Is Student Rental Investment Dead ?

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] Welcome back to another episode of the Canadian Real Estate Investor podcast.

[00:00:18] My name is Nick Hill.

[00:00:19] I'm joined today and every Tuesday and Friday by Daniel Foch.

[00:00:22] And today to start things off, we're going to take a little trip down memory lane you

[00:00:27] and I, Dan, a little bit in a style, yet.

[00:00:29] You remember university?

[00:00:30] Honestly, not really.

[00:00:33] Well, that might be other reasons but you know it feels like a lifetime ago at this point,

[00:00:39] those all-night study sessions for finals, the all-night partying which is maybe one of

[00:00:46] your days ever did any of that.

[00:00:48] The meal plan, you and I both went to Guelph which had the best meal plan in Ontario

[00:00:52] at the time and man that I take advantage of that.

[00:00:56] And the true lack of responsibility other than to just get your work done, you know, those

[00:01:00] were simple times.

[00:01:01] Is that what they mean when they say the good old days?

[00:01:04] It's funny because we're sitting in the studio here and we both just had to take extra

[00:01:09] strength advo for back pain so I think we are those were the good old days.

[00:01:15] I think we're at that point in our life where there are good old days.

[00:01:19] Yeah, I mean it certainly was.

[00:01:23] It's funny my university career at Georgia actually sort of actually launched me into

[00:01:29] being a landlord as well because I got kicked out of residence.

[00:01:33] It sounds like you.

[00:01:35] I'm actually, I used to be a bit of a bad boy.

[00:01:38] Oh yeah.

[00:01:39] The very good boy now but reformed.

[00:01:43] And so I, you know, I kind of pitched doing a student rental with my dad and here we

[00:01:50] are talking about student rentals.

[00:01:51] So anyway, they, university may be the good old days and maybe and we're both lucky enough

[00:01:57] to have great post secondary experience but sadly not the case for many people these days.

[00:02:03] It's obviously a very topical thing.

[00:02:05] There's been two policies kind of happening which we're going to talk a lot about in

[00:02:08] today's episode but two policy changes taking place that are designed to kind of fix

[00:02:14] that problem that's happening in the Canadian economy right now.

[00:02:17] So especially for those international students.

[00:02:19] Yeah, I mean one of the things students need when they attend universities is a place

[00:02:26] to live.

[00:02:27] It's kind of something you always need regardless of who you are or where you are and

[00:02:30] what you're doing.

[00:02:32] Now it used to be common practice for most first years to live in residence which are

[00:02:40] likely on or very near to campus.

[00:02:43] Usually in kind of a larger what would look like almost a mid-rise building made up of dorm

[00:02:48] rooms.

[00:02:49] Yeah, and then second year in the remainder of the time you're in school.

[00:02:54] It wasn't south right?

[00:02:55] You were in south.

[00:02:56] It wasn't south, yeah.

[00:02:57] South which is if this is a totally university a well thing but south is the reason

[00:03:01] that's like a prison right?

[00:03:02] Well they were designed by a Russian architect who had been known to he got famous for designing

[00:03:07] prisons and he designed these residences in a way that a riot proof.

[00:03:12] Yeah, essentially you couldn't congregate more than like 20 people or 15 or 20 people

[00:03:16] so it was these weird brutalistic concrete things and I lived there's like so many staircases

[00:03:22] of the world just like towers and staircases anyways.

[00:03:24] Yeah, my brother lived in the basement of south actually and it's not fun.

[00:03:29] I was in Valley too.

[00:03:31] Nice mountain.

[00:03:32] Super close to everything.

[00:03:34] Yeah.

[00:03:35] Anyway, before we alienate ourselves from the rest of the audience, we love and respect

[00:03:40] all post-secondary institutions in Canada except the ones doing the bad stuff that we're

[00:03:44] mentioning in this episode but yeah, I mean second year you know you're typically even

[00:03:49] your friends would get a house, a rooming house, you'd become roommates.

[00:03:53] You know, you'd live in a large four or five bedroom home everyone would kind of split

[00:03:58] up the rent, the landlord would probably be making a premium home what they would get

[00:04:01] renting it to you know family or something like that.

[00:04:04] Then these houses have multiple more bedrooms than your standard house or end user and I think

[00:04:09] we're starting to get to the point where it's maybe too many bedrooms like I think there

[00:04:13] was this Patrick Brown just came out did you see this?

[00:04:15] There's like 23 students of the other place 25, 25.

[00:04:18] 25 did you see that?

[00:04:19] Yeah, I mean come on like that is insane.

[00:04:23] Yeah, yeah.

[00:04:24] You are seeing student rentals have been a great investment vehicle for a long time and

[00:04:29] that made it made a lot of sense because all you had to do was buy a three or four or even

[00:04:33] maybe a five bedroom house, find where the windows made sense you could add a closet

[00:04:38] and slap up some drywall, add another room or two.

[00:04:41] I've seen student rentals that have easily more than eight bedrooms and sometimes an old

[00:04:46] massive Victorian houses that can be fine but you don't even need that many bedrooms because

[00:04:51] you're charging by the room instead of for the whole house so to wait to get a bit more

[00:04:56] of a return on that piece of property.

[00:04:59] For sure.

[00:05:00] Yeah and that was actually my first investment, it was a student rental house where I lived

[00:05:03] as one of the students.

[00:05:04] It was a great investment.

[00:05:05] It was definitely there were definitely problems.

[00:05:08] The students has tenants, I mean we circle back to the partying and all that stuff and

[00:05:13] in a lot of cases they were my friends who and I also lived with them and so it really

[00:05:17] taught me a lot about that whole experience of relationship management.

[00:05:22] Yeah and like kind of being, I don't know like that, you know trying to have like a friendship

[00:05:26] role while also balancing trying not to get your asses in the house.

