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How to Invest in Student Rental Condos with A.J. Keilty of Varsity Properties

Podcast Featured Image 15

Andrew sits down with A.J. Keilty, the President and CEO of Varisty Properties, to talk about student rental condos and their newest project University Suites in Kingston as a potential condo investment opportunity.

A.J. Keilty Interview Highlights

00:40 Recent Podcast Review
1:25 Who is A.J. Keilty and What Is University Suites?
5:05 Background on Aj Keilty & How He Got Into Real Estate
8:18 A.J. Keilty’s First Investment Purchase
10:24 Going “High End” in Kingston
17:03 What do Condo Investors Need to Know About Kingston?
21:33 Is There Anything Else like University Suites in Kingston?
24:30 The Rental Rates in Kingston
27:23 Difference Between The Average Kingston Property and University Suites
29:13 When Do Most Properties Get Rented for the School Year?
31:38 Appreciation Rates in Kingston
33:43 Why Student Rental Condos?
36:27 House Keeping Services & University Suites
38:49 The Pride and Passion Behind University Suites & Its Location


Varsity Properties main page

University Suites

Varsity Properties Oshawa

A.J. Keilty on LinkedIn

A.J. Keilty on Twitter

A.J. Keilty Interview Transcript:

Andrew: Hello and welcome back to the True Condos Podcast. First of all, my apologies at my voice sound a little strange this week. No, I did not take up three packed a day, smoking habit. I’m just fighting of a little cold here so bare with them. I’m very excited about this week’s show because I’m going to be talking to A.J. Keitly of our city properties of about a new condo investment called University Suites. You may have heard of it already. You’ve seen some ads or heard some ads about it.

Before we get to that, I have a new review on iTunes that I want to share with you and that comes from Joe Toronto, goes by the name of, and Joe says, if you’re interested in the Toronto Condo Market, you will want to spend some time listening to Andrew’s interviews. He’s guest list is awesome and his questions and insights are thoughtful. Thank you Joe for your review and if you would like to leave a review, please do so by going to iTunes, searching for the podcast and clicking a review. Reviews are very helpful in getting the word out about the show and so that more people can benefit and learn from all the great guest and experts that we have on the show. Please leave me a review. Thank you.

Now, like I said, I’m going to be talking to A.J. Keilty. He’s the president and CEO of Varsity Properties of Kingston Ontario and we’re going to be talking about University Suites. Quick overview. University Suites is a new condo coming up in Kingston right next to Queen’s University campus. It’s a project aimed directly at condo investors and the investment model is based off of other wildly successful projects like Sage Condos and Waterloo and maybe you’ve heard of the academy condos at the University of Toronto Scarborough which sold out in just about three weeks time back in June this year.

Basically, what this projects you’re getting a guaranteed rental income plus, you’re also getting full management so that nothing for you do either and units are fully furnished, so that’s a very interesting package for the condo investor. Why student rentals? Well, higher education is booming industry in Canada in case you haven’t notice. The growth rate of university admissions is amazing. If you’re in the housing business, for people going to university and it can be a great market because your customer base is growing every single year. One of the objections that some people have and the reason they say don’t want to invest in Toronto Condos is that you don’t get good cash flow, that is you rely more on capital appreciation, the price is going up then you aren’t getting rental income in you pocket every month from your tenants.

Now, if you’ve been following me for any amount of time, you know that the condos that I invest in myself and then I teach my clients to find in investing, they are all great at producing cash flow, mostly because we’re buying them below market value. If you’re an uneducated buyer and you just look at the so-called average Toronto which the media often likes to talk about the average condo does this or that and get to find the so-called average Toronto Condos. Anyways, when you break down the numbers on this sort of average bases, then you’re looking at the rental numbers you’re not going to be very impressed.

What the student rental condos, something like university suites, they produce amazing positive cash flows and when you consider that the price points are significantly less than downtown Toronto pricing, it’s my belief that every condo investors should have something like this product in their portfolio as they build their condo investment portfolio for retirement.

