Attention: Mr. Evan Sidall

October 18th, 2016 · Kids & Family

2016-08-12-14-21-56Dear Mr Sidall,

I have written about the ridiculous assertion that our vacancy rate in Toronto is 1% or some ridiculous small percentage, and I have figured out why the numbers are completely skewed compared to other countries.

Basically the vacancy numbers include all the condos ever built instead of just the ones that are for rent or in the rental pool.

This means that our vacancy rate number essentially means nothing and even tiny fluctuations represent thousands of units on the market.

500,000 condos are built

100,000 are in the rental pool

10,000 are currently for rent or vacant or under renovation

A proper vacancy rate calculation would end up with a 10% vacancy rate.

Current calculations would end up with a 2% vacancy rate.

I actually did consider during my investigations about the computation of the vacancy rate last year, doing this myself, but it is too big a job for my company.

I am very glad that someone seems to have seen the light at CMHC about some of the risky, dangerous behavior that is so common in this out of control market.

CMHC has a very important role in protecting Canadians, the idea that has been floated around that Banks and Mortgage Originators should bear some of the risk if mortgages go sour. That is just common sense.

Regardless, like the foreign investment numbers, the vacancy numbers are being skewed, I urge you to look at the methodology of the calculation and compare it with other countries and you will see that our vacancy rate has been manipulated to look a lot lower than it is. Investors are being misled by the people who are supposed to protect them.

We absolutely need to maintain the integrity of CMHC and it’s purpose as a watchdog and protector and bean counter for the Canadian people.

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The Link Between Air BnB and Affordable Housing

October 1st, 2016 · Kids & Family, Property Management, Rental Property

Image result for Airbnb
Air BnB is a symptom of our crazy out of whack housing system. That’s my conclusion after speaking to the expert on Airbnb Dr Daniel Guttentag. So welcome to the rabbit hole of my thought process here… here’s an explain like I’m 5 version of Airbnb, how it affects housing, and what I think about it as a business for landlords and tenants as well for that matter.

What is Airbnb?

Airbnb is a website where you can put your house/room/apartment up for rent for a few days/weeks or months and they charge a fee to facilitiate this process and perhaps offer some measure of security if things go horribly wrong. This property manager rented out his downtown condo for $2000 per week and got something he didn’t expect. In fact there is an entire website ( devoted to posting stories about what happens if things go horribly wrong for Air bnb hosts or travellers.

Ostensibly this was designed for friendly people who wanted to share an extra room or a couch with a similarly friendly traveler needing cheap digs for the night and a shower. However, this hallowed idea has morphed into a system where 2/3 of the listings are for fully empty homes and condos and some professional hosts who buy homes solely for the purpose of Airbnb.

It’s not like bed and breakfast of short term furnished rentals are new. They are not. What is new is that there is now a website aggregator that makes it easy and simple to find a place or post a place for rent. Anyone who has enjoyed the services of your average hotel can understand the attraction of landing somewhere and winding up in a home with a place to cook and the comforts of a nice place to live for the same or even a lower price than a motel or hotel.

It’s a bit like my property management business, I manage properties but instead of being in one spot, we have rentals scattered about the GTA. Airbnb is a hotel with rooms  in random people’s homes, condos, all managed by the world’s quirkiest concierge. Airbnb for their part claims they are just a facilitator, Tinder for travellers.

Stranger Danger

Let’s just admit that Airbnb wouldn’t even be a thing if 95% of the time the transaction wasn’t pretty good.  The way the website is designed introduces you to the host or the traveler and leads to a greater sense of security. Most people are pretty decent so it works. However there are some abusers and criminals like Robert Charles Reid (currently wanted) operating in this space and obviously all the condos are cracking down on Airbnb activity.

Risk Management

I’m not against Airbnb at all, in fact, I think it’s a valid business; however, just like other short term rental situations such as student housing, short term rentals and hotels it is undeniably riskier than renting a house long term to a stable professional couple.  The numerous transactions increase the risk because if even 1% of your rental transactions end in a problem obviously you are going to deal with problems a lot sooner if you rent your house for 3 days at a time rather than 2-3 years at a time.

Hotels hire full time people to make sure situations stay under control and even then you get some serious problems. Condos have a concierge that is usually 24 hours and that means that it is very likely you will get caught. If someone rents a room in your house, you are there to supervise the people, but 2/3rds of people renting on Airbnb are renting their entire house/condo space.

This is what led to the discovery that my tenant had decided to rent out his condo and terrace for birthday parties. This yokel couldn’t even be bothered with giving over the keys himself, preferring instead to use the concierge to manage that part of the business for him. After the police became involved with one of these rental situations, the building manager and I worked together to evict our friend and stop his unauthorized renting of the space.