[00:05:30] Same thing you have to do with like house hacking and stuff and I mean you're right Dan, they

[00:05:34] totally are great investments.

[00:05:36] They actually again have been one of the better performing asset classes especially within

[00:05:40] the kind of small cap real estate investing world again you do simple renovations, add

[00:05:45] another bedroom and drastically increase your ROI or your cap rate and you know I don't

[00:05:51] have any student rentals myself but I've worked with a lot of clients over the years helping

[00:05:56] them secure student rentals and I've kind of worked my way into that community and you

[00:06:00] know you're getting between seven and twelve hundred dollars a room in some cases.

[00:06:06] That's serious money.

[00:06:07] Yeah, I know it is wild and then I think there are challenges you know other challenges

[00:06:12] that come with tenants and financing some of these things.

[00:06:15] So sure, yeah.

[00:06:16] You know we talk about this I think we've done it before but like you know you'll often

[00:06:20] see if there's like ten or five different leases, lenders typically won't like that because

[00:06:25] they consider a rooming house and they don't want it to be a rooming house and so you need

[00:06:29] to unify the lease and they get more concrete for them.

[00:06:33] There are other lenders who will play with that space but typically they want it's not

[00:06:38] like they don't really care that it's a rooming house per se.

[00:06:41] It's the volatility and risk of like one bedroom leaving and the difficulty for you to

[00:06:46] fill it whereas if it's a unified lease and they come together go together which most

[00:06:51] student rentals do tend to be like few landlords are renting on a per bedroom basis I think

[00:06:57] like it's usually you get a group of students who decide to do that.

[00:07:00] Yeah, it is starting for sure as you're starting I think with the international student thing

[00:07:05] taking place where people move here and they don't have maybe not that aggregate or

[00:07:09] adults.

[00:07:10] They don't really have a group of friends right?

[00:07:13] And they're not going to residence any year one.

[00:07:15] Exactly.

[00:07:16] Because they're going to a strip mall college doesn't have a residence is the big problem.

[00:07:19] Yeah, but anyway I think rest we'll get to it.

[00:07:22] Yeah so you know although it is part of this episode it's not entirely what we're going

[00:07:27] to be talking about today which is sort of the student rental investment piece of it.

[00:07:32] Yeah, that definitely deserves an episode and we've I think we've been toying with one

[00:07:35] of those full deep dog with for a while and I think now is the time because this episode

[00:07:39] can kind of act as a bit of a foundation for more of the investment thesis around them.

[00:07:44] Yeah and I think like now you've realized the risk like in the course we have this continuum

[00:07:49] of what's risk, what investment falls in which risk category and I never would have

[00:07:54] ranked student rentals as a high risk category but it's super obviously we've just realized

[00:07:59] the legislative risk like based on what we're going to be describing today 50 your market

[00:08:04] your tenant pool just got capped by 50% by a policy overnight right?

[00:08:09] Well I mean and look we've seen policies have built very positive impacts such as MLA

[00:08:14] and the removal of HST and that kind of stuff.

[00:08:17] We've also seen them have devastating effects on certain markets like Airbnb and now

[00:08:20] potentially student rentals right so that's what we're here to talk about today is the

[00:08:25] kind of student rental crisis that we're seeing.

[00:08:28] Now there has been a massive amount of new students that have come to Canada to learn

[00:08:35] and they have gotten burned instead specifically with a focus on the housing aspect of their

[00:08:43] experience.

[00:08:44] For sure.

[00:08:45] Yeah so the number of international students at Ontario University is nearly doubled

[00:08:49] from 2014-15 school year to the 2021-2022 school year.

[00:08:55] The more than triple that college is, the majority of institutions built no new student

[00:09:00] residence spaces during that same period of time and we'll go through the numbers of

[00:09:06] housing standards.

[00:09:07] How is the facility of grown it is astounding but you know I think it's just really worth

[00:09:13] paying attention to and it is fascinating from a purely political perspective because

[00:09:16] and I'm surprised actually that the federal government hasn't pointed the finger more

[00:09:19] at the provincial government.

[00:09:20] It seems like the politically expedient thing to do because there's this thing that I don't

[00:09:24] know if a lot of people know this but the way that the student before the cap, the way

[00:09:29] that the international student program worked was that if a college issued an accepted

[00:09:36] an enrollment or enrolled somebody in school they were issued a temporary or student visa

[00:09:42] right away.

[00:09:44] And so that obviously created this huge thing that we're describing because Ontario now

[00:09:50] is 51% of all the students in Canada, international students in Canada and a huge article.

[00:09:55] So anyway, huge increase.

[00:09:58] So let's look at this article.

[00:09:59] Post-secondary schools must guarantee housing for international students according

[00:10:02] to the province of Ontario now.

[00:10:03] So Ontario colleges and universities will be required to guarantee housing for incoming

[00:10:08] international students.

[00:10:09] It does say incoming international students so it's not like not existing.

[00:10:13] Yeah.

[00:10:14] It's not like existing that would be okay, you know now we got to build another 500,000

[00:10:17] houses immediately.

[00:10:18] Yeah and there could also be like as soon as I saw this I was like they chose the word

[00:10:21] guarantee not provide very carefully right so it's not like they're expecting colleges

[00:10:25] to own about houses yet.

[00:10:27] So this could actually create vehicles to get to that housing.

[00:10:30] Yeah and so this could actually create an opportunity for those student rental investors

[00:10:33] and probably if we're starting to see kind of the sunset on that investment class I would

[00:10:39] be approaching the universities or colleges and saying hey I have this is already housing

[00:10:44] for five students you know they're going to turn over any year, two years, four years do

[00:10:48] you want the place or do you want to rent it off of me and sublet it.

[00:10:52] So that's the logical place.

[00:10:54] I've literally emailed every Ontario college president to ask them if they want it because

[00:10:58] it just makes sense and I like brokering deals.