Okay, so anyway, I interview A.J. Keitly here and he’s going to give me the rundown on how he got started in real estate, talk about what the rental housing might market, what that rental housing market is like in Kingston. Excuse me. I also asked them some tough questions on behalf of all the skeptical Torontonian condo investors who might be thinking maybe this is you. Why would I invest in a condo in Kingston?

For all the show notes on this episode and to learn more about A.J. Keitly and varsity properties and University Suites, just had on over to Keitly. Now, here is my interview with A.J. Keitly.

A.J. Keitly, thanks so much for your time today. I appreciate you being on the line giving us this interview, looking forward to it.

A.J. Keitly: Thank you so much for having me. Happy to help.

Andrew: Yes, why don’t you start by telling everybody a little bit about your story? How did you get into real estate itself? What’s your background? Where did you come from and how did you get to where you are today and tell us about what you’re doing today? Give us a little bit of that.

A.J. Keitly: Absolutely. I did a commerce degree at Queen’s and essentially, like all commerce grad, I followed everybody to Toronto. My first job was actually at Procter and Gamble wherever it is possible …

Andrew: Okay. Where are you from? Sorry, where are you from originally A.J. Keitly? Are you from Toronto area? Are you from Kingston area?

A.J. Keitly: I’m born and raised in Kingston.

Andrew: Okay, so you know Kingston inside and out. You’re from there and you’re there now obviously.

A.J. Keitly: You bet you.

Andrew: You did the Queen’s thing. Local boy goes to Queen’s and then you ended up in Toronto.

A.J. Keitly: Yeah, I had been in Toronto essentially and I ended up working in a career that had a path, a very established group act and I realized that my aspirations are probably a little bit larger than what I could establish in a career. I started doing all the research in the real estate world. Essentially from there, I came in conclusion then I had to get into commercial real estate to learn and then after a very short period of time, everybody here in Toronto realized that Kingston really was home and I need to be back in Kingston where my family was.

For me, that meant re-digging my practice from just office leasing and to, not so much residential but more apartments, multi-reps and looking at into the retail industrial world. I basically plowed every single dollar and made it in broker’s commissions into student housing.

Andrew: Okay.

A.J. Keitly: Time, it was simple, single family homes were you load them up with lots of people inside of them and you’re going to integrate return and that’s who we’re always going to began is, I began with a single home and lease it out using some of my marketing experience at a rate that was much higher. 30% more than the market was used to see and the one key thing we began at first property was housekeeping services. To this day, the housekeeping service included in the rent is been a whole mark of varsity properties and one of the defining characteristics the service that we provide because there’s so many great things no only just for owners to be able to see what’s going on inside the properties, but also residency of booze and help them through their long term school year by having little touch points that become home to [inaudible 00:07:28] Queen and it’s a good feeling to live. It all began with the first property, varsity property, housekeeping services was the big part of it this has to stay as well.

Essentially, I worked as a [inaudible 00:07:42] broker and over the course of four years. I then eventually brought in my university into business. They were engineers and had, ought a great experience and so they were able to work on constructions and development side of business and look for the financing, and those two people are making partners, [Bernard Lematrin 00:08:04] and [Oscar Hugh Hanson 00:08:05] and we’ve been basically now friends for 19 years and it’s a bit part of the last eight years, we’ve been business partners.

Andrew: Right.

A.J. Keitly: That’s podium development.

Andrew: That’s podium develop, okay so Oscar and Bernard, your partners are sort of podium development side of your business and yourself. You’re the varsity properties side of the business. That’s really interesting. You started in Toronto as you did commercial real estate doing leases and things like that in commercial area and then you went back to Kingston and you took the sum money that had earned and you bought your first investment house like a student rental house. Tell us just … I’m always curious to your people’s first purchase. What was that purchase? How much was it? Where was it? What did you run it for that sort of thing?

A.J. Keitly: Absolutely. I decided I didn’t have all the experience so I was able to do a deal with somebody who did. Gentleman [inaudible 00:09:08] had the decades and decades of experience in architect globally who bought old places and fix a month. Usually he would keep them but in this case I was able to give him to sell one of his recently fix the places to me.