The really wrong part about tenant doing Airbnb is that they have no skin in the game. They do not own the house and in some cases rent the house just for the purpose of Airbnb like one guy who tried to rent a house from me at Yonge & Eglinton. If the house has $30,000 in damages it is unlikely that you will recover the money from your tenant.  So they make the profit and you the landlord home owner take the risk. If the tenant is upfront about disclosing the information, and is properly insured, no problems but that is not often the case.

Yield & Work

One the most interesting fact that arose in my conversation with Dr. Guttentag is that Airbnb hosts do not seem to last in the system. (They turnover 75% new hosts every year. < Corrected) They turnover a high percentage of new hosts every year. (One study found host churn of one-third within just six months). That is pretty easy to understand once you know a bit about business. There are a great many businesses that do not scale well or at all. You need a certain amount of skill and savvy to have a business enterprise but to grow a business you need more people to work than you because you can only do so much work, after all you need to sleep and it might be nice to have a vacation every once in a while.

With Airbnb, you make more money but you also do more work. Every time a traveler leaves you must clean, sort, take the keys, hopefully wash the bedding or you must hire someone to do it for you. You can take my word for it, cleaning people are not that cheap and not that reliable. If you rent your place for $200 per night and you need to give $100 to the cleaning lady, it’s not as profitable as if you do the work yourself.

I tried to figure out how I as a manager could take advantage of the trend and I like to pay myself a living wage, and get paid travel time down town and I don’t like cleaning and know how unreliable cleaning people are, and so… I couldn’t figure out how the owner and I would both make more money then a regular rental and so I left it to the purview of the people who do these things the best, owner/operators. You may be able to find managers, but if they don’t make a living wage you are unlikely to keep them over time

I have known a lot of vastly successful student rental and short term rental operators and all of them self manage and do most of the work themselves. There’s just not enough money in the business to hire someone, manage them and make a profit worth talking about. So Airbnb doesn’t scale, not in my mind anyways.

It doesn’t matter how much you make, it also matters how much you spend and once you start hiring people your entire profit disappears.  I hear echoes of past hosts talking about how it was all fun and games until they had to clean vomit from the toilet.

In any case, this is not a “passive income” business.

Symptom of a Greater Problem

So why are landlords/innkeepers/airbnbers so desperate for the extra money? The reason is the eternal problem of wanting to be in business to make a profit. Landlording is a business. However; tenants no longer pay enough rent to cover the expenses. Over and over I hear landlords losing money, the last landlord’s cash flow is lower by $600 per month.

Landlords are expected to suck it up because the asset itself is going up in price and landlord are rich, but in reality someone needs to put in that $600 per month in negative cash flow.

Ontario law pretty much sucks a lot when you consider how long a tenant can live for free. Much better to not have to deal with the Landlord & Tenant Board and if your tenant is an entitled asshole, he’ll be gone in a few days so who cares.  These are the attractions of Airbnb, that and the allure of full bookings at a maximum price.

The appeal of actually being able to cover your mortgage, property taxes, insurance and even make some money is very attractive but like similar social sharing/work like UBER the reality may not add up to the promised profits unless you cut corners like keeping your vehicle insured for personal rather than commercial use, or renting out your condo when it’s not allowed by the building. It’s not a business model that is scaleable or sustainable.

Airbnb Is Extra Housing

Critics say that Airbnb is removing housing from the market, this is true but it’s not actually affordable housing that’s being removed.  Airbnb is actually the luxury market space or the for sale space. It’s just not true that people will start renting their condos out for any rent no matter how much money they have to pour into it. Outlaw Airbnb and all you end up with is a bunch of high priced condos and houses for sale on the market. The people who are performing all this work to try to break even or make a profit are not going to be happy to take a loss and may not be able to take a loss.

It reminds me of a guy who had 5 houses as student housing in a condo complex and the board outlawed student rentals, he sold them all after I told him he coulds only get $1000 per month.

No one is going to start renting their condo units for affordable housing. It’s bad enough and for every owner there is a breaking point where the negative cash flow causes them to sell. No need to belabor the point that it doesn’t scale.

Airbnb – A novelty not a business.



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Whut? Is Affordable housing in Toronto finally?

October 1st, 2016 · Tenant Resources, Weird Landlord News


So earlier today I read this article about roommates with benefits where landlords or roommates offer free rent in exchange for lodging. I decided to do my own Toronto based investigative reporting on the subject. As it turns out the scumlord business is  alive and well. Scumlords seem to be disobeying OHRT guidelines as I found they generally expressed clear gender discrimination.