[00:11:01] That's a good one so anyway the government will also review post-secondary institutions with

[00:11:07] a sizable number of international students and introduce a moratorium on new public college

[00:11:11] and private institution partnership Jill Dunlop set.

[00:11:14] So the announcement comes days after the federal government announced a cap on study permits

[00:11:18] for international undergrad students over the next two years which you're about to describe

[00:11:23] it.

[00:11:24] Yeah federal immigration minister Mark Miller announced the 35% reduction in the number

[00:11:29] of study permits this year so that number is 50% in Ontario.

[00:11:33] Yeah so substantial amount across the country and literally cut in half, cut the new visas

[00:11:37] in half for Ontario.

[00:11:38] And the move comes in response to a recent surge in international students that we've

[00:11:42] been witnessing over the last few years and immigration minister Mark Miller said it meant

[00:11:49] is meant to curb bad actors from taking advantage of high international student to wishes

[00:11:54] while providing poor education.

[00:11:56] So really kind of putting the problem into the light.

[00:12:00] Yeah their language, their language changed a lot too because like he was saying that

[00:12:05] the students were taking advantage of the system but I think it's just as much the systems

[00:12:08] are taking advantage of the students.

[00:12:09] For sure.

[00:12:10] It's a negative feedback loop at the end of the day.

[00:12:13] So premier Doug's Doug Ford's PC government made public colleges and universities cut tuition

[00:12:18] by 10% in 2019 then froze tuition at that level and did not provide a corresponding funding

[00:12:24] increase so what did they do?

[00:12:25] They went and started attracting more students that they could charge or were charging

[00:12:30] three excellent tuition or more butchers international students.

[00:12:33] So these post secondary institutions particularly colleges started enrolling more and more international

[00:12:37] students in an effort to recoup that lost revenue.

[00:12:40] The Ontario government said that it was acting to protect students and improve the integrity

[00:12:45] of the province's post secondary education.

[00:12:48] The challenges stemming from the recent spike in students coming to Canada including predatory

[00:12:54] practices by bad actor recruiters, misinformation regarding citizenship and permanent residency

[00:13:01] false promises of guaranteed employment and inadequate housing for students require immediate

[00:13:07] attention and collaborative action.

[00:13:09] I mean that is just a list of a pretty horrible university or college experience to me.

[00:13:16] The government measures include a requirement that all colleges and universities have guaranteed

[00:13:23] that housing options are available for incoming international students.

[00:13:28] But Green Party of Ontario leader Mike Schreiner said that it will do little.

[00:13:34] Housing doesn't appear out of thin air he wrote in the statement and this is like from my perspective

[00:13:39] you know it is a long run solution right?

[00:13:41] Just like all the solutions we're getting proposed.

[00:13:43] And so this is where we're going to get to the financing component of it as well because

[00:13:46] there were some changes at a federal level with the financing of this type of product but

[00:13:50] mandating housing without a commitment to help Ontario's universities and colleges pay

[00:13:54] for it is little more than smoke and mirrors.

[00:13:56] They go on to say that there's other critiques here from other politicians it's clear

[00:14:01] that the government would rather see post secondary institutions close then cough up the investments

[00:14:05] needed to keep them afloat.

[00:14:07] I mean we're going to go through it because we're going to break down a little bit of the

[00:14:10] numbers on what an apartment looks like in Vancouver versus at UBC.

[00:14:15] Yeah, fascinating.

[00:14:16] Like it's not like look, providing student residence like do you remember how much you

[00:14:22] paid for res when you're in Guilf right?

[00:14:24] Like I remember because I got kicked out I got my second semester back because I hadn't

[00:14:28] paid it yet or whatever.

[00:14:29] How much was that?

[00:14:30] I've no idea.

[00:14:31] Oh it was like it would have been double easily double what I would have been paying on

[00:14:34] a per bedroom race at per bedroom rate.

[00:14:36] Really okay because I think I was painting like 600 bucks a month back then for for

[00:14:42] my like sharing.

[00:14:43] Yeah, yeah second third year the house we had yeah.

[00:14:47] Yeah so I think I had a single and it was I think once it was like 800 bucks or 900

[00:14:50] bucks and rooms at that point were four or five or five.

[00:14:53] Yeah, I mean we paid 600 we had a full awesome house like it was expensive at the time.

[00:14:59] Yeah so anyway while I like while I think they're probably not wrong in that criticism

[00:15:04] it also I don't know if it necessarily needs investment from the province.

[00:15:08] I think that we just need to push these institutions to build housing and make the business

[00:15:14] case make sense.

[00:15:15] Like you know we're hearing about Queen's Inc.

[00:15:17] You have some stuff in here about Queen's right?

[00:15:19] Yeah, yeah.

[00:15:20] And so I mean like look like some of these institutions need the revenue so.

[00:15:23] Yeah so it goes on to say that government will work closely with the sector to reach

[00:15:29] an outcome that provides stability and certainty for post-secondary institutions and students

[00:15:35] alike with further details to be announced and in about a month's time from when this

[00:15:42] episode is being recorded so the end of February.

[00:15:44] The Ontario Confederation of University Faculty Association said that the announcement misses

[00:15:51] the mark by coming with no funding so they got their hands out saying please we need

[00:15:58] this stuff.

[00:15:59] I mean it's just you know announcements don't pay the bills here.

[00:16:01] It's tough though like it's hard for a like at scale to house so if you have I think

[00:16:07] we have 800,000 international students in Canada like 2% of Canada's population is international

[00:16:12] students right now.

[00:16:13] I think if half of those are 51% of them we know are in Ontario right?

[00:16:18] So half of them so 400,000 people like the house 400,000 people is like in the billions

[00:16:24] of dollars right?

[00:16:25] It's not like a city yeah it's a mid to your city.

[00:16:28] Yeah so it's not like a province of Ontario could just like write a check.