It was a pretty simple deal. It had all the great home marks of a new money down deal the best we could and try to give him some of my youth [inaudible 00:09:30] and enthusiasm and he was getting a little on in his career so he was happy to structure deal with me that allowed me to pay basically all about $10 upfront. Then solely overtime paid down a second mortgage and refinance it at the end of, I think it was a three year term originally. That’s how we began so we brought…

Andrew: Do you remember that purchase price was in that first out?

A.J. Keitly: I can’t recall precisely but it was around 400,000 I think, $450,000 [inaudible 00:10:00] the most.

Andrew: This is about when?

A.J. Keitly: This is 2003.

Andrew: About 2003, okay. Yeah.

A.J. Keitly: 2003 is when this all started out and we went to work. I want to say we with my then girlfriend and soon to be fiancé and now wife, we went to work in basically creating the most amazing property that our customers could ever imagine so we at the time …

Andrew: Why did you decide to do that? When Kingston … I know Kingston a little bit. Kingston served in Queen’s area know for the student ghetto and low quality student housing. You decided to go high end. You decided to really … It sounds like you’re shaking up the market a bit and totally putting it something out there for that it wasn’t out there.

A.J. Keitly: Exactly right. We decided to go high end where for decades really had been the low end of business and a lot of, a whole bunch of lack of respect of for the customers essentially. I just grew up in a hotel just down the street, just down the road and say, again [inaudible 00:11:02]. I bring it. Hotel mindset to the real estate world super services point for support …

Andrew: Interesting. Your family’s owned the hotel, is that answer …

A.J. Keitly: Yup, it’s right. Yes so it’s …

Andrew: Okay.

A.J. Keitly: [Inaudible 00:11:15] again on [inaudible 00:11:16] Ontario.

Andrew: Yes.

A.J. Keitly: When I approach the housing business from that side of the world and so, it really … I bright something very new because for the most part, there’s always been a master slaves, landlord, and tenant relationship especially for students who most [inaudible 00:11:30] taka advantage of the fact that students [inaudible 00:11:31] is much experience indication in the world of renting. In the end, I saw that the real customers are not the student. The real customers are really actually the parent, the hind of students.

They want different things than perhaps students want. They primarily what I want to a safe and secure place where their student can be able to survive. Parents, they stay a long time, while the money, 18 year. Send you kids to school somewhere, not really aware but they have these savings and they want to make sure that this most important asset in their entire lives, their children have that most incredible opportunities to succeed.

That’s typically means a safe and secure place just close to campus. For most part, in Kingston, up to that point in time, the houses were very, very rundown and there is always been a location default. If you’re close to campus, you’re least overnight and because there’s very few option and huge demand and real supply, [inaudible 00:12:26] have to work too hard to get tenants.

I decided that let’s just, this is one of the opportunities, let’s just change the model. Let’s give the most incredible place that is super easy. We’ll just make everything included. We’ll find the way to give you in that wireless free at a time, that was huge. That was brand taking new free rose, and there [inaudible 00:12:45] sucks.

Then we also included housekeeping services. That’s all kind of again and from that point forward, we had great rents, more than we had previously had with the original owner and we just keep going. We refinance and we bought some more properties and solely overtime we grew from owning and renovating properties to actually developing. That’s where my partners and my housemates were extremely useful because they had experience in engineering and finance. That’s really where it comes down to in building properties. You got to be able to deal with all the various leverage required to get properties of the ground and financing as a huge private [inaudible 00:13:22 and curating, zoning and applications to get zoning and design a buildings are a big part of it. My two partners, [inaudible 00:13:30] that type of business and we work extremely all together. We all know the answers together ourselves and we take the operating part and we separated to one that faces residents of varsity brand and then one that faces the cities, municipalities or buy yourself of condo units. That’s how it runs.

Eight years now, we’ve been partners and now ten years varsity has been in business, celebrating our 11th anniversary this November and we’re really excited about this model for years. We have had people approached us say can you manage my property for me, or can I buy one of your varsity properties or can I buy all of your company, a chunkier company and we’ve always said now and because there’s never been the right models to make quality of property there. We can constantly put our brand on, put our name on and say yes, this is a varsity property.

We said 2-1/2 years ago to create that product so people can buy where it actually piece varsity properties through a varsity properties design and call you developments design and condo unit. Basically all the same services that you would get at a regular varsity properties but you have the convenience as an owner of buying and selling it as you choose.