The one that was looking for a young gay man was actually profoundly disturbing and creepier than the rest.

For once I find myself pretty naive about things. These are actual ads that I found just an hour or so ago.

The only thing I have to say is good luck trying to collect your rent at the Landlord & Tenant Board. In my admittedly vanilla transactions, I write a rent amount into an N-4.  Seriously what happens if your “rent” isn’t paid?

It does remind me of that one time Edina was showing a unit and there was a “lady” sleeping on a blow up mattress of the unit, and she told Edina she was the “wife” of the landlord. Edina called the landlord, and he said it was his girlfriend and we quit the next day because it was all WAY.TOO.WEIRD.

Basically that’s what it’s come to in this city. If you want affordable housing you’d better polish up your private parts (whatever they are) and get ready to shake your moneymaker. (Click on the picture to enlarge)

fwb-kijiji free-room-and-board-for-mature-maid-wife-toronto-roommates-backpage-com nightly-option-ad-from-clHappy Weekend!

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Mayor John Tory Already Has All The Tools To Create Affordable Housing

September 27th, 2016 · Property Management, Rental Property, Tenant Resources


I’m so sick of people flapping their lips about affordable housing. Especially politicians. Because it’s all bullshit.

Here the city of Toronto website page about affordable housing Everyone is confused, let’s have a meeting about it (with catered lunches and committees.) That will work won’t it?

The real conversation is about poor people being hard to help, and how complex an issue housing is. Even when you give the poor an almost free apartment, like they do in social housing, a certain portion of the population sees fit to hoard, deal drugs and turn tricks out the lobby of the building. The city of Toronto can’t afford to fix the apartments they have never mind build new ones. They sell off as many units as they can after they are turned into cesspits by the people who live there, likely to be turned into more condos.

However, the city of Toronto has a rarely used tool to lower rents on a scale that has never been seen in Toronto or anywhere else for that matter. Furthermore it would be the fairest most equitable way to provide equity for the most disadvantaged part of society you have ever seen.

Lower Taxes on Multiresidential Apartments

2016 Property Tax Rates

Description City Tax Rate % Education Tax Rate % Transit Tax Rate % Total Tax Rate %
Residential 0.4970292% 0.1880000% 0.0029439% 0.6879731%
Multi-Residential 1.4492567% 0.1880000% 0.0028860% 1.6401427%
New <——-
0.4970292% 0.1880000% 0.0029439% 0.6879731%
Commercial General 1.4569742% 1.1800000% 0.0028860% 2.6398602%
Residual Commercial –
Band 1
1.2562142% 1.1800000% 0.0024883% 2.4387025%
Residual Commercial –
Band 2
1.4569742% 1.1800000% 0.0028860% 2.6398602%
Industrial 1.4492567% 1.2536020% 0.0028860% 2.7057447%
Pipelines 0.9560674% 1.4820840% 0.0056628% 2.4438142%
Farmlands 0.1242573% 0.0470000% 0.0007360% 0.1719933%
Managed Forests 0.1242573% 0.0470000% 0.0007360% 0.1719933%

Look at that crap… a tenant living in those Parkdale cockroach infested rat traps is paying 3 times the property tax than those shiny new buildings.

Part of the reason that tenants are poor and landlords can’t fix up their buildings is because the City of Toronto is a greedy inequitable tax sucking behemoth.

It’s the law that if property taxes are lowered, the tenants automatically get a rent reduction. I know this because I was managing a building when the city moved our garbage bill from our property taxes to the water bill and it triggered an automatic rent reduction when they’d actually raised our costs.

Here’s quote from the brochure from the Landlord & Tenant Board Brochure about Automatic Rent Reductions.

When a landlord’s property taxes are reduced by more than 2.49% from one year to the next, the Residential Tenancies Act (the “Act”) requires that rents also be reduced to reflect the decrease in the landlord’s municipal property taxes. This is called an automatic rent reduction. If municipal taxes have been reduced by more than 2.49%, municipalities must send a notice of rent reduction to landlords and tenants of residential complexes that have 7 or more rental units. The notice of rent reduction sets out the percentage rent reduction that will be applied to all residential rental units in the complex.

This is a matter of equity, and if the City of Toronto wants affordable housing they can do it immediately using the tools they already have. Why should tenants living in a 30-40 year old building pay 3 times the property tax as all the downtown condos and brand new rental buildings ? The poorest of the poor are subsidizing the property taxes of the richest of the rich.