[00:16:31] Like I think that people like they're calling it funding but it's not like funding like

[00:16:36] the only way to do that is either through bonds or alone and so which is the federal

[00:16:40] governments like I don't know if the province actually had like I kind of get that they

[00:16:45] don't I don't know if they actually understand like how the and most politicians don't

[00:16:50] I guess understand now the capital stack for a built like building some work right

[00:16:55] like even university is going to get a construction loan to build something they're not like nobody

[00:16:59] is just paying cash you know what I mean so it's not and it's like and it's not like

[00:17:04] the province could do that like it's so much money that nobody can just write a $15

[00:17:08] billion check right?

[00:17:09] Like well that's not just the money it's the public the public sector doesn't have the

[00:17:14] resources in my opinion do this right like they need to figure out funding through again

[00:17:19] a creative capital stack a number line the private sector to help implemented.

[00:17:22] Yeah yeah and so we'll get to it because the

[00:17:25] federal government has been doing some work on on that they announced it after this on

[00:17:30] the 29th they may announce about it which we'll get to later in the in the episode but

[00:17:34] Dunlop also announced a provincial review of programs offered by post-secondary institutions

[00:17:38] that have a significant amount of international students to ensure the programs are appropriate

[00:17:42] quality and meat labor market needs.

[00:17:44] I like that one I do I think you know I'm a few and I talk about serious we've been

[00:17:48] talking about it like the need for people to to get into skilled trades in Ontario and Canada

[00:17:54] you know I think the other thing is a lot of students are becoming disappointed because

[00:17:59] most would imagine that a student comes here they get an education their objective is to

[00:18:05] get permanent residence and a lot of them are being sold that they're or being not sold

[00:18:10] but told that that's the outcome.

[00:18:13] That's right like that's what's going to happen but what happens is the degree that

[00:18:17] they get is is not good enough and Ontario employers are blacklisted some of these strip

[00:18:22] colleges and so they don't get a good enough job when they finish school and then they

[00:18:30] can't qualify for CRS which is PR the permanent residency.

[00:18:35] And the negative feedback loop continues yeah yeah and so I do like that like all of these

[00:18:40] things are like it's like we're just realizing that we should match immigration to who

[00:18:45] housing started should match the study permit or educational types program types to what

[00:18:51] the labor market is demanding like are we just getting here I guess basic economics you

[00:18:57] think but hey yeah so anyway yeah so the the federal announcement included barring students

[00:19:04] in schools that follow private public model from assessing postgraduate work permits and

[00:19:09] territories and universities have come out against the federal governments move to cap

[00:19:13] international student visas visa story because in a 2022 report from Ontario's auditor general

[00:19:21] it said that the provinces schools have become increasingly dependent on tuition fees from

[00:19:26] international students so let's go off in a quick tangent here Dan for a crazy story

[00:19:31] you mentioned this earlier Queens University prestigious this is the funniest part no offense

[00:19:39] to Queens but Queens students were like you know they're like the rich kids yeah I mean

[00:19:43] I remember going to hear that here that Queens has no money yeah I mean like you go to Queens

[00:19:47] it looks it looks like you know it's not brutal in I don't think so no it's not I know that's

[00:19:55] in the you know Western Western's and I know that's Sir Richard Ivy Business School right

[00:20:01] you're gonna cut that from the episode yeah can we cut this editor doesn't exist it's right I mean

[00:20:05] it's prestigious regardless right you go to yeah only McGill is an Ivy League school Canada's

[00:20:10] Harvard is Canada's McGill they call it there we go okay well there are no Ivy League schools in

[00:20:15] Canada by the way and we are aware of that well Nick wasn't but he is now yes thank you live

[00:20:19] live learning here on the podcast yeah I learned something every time we do these two yeah so Queens

[00:20:23] again prestigious university they recently made the news but not in the way that you may imagine

[00:20:31] here's one of the many headlines that came out about Queens recently Queens could go under without

[00:20:40] to courses and that is from the national post now then I pulled a few excerpts from this

[00:20:45] article can you read these quotations please sure so it says Queens has instituted a hiring freeze

[00:20:51] for faculty and staff and is facing a deficit in June projected to be around 50 million the

[00:20:56] faculty of arts and sciences bears the brunt of that made worse by fewer international students

[00:21:00] of provincial tuition flea freeze inflation and fewer retirements than predicted gravy trains ending

[00:21:07] for this country right now man it really is like things are kind of coming down let's just take

[00:21:12] those piece by piece you know international students fewer them okay well they're directly reliant

[00:21:18] on tuition because they're a school and that's their customer so that's not good provincial tuition

[00:21:24] freeze again tuition frozen not good inflation Queens is feeling it just like everybody else

[00:21:31] and fewer retirements well that's because the people that we're looking to retire are also dealing

[00:21:37] with inflation and everything else they're like you know what I could probably use a couple more

[00:21:41] years here milk this gravy train before it entirely runs out yeah that or and or because I think

[00:21:47] a lot of public sector is dealing with this like the work remote is like very easy to blend in like

[00:21:53] semi retirement a lot like that's why I'm waiting and stuff like that right so yeah and a little

[00:21:58] bit more than ten year right so you're not just being like a yeah why we're talking professor you

[00:22:02] have worked two hours this week yeah you need more out of you yeah so the next one says I am concerned

[00:22:08] about the people that you've described the junks and other people as you put it in precarious

[00:22:12] positions but I'm concerned about the survival of this institution because unless we sort it out

[00:22:17] we will go under Queens Proboast Matthew Evans I'm just gonna go out on a limb here and say

[00:22:22] that would not be good for Canada's economy if one of our most prestigious schools no go yeah so

[00:22:27] Evans told faculty and staff that 85% of the university's operating budget is from tuition and

[00:22:32] operating grants both of which depend on student numbers so let's I think we Queens needs to

[00:22:39] lever up and build some student housing and sounds like you know in like axon who we had on the show