It’s build to the standards that we set which is a very important thing to remember because there’s so much low quality product out there in student housing. Our properties really shining and standing that have been high quality alternatives.

Andrew: Wow that’s great. Really interesting I really like just piecing the whole story together from your growing, your upbringing in a hotel environment and then flipping the model on its head with your first rental property in Kingston going high end when everybody else was going low end. It sounds like you had a homerun with it right away and then you started, you partnered up with your partners and then you started building more student house that took to expand the model and now you take to the next level actually building a condominium where you can invite other investors to participate in your same model under your same brand what you’ve been building for ten years.

I think that’s really cool to see that evolution. As it comes along I think it’s really exciting for you to see it also get to this point.

A.J. Keitly: It certainly is. It’s been a long time coming. We really have an amazing culture and amazing you know, people here at varsity properties. We’ve had, we’ve waited a long to build … We had the right culture before we offered this opportunity to outside folks. That’s a big part of it, right? You have to have the right people on the bus and so, for us, we now … I’ve reach the scale and have the systems in place to be able to look after these large scale communities. We just opened up a property in [inaudible 00:16:15] actually about three weeks ago. It was our largest community at. We have 260 residence that moved in on the first of September and they received their products on time. That’s the most important thing. After 22 buildings that we’ve constructed and lease, we have delivered on time 100 percent of the time. That makes it very easy for parents to be able to say, yeah, you know what? I would pre-lease your property. I’ll give you my deposit because I have confidence that you delivered on what you say you’re going to do. That student housing is absolutely critical because quite frequently it’s not delivered on time with these issues.

For us, we know that our capacity and ability to deliver the next project already depends on reputation of previous project. We push really, really hard and schedule really carefully and make sure we deliver things on time so people get exactly what they’re expecting when they’re walking in the front door.

Andrew: Amazing. Let’s talk about Kingston now. A lot of people listening are familiar with the Toronto Condo Market. A lot of investors here have purchase in the GTA but maybe some people are not familiar with Kingston. What condo investors need to know about city of Kingston and about the current stay to the housing marker there, can you give us a overview, of course of snapshot of what’s happening right now.

A.J. Keitly: Absolutely. I’ll start on the demand side and that’s a really interesting story. Kingston is anchored by three institutions on education side, Queen’s university of course, as we all know, RMC, Royal Military College and Saint Louise College which is all community college. It’s education town and has been for many decades, almost 200 years now.

There has been a culture of excellence that exist and it continued to draw in a very, very top students this community that seemed to learn. I must apply on the demand side, I think it’s very fascinating is that we have a school that currently is about 24,000 students at Queen’s university and the university itself is actually just built two brand new residences. Are they’re on the ground building them right now. As the ability for 500 new first year students. That creates is the demand for three, basically three times that and out off campus. Because when you live in the residence in your first year, you have live in under your first year and you’ll find housing elsewhere.

500 new seats in the first year, it creates need for 1,500 new beds for the next three years. It’s very exciting time because there’s an increase demands for our product for the off campus housing as the university used to expand and have expanded continuously. It’s one of the top rank schools around and they’re actually, being very careful now they grow and every time they do, they still get way more applications that they ever could possibly fill.

The downside is very, very good. What’s interesting too is that the university itself is made up of students who are 95% out of time residents. They grew up in a place out in Kingston and there are 85% from the GTA. There’s a huge need for rentals because 95% of this students come in looking for a place to run for a short term between three to four years basically. Then you turn over to the supply side and what’s really interesting is that Queen’s university is situated on Lake Ontario, it’s right on the lake. There’s no chance you can build anything to the south which is great. Physical barrier.

Then over to the east, is a heritage area which is again unable to [inaudible 00:19:42] it’s constrained so you can’t build new supply there.

Andrew: This is the east side of the campus.

A.J. Keitly: That’s right. It’s called the [inaudible 00:19:42] district, it’s what’s called.

Andrew: Right.

