties are and I'm not sure how far away Peterboro is from Montreal, but it's a four
Jared Henderson [00:04:20] and a half hours.
Dave Debeau [00:04:21] Yeah, it's a longer drive than you want to do on a regular basis. So are you based in Montreal because you're from there or you work there or what's what's got you in Montreal?
Jared Henderson [00:04:31] Yeah, I'm born and raised in Montreal and I do love it here. The reason why I continued investing in Montreal, sorry, in southern Ontario instead of Montreal is because of the strong fundamentals in the GTA through transportation development, job formation and immigration. There are very strong fundamentals that bring strong appreciation to the GTA and the tertiary markets that I'm investing in. So my logic is I want to continue to invest in the markets that I know that are going to appreciate. Now, of course, what you would ask, why wouldn't I think Montreal would appreciate what our market has been on fire here for the last two years, but up until then, I think it was pretty slow and steady. So it definitely didn't compare with the appreciation. And once I saw what was going on in Toronto and in the other markets nearby, I wasn't really interested in investing in Montreal. And to be honest, I wasn't really interested in in managing my own properties. I developed a strong network. There are lots of meet ups and ways to meet different people that are involved in real estate investing in Toronto and markets like Peterboro and I decided to create a network of people that I'd work with that would help me manage these properties. So I took. A challenge,
Dave Debeau [00:06:03] a hands off thing for you right now.
Jared Henderson [00:06:06] It is, but I would say that it didn't come for free. I've had to have changes in property management. I've had to build the network. And it's about constant communication with the people that you're working with to ensure that you're getting strong service. That's comparable to as if you were living close by your property.
Dave Debeau [00:06:28] Makes sense. All right. So when you're when you're buying these properties in Peterborough, are you buying them as preexisting student rentals or are you buying a single family home and turning it into a student rental?
Jared Henderson [00:06:42] I'm buying a single family home. My archetype is a raised bungalow, so it's got a lot of light in the basement, preferably a lot of windows that are already there in the basement. So I don't have to create new windows, which costs three to five thousand dollars per window. Preferably it's got a side entrance or rear entrance so that we have different ways of of accessing the units. And it also lends the ability to create a second suite down the line. So although I'm doing student rentals right now, I like having multiple exit strategies. So, for example, if the student population dries up and there's too much competition with investors like myself are concentrating on cash flow and filling up all these rooms, I can either do a single family by just converting it to a nice new home or I can duplex the the building to go back. To answer your question, I'm looking for homes that have about three bedrooms. And what I'll do is we have a recreational room in the basement that's usually about 10 by 20 feet. And I'll turn that into two bedrooms and I'll turn the space next to the kitchen into another bedroom if the living room is large enough. So I'm usually able to leave enough room for some living space, a common room, if you will, and turn a three bed into a bed and generate revenue with a lot of it has to do with the layout of the place. Yeah.
Dave Debeau [00:08:20] Is that kind of the sweet spot is six rooms to house,
Jared Henderson [00:08:24] six beds is a sweet spot in terms of good cash flow and manageable results. Once you go seven rooms plus I hear I haven't done it yet. You need an extra kitchen. It becomes just more more demanding on my my manager. And there is, as do you say, diminishing marginal returns that you're receiving through adding extra bedrooms and also just health and safety as well. Right. The intention is not to make it an uncomfortable living space. It's to create enough living space so that, you know, six people can live comfortably under one roof.
Dave Debeau [00:09:04] So I'm just remember back to my university days. That's quite a time ago, but so a few things around a logistics popped into my mind. So I'm thinking it's six people. Is it typically coed or is a typically have all males, all females? It doesn't really matter. How do you how do you set up your.
Jared Henderson [00:09:25] It's actually coed most of the time. There's no intended preference. I would give a big shout out to my property manager who definitely screens. Well, I think that's that's the number one thing you want to make sure pass the the normal criteria that you have a real good feel for this person, that you understand that they're not going to start large parties cause mischief and also knowing the other tenants that are in the building, making sure that they're going to get along, that they don't foresee any conflict. So he's really been strong at that. So a lot of people have big apprehensions about student rentals. They think that all of the guys are just going to to trash the place. They're going to have parties and you're going to have to do so much work, it's not going to be worth it. I haven't found that to be the case at all. You know, if you screen properly and you treat people fairly, they're going to treat you fairly back.
Dave Debeau [00:10:24] So what is the typical tendency in a student rental? I mean, because know school goes by the semester. Are you renting out by the semester? By the school year? By the year? How do you how do you guys do that?
Jared Henderson [00:10:38] Yeah, so I aim for year long leases. Most of my students are at Fleming College, where you're having certain. Terms be one to three years versus typical university, which would be four years. So with these shorter periods of time, I do have a little bit more turnover. However, there is some flexibility. If I do have a circumstance where, you know, I've got an opening for eight months and I've got that one room to fill, then I will be amenable and make that adjustment. So long story short, the decision is made on the fly based on the house's need. But I do aim for one year
Dave Debeau [00:11:18] their typical tenants, you're going to school, do they take the summers off? And if so, what do you do for those those four months in the summertime when they're not using you're trying to get them for a year long lease. Are they actually in there all year long?