[00:22:43] David based on Queens yeah in King's thousands and thousands of thousands of

[00:22:48] mental units the opportunity was there right yeah but they they got their they have been in the

[00:22:54] wrong business for their business and now all of it almost looking at housing you know it goes

[00:23:01] back to that the McDonald's principle right you're in the wrong business you're not the business

[00:23:05] of hamburgers you're in the business of real estate yeah no one knows but everyone should be in

[00:23:09] the business of real estate I guess I mean and I write you're right then I mean if Queens

[00:23:12] and Figures said they'd be in a different positions because you know Queens is a staple as far

[00:23:17] as universities go right I mean it is it doesn't it's not Ivy League but it's got Ivy growing on

[00:23:22] buildings on the campus that's what I was that's a human I mean it's been around for over 180 years

[00:23:31] and you know back in 1841 did they think the student the you know international students would be

[00:23:36] a reason for this thing to go under it's a legacy school the beautiful campus and Kingston itself

[00:23:42] beautiful city it relies heavily on the student population to support that local economy I mean

[00:23:48] they have a population of over 30,000 students yeah I mean it does like I have some too big to fail

[00:23:55] vibes like something's gonna happen here but I can't see it but it is a fact that I'm hoping

[00:24:01] we're talking about it is scary that is interesting actually that it's like not some kind of thing

[00:24:05] that's just like a rumor in the back it's like this isn't the news and almost a cry for help right

[00:24:11] like it's yeah they're almost like calling the bluff of like hey too big to fail over here like

[00:24:15] come fix it would be a shame if someone came and bailed us out you know it's a it's a sign from

[00:24:21] my perspective when you're seeing this and seeing because all of these institutions pay interest

[00:24:26] rates right like they do they all they all they all subject to inflation they're all subject to

[00:24:30] interest and yeah yeah and so I think when you think about like everyone just thinks of the economy

[00:24:35] like Enbridge is a good example Enbridge just laid off 650 people because they're feeling the crunch

[00:24:40] of the modern economy I don't know how I'm surprised that if don't put those employees wages

[00:24:44] on my bill because they've seen to put everything else on my Enbridge bill but it's almost like

[00:24:49] Bellon Rodgers as well it's like how do you guys have problems yeah yeah there's only two options

[00:24:53] in Canada but this is and I think I really do I think that this is like there's just been a lot of

[00:24:58] mismanagement in the Canadian economy like I think we have the most the most unprofitable companies

[00:25:02] in the world yeah Chuck was just telling us that or you were you were talking about that last night

[00:25:07] where I cited the data point but then it ended up being Chuck was like it's because of there's

[00:25:11] a lot of people just writing down their taxes yeah high tax but it's also a lot of commodities

[00:25:15] companies mining companies that show losses on paper yeah yeah let's still I mean that number

[00:25:19] came in at over 60% of of Canadian businesses being non-profitable correct yeah I mean yeah yeah

[00:25:27] yeah so yeah so I guess you're telling me that students are a little lion upon students to be

[00:25:31] successful with this Queen's yes I mean who would have who to thought and so anyway it's pretty

[00:25:37] clear when you look at the numbers some of the data we're about to read after this other

[00:25:41] piece here is a little bit crazy but I think the question like is if this whole shake up is

[00:25:46] happening what does it mean for student rental landlords just quickly because they know we're not

[00:25:49] going to go all in on the on the student rental piece yeah so I mean landlords are probably hoping

[00:25:55] that these colleges universities start maybe making offers on their portfolios because a lot of

[00:26:00] the student rental operators that I know they don't just have you know you don't have one student

[00:26:04] rental that's that's your asset class that's your investment thesis you've built out the power team

[00:26:09] and the systems around that business to support it and I mean if you're an Ontario student rental

[00:26:13] landlord maybe worth considering approaching the colleges to sell your properties instead of

[00:26:18] competing with them or approach us and we'll get you on Dan's email campaign yeah I mean like

[00:26:28] I and I have I approach all of these colleges directly to see number one if they're willing to

[00:26:32] or looking to take that I mean that's the most agile supply from my perspective on I would be if

[00:26:36] I would yes and supply I mean there's a distance by already used for that purpose and then even go

[00:26:40] back and have as you said have those have those operators yeah you know there could be VTBs in

[00:26:45] place so it could be rental owns in place yeah it's probably too let's fight due to like

[00:26:52] sophisticated not sophisticated but like it's not just wouldn't make the most sense like they're

[00:26:56] gonna get like they could just get a blanket loan buy up everything yeah in Kingston like they could

[00:27:01] do that they're capable of doing that and then they're get them oh now all of a sudden you're

[00:27:05] investing like now it's easy for somebody to be like hey do you want a bailout because you have

[00:27:09] assets now not just a 50 million dollar deficit but you know my my thought is at the same time

[00:27:15] they're also gonna have to start off loading taking a lot of that housing stock because that like

[00:27:20] Kingston's a good example bunch of old like mansions right they're cut up into into multiple rooms

[00:27:27] for students and some of them are really rough to be honest with you um some are fine but

[00:27:33] that you know that those are all houses that could eventually be occupied by families and that

[00:27:39] student rental supply is competing with housing for families so they you know they buy a bunch

[00:27:43] today they have the agile supply they're solving the problem that they're being asked to deal with

[00:27:46] by the province colleges and universities that are being asked to deal with this by the province

[00:27:52] and then in the same time they're also creating new supply by building through some of the

[00:27:58] funding programs that we're describing start bringing that online moving people over moving all

[00:28:02] the students over and freeing up that existing supply because like I mean student rentals is like very

[00:28:08] it's it's their their dorms right in a lot of cases like they don't need to all be apartments

[00:28:12] and stuff like that so when they're when they're built in that way it's like it's very purpose

[00:28:17] built right and houses you know it's not it's the least efficient use of a house to cut it up in