A.J. Keitly: Beautiful architecture. It’s one of the things that Kingston known for. Then if you go to the north, there’s a lot of properties slide up in tiny, tiny pieces and it’s hard to assemble but it’s used a pieces of land. There have been a lot of barriers to actually building new quality product because it’s so hard to get enough property close together to go and build the scale required. Also, I can’t forget, the rents are so high every where because of huge demand. It’s hard to actually by the land cost. That’s another issue. Then basically, you’re saying that the slow [inaudible 00:20:20] that campus student area removing to the west.

Those are all the areas around the campus so we have a very constrained location and where we can actually build. On top of that, there’s also zoning constraints. Kingston had some very difficult zoning to yield, figure out to put high identity tall buildings. We have situation where there’s pretty much only Princeton Street where you can be able to build on and Princeton Street as it goes form east to west actually goes further and further north in a way from campus. We are the closest place you can be to university avenue right at the corner of Princeton University.

We can’t build closer the [inaudible 00:21:01] zoning isn’t really permitted to go anything closer to campus. We got a really great occasion for all these physical barriers which basically constraints the supply …

Andrew: It sounds like you’re in the suites spot in terms of location.

A.J. Keitly: Right. Exactly right.

Andrew: You can’t get any closer and you don’t want to go any further away, so this is a suite spot, isn’t it?

A.J. Keitly: Exactly right. Things about 2-1/2 years to assemble all the pieces of land to make this project come together.

Andrew: Right and so again, so finishing up the on the supply side, what is … Is there anything else being built like this. Has anybody tried to do something like this or just like you say, due to physical constraints and due to zoning restrictions that no one’s done this yet and this suggest, you’re sort of the first movers in this type of a product.

A.J. Keitly: I like to say we created the idea of conduits like this. I think we’re following examples in Waterloo. We’re following examples in [Gwealth 00:22:08] and other examples on London Ontario. It’s not a new model but it’s definitely new for Kingston. There hasn’t anything like this built here before which is I think a very unique opportunity to be to the market with this kind of thing. There are other housing developments coming online but they are farther away from campus.

As a student’s number priority, as a parent in the one priority was of course safety and security. Student’s number one priority is location. Kingston has additionally unique factors to it. There’s no on campus parking for people so it’s hard to drive to campus like say with a western and parking a parking lot or UIT and parking a parking lot and walk to campus. There aren’t those kinds of parking lots available on campus because it’s a very constrained urban campus. Then there’s the issue of transit. If a transit not as frequently serviced as you might expect for the area. It’s hard to live far away at community campus by transit. It’s really cool to Kingston.

Going to by bike and the snow issues that come with riding a bike make it really tough to bike a long distance. Really lots of walking that’s why walking is the number one thing for students, is they want to be super, super close.

They want to roll the bed. What might seem like a long ways away in Toronto is just an impossible distance away and Kingston so put into perspective we have people that will frequent us well I want something financer in campus. We show them something new. It’s 10 or 12 minutes from campus. No, no 5 minutes from campus. I don’t want to even think of anything that’s even 10 or 12. 10, or 12 too far, 15 minutes, forget about it. No way.

Andrew: Those extra 5 minutes are a deal breaker, right?

A.J. Keitly: It really is. It really is and the rents follow as well. Here we have a location that’s 5 minutes to walk, has also bikes lanes that go directionally to the building Dartmouth main campus to our building. It’s just truly you can’t beat. You can see campus from the front door of this product in this project. It really is an exciting opportunity and really a location which won’t be replicated. I think it’s a neat thing about Kingston is that it really is GTA market in terms of rent expectations. But we’re getting it lower cost land in the GTA. …

That’s one of the beautiful things about this project is. That’s the supply side. We have very limited supply close to campus. There’s not a lot of new product coming online. It won’t for a long time because of zoning restrictions and servicing capacity as well. It’s pretty cool. We’re really excited about this project.

Andrew: That’s great. Let me ask you if you don’t mind. I want to give you some questions. I want to ask you some condo investors from Toronto listening and have that Toronto bias. They only are use to investing here. Maybe there’s a little bit skeptical about getting into an investment in Kingston. Some of the questions they might be asking I want to ask you right now. Is that cool?

A.J. Keitly: Absolutely.

