Understanding Student Rental Financing

Student Rentals, from a Financing Standpoint

Michael: So, obviously ladies and gentlemen on this webinar tonight, I'm not Daniel Patton. My name is Michael Zanzini from BM Select from Butler Mortgage, Daniel and I are partners here. We've been working together for close to a decade with our firm and our brokerage. 

We're very proud to announce we are actually for four years in a row the number one mortgage brokerage in the country, again, which we're very proud of. We just got that accolade and found out about a week and a half ago. Which we're very proud of, but without further ado guys, student rentals, from a financing standpoint, I'm going to break it down.

Different banks that finance them, different rules, different underwriting, qualification criteria for them. So, with student rentals, now a student rental can mean many things. So, I'm going to break it down into three categories, essentially. Like the first one, a rooming house.

If we're renting to multiple individuals and we're renting to actual, not students and we're renting to, let's say adults 7, 8, 9, 10, bedrooms. We've seen some crazy things in our times of doing mortgages. Unfortunately, banks have issues when a property is deemed a rooming house, renting to multiple individuals, renting out multiple rooms to separate people and how they view it.

Basically, the feedback we've been getting over the years is the banks view it almost like a hotel. It's short-term, it's not a long-term tenant. Most of the time, there's no real leases in place. A lot of these people are just paying cash. They may be a couple of months moving on, so on and so forth.

So, those can be challenging with financing and typically the institutional banks and even B lenders of the world, won't touch them. So, you're looking at private lenders in that category of a room. The second category of want to touch on it's like a regular single-family home or a duplex or triplex.

Now, perception is everything to a bank on financing guys. So, for example, if an MLS listing or an appraiser goes out to a property and the MLS listing states, great for students, assuming students close to university. Perfect for investors, assuming students as tenants.

If it walks like a duck talks like a duck, then it's probably a duck. So, in that same breath a bank is going to deem it as a student rental. Now I'm going to get to the bank. And who finances them and what their policies are, but just to stay on that point is if it looks and walks and it is a student rental and the whole purpose it's going to operate as a student rental.

Then it's a student rental and where I'm going with this is if you are buying a property that is a regular single-family home or a duplex. And it's vacant or it's just a regular normal listing and an investor to go buy a house. If your intention is that you might rent it to a group of students, or you might rent it to a family, or you might rent it top and bottom to a couple and to someone else that kind of opens up your more options to which banks will finance them, because if it's perception and not deemed a student rental to a bank if it's just a regular one. Now, we can approach different lenders with different qualifications to get you maybe better rates to shop you around.

The last component is a typical registered licensed student rental, something that's actually licensed with the city operating as a student rental. That's black and white. So, if it's operating as a student rental then it's a student rental. So, with that now being set with the three kinds of categories of these multi-years.

Student rental categories. However, you want to say it is who's actually going to finance these deals. First things first, as we all know, and if we don't know when you buy an investment property and your sole intention to a bank is it will be an investment. As a rental, the bank says we need 20% down.

Not everyone if you are putting less than 20% down will finance a student rental or an investment property. Now who will finance them. First things first, 20% down RBC and CIBC are the main banks that will finance student rentals. Fantastic. We've I can't even count how many thousands and thousands of investors we worked with over the years when it's a student rental operating as a student rental RBC, and CIBC are the two major lenders who will finance them with 20% down.

Obviously granted we qualify and all of that 20%. TD bank in our experience, we'll consider student rentals with 35% down. Have we seen clients get acceptances maybe with 30, but typically 35% down. Same with Bank of Montreal, BMO as well. We'll consider them 35% down. Scotia Bank, probably what we joke at our office and our brokerage is the most investor friendly, great bank to work with as an investor.

For whatever reason, they don't have an appetite for student rentals. Unfortunately, now another couple of lenders I want to touch on. If we've heard of them, we call them B lenders or the alternate lenders. HomeTrust equitable bank, two major lenders in the mono-line space. Meaning when clients are first time home buyers buying a primary residence, putting less than 20% down.

These are two of the biggest, monoline smaller lenders as we call them in that competitive space, but they're actually massive. And the alternate B lender space, they charge a little bit higher rates when you're on the B side of the business and charge small fees. But these guys will consider student rentals with 35% down as well.

So, in a nutshell, student rentals are fantastic guys. They could be a cash cow, great properties. Great for investors. That's just the whole purpose of this webinar. Tonight, from the financing side is number one. You have to be working with trusted professionals, working with a good mortgage broker, working with good real estate agents to find the properties and just being aware and understanding of the banks that you need to navigate through to secure a fine. That's pretty much it.

You can reach out to me at michael@bmselect.ca. And you can also reach my partner who was going to be joining us tonight. Daniel Patton, his emails, daniel@bmselect.ca. 

Francois: Thank you very much. And you finance any type of property. Do you also get into commercials?

Michael: Absolutely. So, on our brokerage side, we handle everything. Anything from student rentals to single family homes. So, one to four-unit properties you'll tend to always be under the residential category.

You can get exceptions to still be classified residential. And then once you get the six units and above you're under the commercial category. So, to answer your question, Francois, yes, we do everything. Commercial lending, residential lending, whatever you guys need. Perfect buyers, selling buys, principal residence, like mortgages, whatever financing you guys need. We're always here to help.