[00:28:24] this only room you know what I mean yeah so anyway the the potential viable strategy and navigate

[00:28:30] the challenging landscape of student housing market in light of the recent policy changes is

[00:28:35] probably to think about what these institutions are gonna do do you want to you want to start me

[00:28:42] off here with this data from because it's so that we're talking about universities but colleges are

[00:28:48] really where we're seeing some like crazy crazy stuff happen so so give me this data on student

[00:28:54] enrollment in colleges so Ontario colleges specifically increased their international enrollments by

[00:29:01] on average 240% in just seven years talk about returns and built almost no new residence homes so

[00:29:13] again across the I don't know 25 to 20 let's say colleges here that will get into growth percentages

[00:29:21] on an average 240% and not no new residences almost so I think it was like 7% increase in housing

[00:29:29] so okay yes so not 240% so call it 233% increase with no houses then so the most ridiculous ones

[00:29:37] on the list are and I'll start off with the two ones that are just astronomical loyalist college

[00:29:42] between 2014 to 2020 or 2014 to 2015 and in 2021 to 2022 the change in growth represented as a

[00:29:53] percentage loyalist college grew by 4,671% 4,671% you forgot Northern college which grew from 0

[00:30:06] to 3000 international students for infinite growth percentage oh I didn't yeah okay I didn't even

[00:30:15] I probably thought that was just kind of a blank one there now infinite yeah so from zero

[00:30:21] to try throwing that in your model we expect our enrollment to grow by infinity then what's next

[00:30:26] there just under 4,000 to college at 3,390% 9990 almost 5,000% and then hit us with the next three that

[00:30:38] make up the the craziness on the list here Dan and yes so canador college grew from

[00:30:43] 336 international students to over 6,000 international students for growth of 1700%

[00:30:50] Conestoga college grew from

[00:30:53] 763 to 12,000 international students for a growth of 1500% and st. Claire college grew at just over 1000% so

[00:31:06] I mean I those are just like not

[00:31:10] not really like real numbers like yeah I mean it's just you're bound to get to a consequence and

[00:31:15] we're at the consequence but like it's I feel like anytime you see like again you know that there's

[00:31:21] that old little Wayne quote men lie women lie numbers don't so I moved out of my condom into the bank vault

[00:31:28] now that's the first part of that is numbers don't lie okay so when you start and people keep track

[00:31:34] of this you don't just randomly be like oh I think there's a couple more students here than

[00:31:37] than the last couple years when you grow by something in a thousands of percent and there's nothing

[00:31:43] being done on the other side of that to to support that growth like we're not talking about like

[00:31:49] Facebook users here okay we're not talking about like oh like Uber has grown from no one using

[00:31:54] the rideshare program to like you know thousands of people use this isn't a tech stock or a tech

[00:31:58] platform these are human beings that are coming here to add you know go through the post-secondary

[00:32:03] education process and don't have anywhere to live though you know you can't grow almost 5,000

[00:32:09] percent and not build any homes and expect everything to be okay yeah no and I think that they're

[00:32:14] really seeing the political consequences now I mean it's all anyone's been talking about over

[00:32:18] the last little bit it's all policymakers are trying to solve for over the last little bit I mean

[00:32:23] in the last week we saw three different policies two from the Fed and one from the province

[00:32:27] to try and fix this problem yeah and and had they had they been thoughtful about doing it like

[00:32:32] I don't even care if you if you grow I'm of the camp that immigration is necessary to grow the

[00:32:37] Canadian economy and for sure and and this type of population growth I mean literally stat can came

[00:32:41] out today saying that the birth rating Canada is the lowest it's ever been so we obviously knew

[00:32:46] it was still growing if we want to keep entitlements up and if we want to have be able to have

[00:32:51] baby boomers retire we need people to be contributing to that system and taking care of them participating

[00:32:57] in the economy and paying into pensions and and you know it's it's that's the reality but there's

[00:33:03] a way to do it and like you said numbers don't lie the math just has to work so anyway yeah so okay

[00:33:09] so absolutely wild stats there now again another little wild piece of information here from friend

[00:33:15] of the show and the guy that we write the newsletter with pH floor go follow him on Twitter if

[00:33:20] you don't already do that Dan you brought this up as a teaser earlier yeah Vancouver rentals versus

[00:33:26] UBC rentals walk us through this little Twitter thread here yeah so he says let's take Vancouver as

[00:33:31] an example to see how lucrative student housing can be so renters are super high in Vancouver according

[00:33:36] to zonper median renter $3,000 a month or 54% above the national average and CMA she actually just

[00:33:43] came out with their report which we're going to do an episode on a couple of weeks and the next

[00:33:47] couple of weeks will record it probably in the next couple of days here so average price per square

[00:33:51] $4.3 and 3 cents so rent rent per square foot four bucks now let's compare that to UBC student housing

[00:34:00] on campus and say the rates they charge highlighted are the rent prices for nano sweets and studios

[00:34:05] and the approximate square feet of those units table at the bottom shows the rent premium UBC student

[00:34:10] housing commands so the nano suite is five dollars and 31 cents or 32% higher than

[00:34:20] the alternative apartment and the studio suite is six dollars and nine cents per square foot

[00:34:27] or 51% above the rents per square foot of a regular unit in in Vancouver so this is just

[00:34:39] absolutely insane because the nano studio is 145 square feet okay 100 minutes it's literally

[00:34:49] but that it's a bedroom but it also has a kitchenette in it it has a three-piece bathroom in it

[00:34:56] and it has a convertible desk slash bed and as a bookshelf don't forget about the bookshelf that's

[00:35:01] a full that's an expensive bookshelf because that's like that must take up two three square feet

[00:35:05] right there seriously yeah you're paying uh 12 bucks a month for that day with this sit there

[00:35:09] it's better be reading Nick okay the studio and take it from guy who once lived in a studio apartment

[00:35:16] studios are small this is a lot smaller than a studio apartment this studio is 215 square feet