Andrew: Okay, let’s start with the rental rates. Now I’m fortunate to have a little bit of sneak-peak at some of the rental rates that you’re going to be guaranteeing in the project for investors. Now, how realistic are some of these numbers because they seem quite high or maybe a better question is are these like what kind of rates do you think someone will get for these types of condos in the future when the building is actually completed?

A.J. Keitly: Well one of the things that’s important to think about is that because we expect the proximity to campus will be a mA.J. Keitlyor driver of the type of resident that lives there. We get to think about the product less in terms per suite and more of per beds. If you can consider that a person has a child say that’s for 18 years and then basically that lifetime savings in three years on off campus rent there’s a lot of spending power especially when that spending power comes from the GTA.

We have GTA customers coming to a market and Kingston where the land is cheaper but still the rent are very high because of that huge demand are close to campus. Even right now, I mean it’s amazing. There are not properties that are amenitized like what we’re planning here. What I’m saying, that properties this is going to be the first property that has an off campus gym the way we have it here with the Yoga room and study rooms. The kind of programming that really makes a special place to live. Those really unavailable anywhere else close to campus. These are other all other properties that might be able to rent are usually single family homes or small apartment buildings which have zero amenities what so ever. They are also very inefficient to operate as well. They’re heating cost are higher there.

When you think about the rental rates that were getting right now it’s basically the same numbers we projected in this property. Slightly more just because the [LE 00:26:58] amenities are available but really we’re gaining [inaudible 00:27:00] right now. That’s the most amazing thing. People can’t even believe it when we like show them and tell the numbers that were getting on our existing product. The reason we’re gaining that number again in the high rent numbers is because all these factors I told you earlier extremely constrained supply and an increasing demand. Only increased demand but increase demand from affluent students and their families who really want the best for their success.

Andrew: Right, so you are getting these because as you were saying your getting these numbers or similar to them right now. When the average person who doesn’t know the Kingston market looks online, they might see ads for a room and a house for $600 or something like that. Explain to us like the difference between the average Kingston property and the types of properties again that your, that varsity property is renting out.

A.J. Keitly: I think you have a very good point there. These really are different than we may have usually seen. Quite frankly, if it’s September or after February and your looking online for a place to rent and still available for rent it is absolutely terrible. The quality is extremely low because if you have anything it’s where you stop. If it’s still available and it’s cheap, cheap, cheap it get us in terrible, terrible condition. Quite frankly you have to imagine there are some properties that have had no maintenance for 40 or 30 years. It’s crazy but that is something, that is all …

What really is important to understand is that after 10 years of building this brand of high quality student living Darcy Properties up command a premium and as simple as that. People expect now to get a level of service that they would not have otherwise be used to getting around here so they pay a premium for the brand and the experience that we’re able to revive your residence.

What’s really interesting is that we have now so much information and data. We’re always looking for ways to try and improve our systems. We can see what people want and are going to pay for. We strip some things out of our systems. We’ve added things to our systems. We create a product that really is designed to make a residence plays a lot easier when their attending school. That is the reason why we could easily get a premium over the properties that you may see available for rent. Again if they are available for rent in September their absolutely terrible.

Andrew: Right, good, great point. When do most properties get rented out for the September 1st start of the school year? When are the students actually signing the leases for those properties?

A.J. Keitly: That’s a great question. There are two mA.J. Keitlyor markets in Kingston for our business essentially. There is the undergraduate market and there’s the graduate market so I’ll start with the undergraduate market. We began our leasing or base our marketing on September 1st. As long as they arrive to campus we start doing events trying to attract their awareness to our brand hopefully make them become one of the residents into that 7 or 8 weeks later.

We began leasing our products usually October 15th and then we usually are done at leasing of our products typically around the end of January. All that leasing that is done are for leases that commence in the first day of May. That’s typically was the undergraduate market will be attracted to.

Andrew: Wow. That’s something that we’re definitely not use to in Toronto. You’re leasing out these properties 8 to 11 months if my math is correct, 8 to 11 months before the students move in. These places are leased out?

A.J. Keitly: Correct

Andrew: Amazing.