Jared Henderson [00:11:33] Some are. Some are. And even if they're not, I've had success filling out my homes in the summer, they would be slightly less occupied. But we're talking four to five rooms complete versus six over the summer now, which is which is fine.
Dave Debeau [00:11:50] Yeah. And what would you say? I know this where we are located, there's a huge, huge, huge international student population. Is that a big part of your business as well?
Jared Henderson [00:12:02] It's starting to become now that both schools are admitting more international students and they're representing a larger demographic. Yes, absolutely.
Dave Debeau [00:12:12] And just kind of wondering how the covid thing is affecting that, because, you know, a lot of a lot of kids went home and may or may not be coming back to the new semester.
Jared Henderson [00:12:21] Is that is that a lot of the international students are the most highly retain tenants that I have. Because, you know, if you think about someone I don't know who whose parents live in Ottawa or Toronto and they're going to university in Peterborough, most most students would just say, OK, well, I'm going to go home for the summer and not pay rent. A lot of international students don't have that option. And so they'll stick with me throughout the entire year. And in the case that they're not in school, they're finding local work. You know, they've got summer jobs right in Peterborough. This is a diverse economy there. So there is more stability than one would think. Absolutely.
Dave Debeau [00:13:00] Yeah. OK, very cool. Good to know. So, Jared, I got lots of questions for you. So are you typically doing this on your own or you're working with joint venture partners or investors? How do you go out and buy your properties financially?
Jared Henderson [00:13:16] So originally I started doing them all by myself. I've got in Peterborough, I've got two that I own in my own name and the other two I've started taking on money partners.
Dave Debeau [00:13:29] OK, very cool. And just to give us the gist, so the kind of house that you that you pick up and that you convert into a student rental by taking that three bedroom bungalow and hopefully creating five, if not six rooms in there, give us an idea of what would that place typically rent out for as a single family home? And what are you able to rent it out for with your normal occupancy as a student rental just to get an idea of what the difference is?
Jared Henderson [00:14:02] Good question. So typical house right now that I do own that would rent out as six beds. I'm getting in between five and six hundred dollars per room, so that would be three thousand to thirty six hundred. However, I do cover a lot of expenses. No. One, I cover all utilities and Internet and depending on the house, sometimes cleaning services. So there is a lot of value there in the package deal. And if I were to rent that out as a single family home, we're looking at something closer to realistically two thousand dollars. It could be between two and twenty two hundred where we would be, you know, as we say, plus plus where the family would be taking care of the expenses. The utilities. Yeah.
Dave Debeau [00:14:51] Yeah, so that makes a huge difference on the bottom line, because if that single fan because again, you got to take into account you've got expenses, right? You've got your mortgage, you've got your property taxes, you've got all your normal expenses with that. So would you say that that the cash flow, because it's a student rental, probably, I'm guessing somewhere in the range of five hundred to a thousand dollars a month, more than it would be as a single family home.
Jared Henderson [00:15:19] Yeah, you know what I would say five hundred, because depending on who you ask, you know, a lot of people inflate numbers. I really like to tell it like it is. And I would say five hundred versus a thousand simply because a lot of the utilities are high when you have six, six people,
Dave Debeau [00:15:36] six young people,
Jared Henderson [00:15:38] electricity. Yes. Young people, water, electricity, free laundry. Right. So I've got laundry machines there that are being used hopefully just by them. And you monitor it to make sure it's not excessive. If I notice that certain months things look out of whack and I'll address it with my property manager. But I'm competing in a market and I'm charging market prices. So in order to make more profit, I'm running it as a student rental where I'm generating, I would say five hundred versus a thousand. Going back to the original reason why I started doing student rentals, I would hesitate to say that I put this. I wouldn't want to rent it to a single family simply because I wouldn't want to get stuck in this position. I was before in Hamilton, where a lot of people might, you know, everything looks good on proforma. And until you get hit with an eviction or certain problems with the major tenants, which are which could be a family that is either going through a tough time or just isn't paying you, one would have to go through that to realize that you don't have many options versus students or students. There's nothing wrong with healthy turnover and a little bit more work involved to to have that steady income going back. I don't know.
Dave Debeau [00:16:55] And lower your risk radically. Yeah, because, I mean, that's the way I see it. Single family homes vacant. You're one hundred percent vacant. You've got a six six bed student housing, you've got one or two vacancies. And there you still got four or five to keep you afloat. Makes a big difference.
Jared Henderson [00:17:12] Exactly.
Dave Debeau [00:17:13] It hasn't been a lot of fun. If people want to find out more about you, what's the best way for them to do it there?
Jared Henderson [00:17:20] Check me out on Instagram at age fifty five. Believe you put some of my contact info in the show notes. We can go from there as well and be happy to talk about real estate, what I do, or if anyone's looking to get into the game, advice on the approach to getting their first property. I love talking about it some.
Dave Debeau [00:17:38] Very good. Thanks a lot. Nice to meet you. Thanks so much. Likewise. Take care. Talk to you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast. And you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom. Take care.