[00:35:24] and um we don't have a bookshelf in here to expense so we do have a dresser that would take some

[00:35:30] of the valuable five to seven square feet the studio oh it does have like a little dinette too

[00:35:35] that's what I upgraded in the studio but you know it's interesting because when I used to get chirp

[00:35:38] because I had a kitchen and a bat lane bathroom actually my current house has a bathroom off

[00:35:42] of a kitchen which I would like to change but this is a very deliberately designed bathroom off

[00:35:47] of a kitchen kind of thing like you could I mean you could probably be using the toilet and the sink

[00:35:54] at the same time oh yeah you'd definitely feel like especially if you play basketball you got long

[00:35:58] arms you're just they're looking pretty close there man just um crazy to see this I mean

[00:36:06] I mean again this this is just shock and a sea that how how expensive this stuff is

[00:36:10] and the conclusion that he put in the twitter thread was you know get into the business of

[00:36:15] of building student housing like yeah like seriously like that you know I don't have a ton of

[00:36:21] faith in public private institutions or or public institutions to build things cost effectively

[00:36:28] and so they're probably bound to mess it up and not make it a profitable venture in some way

[00:36:32] well though the some way is overpaying for construction because I mean all this construction

[00:36:38] cost guide came out and you know that if you look at public the private sector per square foot

[00:36:43] cost versus the public sector per square foot cost it's just hilarious right it's like they should

[00:36:47] overpay because like they don't know really what they're not experts in that field or I don't know

[00:36:52] or the contractors know that you know they're sure there's some there's problems in market

[00:36:57] 10 percent point yeah so anyway the point being that if they do it right they could just they

[00:37:04] could actually turn this into revenue generation and maybe we wouldn't have to close down queens

[00:37:07] because they become a student rental provider queens homecoming is too fun to close it down

[00:37:11] we have a good time going here so okay so this next piece is is is from one of my favorite government

[00:37:17] agencies here the financial consumer agency of Canada otherwise known as FACAC yeah they put out

[00:37:24] some great information for students that are looking to maybe plan their budget and help their

[00:37:31] budget and it's titled managing your budget as a student so let's take a look at what the

[00:37:37] information they have here covers as a and this is for prospective students to keep in mind and

[00:37:42] it says cost to include in your budget we'll just rip through this quickly Dan because I want to get

[00:37:46] to the last piece on some of the new legislation and funding for this stuff but I just thought

[00:37:51] this was funny and I wanted to include it because there's there's such a blatant student housing

[00:37:56] crisis and then of course we got FACAC over here putting out essentially hey guys don't forget

[00:38:01] about tuition fees this will include your the school here attend your residency the proviseteratory

[00:38:07] and that's really helpful what's the next one on here I got to pay my student fees well this

[00:38:12] says you have to pay to a student union books other course materials living expenses I mean the

[00:38:18] living expenses one is this stuff is interesting when it comes to international students because

[00:38:24] you know assuming that this is your first time in Canada you're coming here to study you now all

[00:38:29] of a sudden are like I have no idea like you know many are coming from places where the cost

[00:38:33] of living is far cheaper and so before they said you need to prove that you have $10,000 in living

[00:38:39] expenses to come to get a student visa to come to Canada they increase that by over 100% I believe

[00:38:45] yeah I think it's 20 something 20 just over 20 32 yeah anyway it's over 20 grand now which still

[00:38:52] is like okay yeah you might have one year worth of just living it but just rent yeah but it's like

[00:38:58] you know like I get that because students are we're literally coming here and they'll be like oh wow

[00:39:04] I can't afford anything like I have 10 grand in my pocket and I'd be lucky if I make it through

[00:39:09] the first year of school and it was obviously creating big problems you're seeing 10 cities of

[00:39:14] students like imagine being an international student coming to Canada wanting to pursue you know

[00:39:19] higher education in another country and having to live in a tent in a park because and because like

[00:39:26] look there's a bit a degree of buyer beware to this right caveat emter a degree of that but if the

[00:39:32] government saying like hey here are our requirements and they kind of setting out recommendations I mean

[00:39:37] people trust that and then come here and are very disappointed in I mean a bad situation yeah

[00:39:43] I mean if the advice they're giving is hey living off campus you may choose to live off campus

[00:39:47] rather than residence you may choose to live in a tent off campus let's just one right and

[00:39:52] this could mean living with you it was one so there was one happened in in North Bay and

[00:39:57] do you remember this one so there was this couple living in a tent and then the university or

[00:40:02] the college like clap back and they were like oh that there's just like a publicity stunt or whatever

[00:40:06] and it was back and forth on like the media because the college was like saying it was like I mean

[00:40:12] the fact that even if it was which I don't think it was a publicity stunt even if it was like

[00:40:17] the fact that people took it seriously and was like it got attention as believable publicity stunt

[00:40:22] says enough I think about the situation so to yeah I mean look the the focac stuff goes on to just

[00:40:29] be like you know for example a small town of Nova Scotia maybe a lot less more expensive than a

[00:40:35] rental in downtown Toronto remember to consider food costs and heat and you know

[00:40:40] the resources being provided for these students right like don't forget entertainment costs and

[00:40:44] consider transportation it's just it's just so basic and almost ridiculous that you know it's like

[00:40:52] here's a list of like the standard things that that are going to cost you money in Canada likely

[00:40:58] everywhere else and we're not going to do anything other than tell you this now that aside let's

[00:41:03] move on to the final piece here Dan and get this in here quickly because this is this is an

[00:41:07] important piece yeah so so the universities and this is where this new policy comes into place but

[00:41:14] the university's uh this is November of last year they after the fall economic statement was released

[00:41:20] they basically lobbied publicly lobbied the government so if you go to univcan.ca Canadian

[00:41:24] universities it's like their association let's call it they release the statement saying oh the