A.J. Keitly: Undergraduate market flows that way. The graduate market is a little bit different but very similar. The graduate market usually receives our acceptances around July 1st each year. They come to Kingston looking for places to live after they found that spot in the program. They usually are doing the leasing in the first week of July, usually by the end of July all the graduates have a found a place to live and the market evaporates basically.

What’s really, really great is that for the longest time graduate students have really had a tough time because they have to complete all these undergraduates students who basically have already leased up all the properties. There’s not a lot of amount of stuff available when it comes September.

We’re really thinking this property given the smaller suite sizes the studios’ and the two bedroom and the three bedrooms, they’re going to be very attractive to master students because there’re going to people who want a little more privacy who are used to having their own space perhaps or really had big house before friends and now they want to have their own space or a couple that might live together. We’ve design this building I think it could be attractive to folks who are in that stage of life. They come online and they usually do their leasing about 90 days to 60 days in advance at least start date.

Andrew: Interesting. What else I want to ask you about appreciation rates. Now if you look at big picture usually big cities like Toronto will appreciate real estate prices will appreciate at a faster rate on average over the long term compared to small cities.

A.J. Keitly: Yes.

Andrew: A very general statement. I know. But that’s sort of the thinking I think a lot of condo investors will have is say well you know what the cash flow looks good on this but I think it’s going to appreciate in value at all. Now can you speak to that from your 10 years of experience in the market?

A.J. Keitly: Absolutely so just about a month ago going through some more records to get rid of them. I happen to stumble upon each cancelled check from the lease that my partner is [Brian Oscar 00:32:29] and I had out property at 260 William Street. We were housemates there and the check was for a five bedroom … sorry, six bedroom house. I apologize. My share for my bedroom was $230 per month.

Andrew: Okay.

A.J. Keitly: It’s a very respective now. The same size it has we do have property very similar in location and quality to that one the same amount now is a little less than $700 a bedroom so a pretty substantial fling from $230 up to $700 a bedroom in a course of ten years.

It did a very good market because university keeps expanding. The supply is not capped up. There has been no large scale developments completed to able to take up that supply so as naturally rents rise as people kind of start to compete for the best locations. That’s where the value is created in my mind to. I mean if you could invest into a property that’s going to have cash flow from day one but also have the ability for you to get capital appreciation and equity build up too hopefully as your putting in mortgage it really is a three magic pillars in my mind of why great investors choose real estate as big part of their portfolio.

Andrew: Perfect. Why student housing? Again, a lot of people skeptical about renting to students. Students are terrible tenants. They’re going to break my appliances. They’re going to put holes in the walls. What would you say to that?

A.J. Keitly: It’s a great question. I’m glad you asked that because I’m also afraid to answer but we really have found a magic bullet. Its comes to housekeeping services that is the system that we built of checks that we have allows for our residence to be able to live in the properties and be no different than any other resident. The concern down in the past has been the animal house mentality. The reality is that change greatly over the last decade. What use to be a situation where if you get an undergraduate degree you’re almost guaranteed the job?

Now an undergraduate degree is basically high school. You have to do really well in university’s actually undergrad to get into a master’s program. Consequently what you’re seeing more and more is that people are wanting to do extremely well in their undergraduates. They have the marks to be accepted in the next program. When that’s done is this move people from being in larger homes with 5, 6, 7 people living together into smaller suite sizes. There’s less action, less craziness, less partying quite frankly. We even build our suites with smaller living room areas to be able in our larger properties we house 4 or 5 bedrooms to be able to actually make it harder to get the group together.

These suites we have here over university suites they are designed again studio is bachelor in one so its very hard to get those big, large gatherings and crowds that might cause problem in other properties.

We have don’t get me wrong we’ve got amenity space where people can book in those spaces to do those kind of things. The reality is that we have a much more mature demographic being in these of properties, to live there and to lease. At the end just a hammer around the point we are kind of 10 % of the entire in flow market. The other 10 % would say is seniors and there’s an 80 % in the middle where people just rent an apartment then you’re on your own.