Or maybe all these committees and catered lunches are about the same old rehashed and tired memes about equity when basically it’s just coffee time for bored bureaucrats and more of the same lies. You need balls of steel to stop talking about affordable housing and do something.

Mr Mayor Tory, you already have the tools, now do you have the balls?

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Why Are Condos and Investors Such A Bad Combo?

September 9th, 2016 · Property Management, Rental Property

Toronto view

To understand a little about why condos are not the best fit for investors, you have to understand how condos operate a little bit.  The condo is an idealistic creation of democracy at work. Simply put, the building entity is put into a corporation and each unit owner owns a share of the building/corporation.

Each owner gets a vote for the Board members and those Board members are responsible for the operations of the building in conjunction with the property manager if there is one. Owners also need to vote on major building issues.

I’m going to ignore the fact that 99% of people are not qualified or understand in any way the complex building systems and contracts in a condo and the fact that another giant percentage of people are difficult, litigious, cranky, ignorant and obscene.

I’m going to simply talk about the fact that condos were originally designed as a corporate entity for people who lived in the building. The idea was a community of people with a common goal of having a nice decent place to live and everyone would work together for the benefit of all.

There are two problems with the system, one is general apathy and the other is that investors do not care to attend Board Meetings. In many cases you must live in the building to be on the condo board. You also don’t get paid and people will nit pick, complain and second guess everything you do.

What happens when investors and others are not involved is the following that I received several months ago.

Dear Home owner,

As you will now be aware the response to the AGM meeting that took place was very low and we were unable to obtain the required Quorum to pass the bylaws.

The meeting has been rescheduled for another date. Therefore we are asking for you to please complete and return the attached proxy, completing all highlighted sections and items.   Please submit via email  or alternatively you can leave these with concierge.

If you have any queries or wish to discuss this further, please contact the Management Office.
Your prompt response is appreciated.

Poor Ignored Property Manager...

So imagine that you are in a building that is 80% investor owned and most of those investors are not involved in the community of their building or Board affairs, you simply can’t run the building. At one point you the manager or condo board have no legal mandate to enact or do anything at all.  This is what is going on in this particular building.

Further to the Annual General Meeting a vote has been called and motioned to adjourn a meeting to the following Agenda Items due to insufficient of votes to meet the required percentage of the matters tabled at the meeting.

In the matter of Borrowing Bylaw #4 allows the corporation to place replacement mortgages against the Superintendent’s suite (this requires 50%+ of votes)

In the matter of Borrowing Bylaw #5 allows the corporation to place replacement mortgages against the Guest Suite (this requires 50%+ of votes)

In the matter of Borrowing Bylaw #6 allows the corporation to place replacement mortgages against the Guest Suite (this requires 50%+ of votes)

For the vote on sale of the guest suite (requires 67%+ votes)

In the matter of modification to the common element fees. (requires 90% of votes)
We anticipate that we will achieve all required votes and pass the Borrowing By-Laws including the matter of modification to the common element fees.

If you can not attend the meeting, please send in your proxies for quorum and achievement of the above initiatives. For your convenience, proxies will be available at concierge desk. Please come and fill in the Proxy, date it, sign it and submit to Management office (see attached blank proxy form and explanations).

NOTE: If you have submitted your proxy and voted ahead of this meeting, you are not required to send in your proxies again – thank you.

If you have any questions or queries, do not hesitate to contact the Management Office.

Thank you.

Poor Ignored Property Manager
In this case the manager is trying desperately to remortgage the guest suites and Super’s suite because the developer is charging them some unholy percentage of interest.The goal is to save the unit holders lots of dinero in maintenance fees. But a lot of their investors are not there in the building and no one is voting because it’s too much trouble and so no one (not even God) can do anything in the buildings.

This is common and that’s the problem.

There is no such thing as passive real estate investing!

Just like you won’t look like Arnold Schwarzenegger without exercise, you won’t make money in real estate without working for it. Investors buy condos because they are passive investments they think they don’t have to do much with and then the property managers and Board members can’t run the building because investors can’t be bothered to vote.

I wrote a few days ago about how condos are crappy and a twitter follower said “Investors shouldn’t buy condos unless they are going to participate and be informed about the condo board and governance of the Condo Corporation” and he’s right and it causes tremendous problems and the response to the problem caused by these investors and non voting bystanders is even worse than the problem it was designed to repair.

To recap, investors are told condos are a passive investment and they don’t participate in the running of the building which hamstrings the condo corporation, the condo board and the property manager.  Complete chaos ensues. No one can do anything about it et vitam eternam.

Can you say Inertia?


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