[00:41:28] federal government outlined two key new investments in housing $15 billion in new loan funding to

[00:41:33] the apartment loan construction program which was the other CMHC financing for uh purpose

[00:41:38] but rental so let me try and describe this quickly so MLI select is mortgage loan insurance so that's

[00:41:43] where banks lend the money but CMHC ensures them MLI stands for mortgage loan insurance and basically

[00:41:49] CMHC buys those loans off of the banks and sells them off as Canada mortgage bonds

[00:41:56] the uh this this program is actually direct money that is lent from this and I know a lot of people

[00:42:02] have had success with this you used to be called RCFI I can't remember what RCFI stood for I will

[00:42:06] tell you in a second but anyway then they and so this is it's a different program but you can still

[00:42:12] apply through CMHC so um $15 billion towards that which has now been cha- the name has been changed

[00:42:17] to the apartment construction loan program um and they said it it does not explicitly allow Canadian

[00:42:23] universities to be collaborators in solving our housing crisis universities are willing partners

[00:42:27] to the federal government provinces municipalities and private not-for-profit housing providers

[00:42:32] been working to address housing affordability and supply issues while I I don't I don't know whether

[00:42:37] or not I like think that that's true because they could have gotten this profitably as a like

[00:42:44] through a private route anyway they're saying they need they've been calling on the government to

[00:42:48] take three major recommendations on housing incentivize building with low-cost financing which is what

[00:42:53] this is describing expand eligibility for the national housing strategy to include post-secondary

[00:42:58] institutions and increase the supply of affordable housing in communities across the country so

[00:43:04] give me the first one here incentivize building with low-cost financing yeah it goes to say that

[00:43:08] universities are facing challenges with all the stuff we talk about on the show rising construction

[00:43:13] rising borrowing costs limited funding and a need for way more student housing they're addressing

[00:43:19] these issues by building more residents repurposing existing buildings and exploring innovative

[00:43:25] housing options but they need more support if universities had affordable financing from the

[00:43:31] federal government for student housing construction they could definitely achieve more so then they go

[00:43:36] on to say the expand they're asked about the expanding eligibility for candidates housing programs

[00:43:41] they said that the national housing strategy in 2017 was aimed to reduce homelessness and support

[00:43:47] community housing however after six years the strategy no longer meets the diverse housing needs of

[00:43:51] Canadians I feel like everyone is just going at this government right now it's crazy like you know

[00:43:55] I mean I'd sit think that universities typically were a little bit more supportive of current

[00:43:58] administration but apparently not it says currently student housing and retirement homes are not

[00:44:03] eligible for government programs like the RCFI program rental construction financing initiative

[00:44:08] programs what it stands for allowing the use of these funds would provide more students with safe

[00:44:12] affordable and convenient housing options by expanding eligibility for the national housing strategy

[00:44:17] programs and providing low cost financing universities can quickly and efficiently address

[00:44:21] student housing concerns however the overall shortage of affordable housing in communities across

[00:44:26] Canada needs a broader solution universities play a vital role in the community's creating jobs

[00:44:32] stimulating local economy and providing essential services they urged the federal government to

[00:44:36] collaborate closely with post-secondary institutions to address candidates housing affordability crisis

[00:44:42] so well that's the shot what was the chase Erick? Yeah so the follow-up shot in the chase are

[00:44:48] alike and so the follow-up to the news release who's going to university style with the you know I love it

[00:44:52] yeah I didn't take a shot gun this last piece here get it over with the so unlocking funding for

[00:44:59] student housing and this literally came out will time stamp this as this came out two days ago

[00:45:03] January 29th of 2024 from the Department of Finance it says as part of Canada's economic plan the

[00:45:09] government announced further action to build more homes faster by supporting one before I think

[00:45:15] that's where I've heard a couple times here that's not a necula rindra what come up with something

[00:45:19] way better than that building more homes faster by supporting construction of student housing then it

[00:45:25] goes on to pump Canada's tires and say we've got a bunch of great learning institutions here

[00:45:29] and they're talking about the strimo colleges yeah of course right then it gets to say to help

[00:45:35] fixes the government of Canada will be offering low cost loans to build more student housing on

[00:45:39] and off campus by reforming the apartment construction loan program we will help more students find

[00:45:46] housing they can afford close to where they need to study and help to ensure that those homes

[00:45:52] are more available for families who live in the same communities year round so essentially

[00:45:58] the same thing everyone else is saying we need more homes we need financial products to get there

[00:46:02] we need labor to get there we need construction costs to go down to get there and that's pretty much

[00:46:07] it so there's a lot at play with student housing and Dan maybe this will be great for when we do the

[00:46:14] the kind of student housing investing episode in a couple weeks we can see where we are updates wise

[00:46:20] on on this legislation and I'm gonna get a I'm gonna get a college president on the show let's

[00:46:25] go let's talk to Queens and I'm gonna force them to buy properties off of our audience on the show

[00:46:31] yeah and if any we I know we've got a bunch of people that listen that our student rental investors

[00:46:36] you got any stories you got an opinion on this reach out to the podcast throw us an email and

[00:46:40] we'd love to kind of opine on your opinion or your situation on the podcast that would make

[00:46:48] some great content so until then hope you got a ton of value out of this and uh and we're able to

[00:46:53] identify some trends as to what we're talking about in some opportunities because that's why we do

[00:46:59] this so thanks so much for listening we'll see you on the next one. The Canadian Real Estate Investor

[00:47:05] podcast is for entertainment purposes only and it is not a financial advice. Nick Hill is a mortgage

[00:47:12] agent with premier mortgage center and a partner in the GNH mortgage group license number 10317 agent

[00:47:21] license m21003037. Daniel Fosha is a real estate broker licensed with rare real estate

[00:47:30] a member of the Canadian Real Estate Association, the Toronto Real Estate Board and the Ontario Real Estate

[00:47:36] Association.