See is how they usually comes with fully furnished. People check in them all the time make sure grandma and grandpa are okay and look at senior’s student housing to very similar cousin to that business where we rent them fully furnished. We have people check in every two weeks or a month to make sure things are going to okay and to touch up the suite and make sure that they smell right. [Inaudible 00:35:59] damage the neighbor so if anything has occurred we’re on it super fast. 40 % of our work orders come from our housekeeping staff who actively looking to actually create value by reducing expenses. As fast as you can repair something the less likely there will more damage that build up over time.

Those were the things that really make it work for us to be able to essentially have this fantastic revenue stream. But then protect from the down side of expenses of high maintenance [inaudible 00:36:26]

Andrew: Just to clarify so is housekeeping services going to be part of the university suites condo or is that just what you’re saying current portfolio rental properties under varsity properties.

A.J. Keitly: Actually that is actually both so we have setup for the condo operation to be managed by varsity properties then varsity properties will also provide a resident services package for folks that say want to rent their suite and not live in it. They’ll need a resident service system put in place. We can provide that too.

The resident services package allows us to take a percentage of the rent and in exchange for that find the resident … Market the residents, find them, put them in the leases and then include housekeeping services in that same fee to make sure that we are in there, clean the suite for that owners resident constantly every month. It’s a whole turn key package which allows for an owner to not to worry about the hassles of actually getting the money in the door. All they have to do is sit back at home and collect the rent checks.

Andrew: Well that’s amazing A.J. Keitly. You really treating the asset in the first three years as if it’s your own?

A.J. Keitly: It is and it really is our own because we are relocating our home office to the ground floor of this building. Our space is right front center at that property is at that main corner. This is our home and we want to make sure that the property looks fantastic. It continues to stay leased for a very, very long time because it’s the reputation of our entire firm is staked on the property.

Andrew: Wow that’s really a unique offer. I haven’t seen anything like that before and I think it really speaks to your brand as a company and the quality that you represent I think. Just the fact that your in it for the long term and you really want to have … You’re not just looking to maker some money today and be number. You want to actually develop a brand and develop a pattern I guess of success and quality over the long term.

A.J. Keitly: That’s right. This is just this one more step in evolution of our brand and of the resident’s experience. We fully believe that there’s an opportunity to create something that you can transplant from city to city hopefully. No matter where you have a child [inaudible 00:38:43] school someday maybe down the road you’ll have the ability to choose a Darcy Property to lease from.

Andrew: That’s amazing. Just in conclusion A.J. Keitly is there anything else that we should know about yourself or your company or about investing in this project?

A.J. Keitly: Well the main thing is that were very proud. This particular opportunity is very special because it’ll take an area that has had a really good opportunity for renewal. There’re a lot of great things happening. There’s a brand new street here tarts being built by the City Kingston, brand new light standards and brand new furniture, new sidewalks and new roads.

This is an incredible location that is getting our support both from the City Kingston and then from us bringing a concept here. To be able to welcome a whole bunch of new clients to our customers so our clients to our companies that we can invest along side and be partners with we’re super excited. We can’t wait to be able to unveil the opening day of this property to all the new residents. It’s very special. I mean I live only three or four blocks away from the site. This is home and always will be. We’re very excited to see university suites come to life.

Andrew: That’s great. Thanks again for your time A.J. Keitly and look forward to seeing you in Kingston.

A.J. Keitly: Thank you so much for having me. I appreciate it and look forward to talking to you soon.

Andrew: Okay, there was my interview with A.J. Keitly Keilty. I hope you enjoyed that. I think this project is really unique and I really think it offers something that every investor should have in their portfolio. I’ve learned a lot about the Kingston Market over the past few weeks from my conversations with A.J. Keitly and his team as well as my own research that I have doing. I think this project is a sure fire, great investment to get into. If you are already a true condo subscriber then you should have already received the investor package from this particular opportunity from me.

If you are not a subscriber then what are you waiting for. You’re missing out on a lot of good stuff that I do not publish in public forums. I only send to my subscribers. Make sure you go to and become one today. Again check out the show notes for this episode at Keitly. I pout up a video there which is all about varsity properties and what they do and what makes them unique. I think you definitely want to check that video out as well. Check it out Keitly. Thanks for listening to this episode and thanks for all your support. Bye for now.

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