Are Rents Are Down? (Yup)

April 13th, 2017 · 3 Comments · Property Management, Rental Property

Finally because developers are terrified of losing the Exemption to the rental guideline we get some negative news about the rental market from Urbanation. That will not sell condos.

Revisiting The Vacancy Rate

According to the numbers days on market for the condos was 20 days. Before when I talked about vacancy rate, I discussed how vacancy can also be expressed using time and how a vacancy rate of 1% represents 3 days on market and that no one is renting apartments in 3 days. 20 days is equal to a 5.4% vacancy rate. I’m just not seeing the frenzy that people are talking about, in fact, it’s a good day if we can get more that a few people at a showing, and most of the time, it’s just one.

Realtor.ca/mls.ca Is Not All That For Rentals

In the past as property managers we didn’t have access to the MLS/realtor.ca website, but we now do. We can and do list on the realtor website. It’s ok but I feel like we really lose a lot of knowledge and control of the rental process. Some of my clients insist on my attending showings even with other agents showing, and I’ve refused applications based on what I found out. I had one application I would have accepted except everyone smelled like weed. It was a really high end home that was completely gorgeous and I don’t take chances on that kind of situation.

So far, it’s been ok but nothing spectacular. It’s just one more website as far as I’m concerned. In the past I didn’t have this information and realtors would tell me how fantastic it was whenever I would talk about the vacancy rate.

Just kijiji is 3-4 times bigger that realtor.ca, and there’s a ton more websites. Kijiji.ca are owned Ebay now so no scoffing allowed.

The Myth of Rental Bidding Wars

In the article they talked about how 9% of units went above asking price. I was talking to a colleague about this the other day, and we are still waiting for all these bidding wars to come to us. Together, we’ve been in this business 50 years, but what do we know?

Apparently we know how to price our units and we don’t abuse tenant’s time and budgets. Here’s a story I got from CBC Facebook page.

Not sure if bidding wars over rentals are old news here, but I recently encountered a landlord who outright asked everyone looking at the place (an $1875 1-br on Indian Rd.) to bid higher than the listed price if they wanted to be considered. The exchange, originally posted on Bunz Home Zone, is below. While I find this bait-and-switch tactic in rentals reprehensible, there seems to be some debate over whether pitting tenants against each other in this manner is right or wrong. Regardless of market-based pricing and legality, it just seems unethical to me.

Email from landlord:

Thank you for your note. It was a pleasure to meet you and [] yesterday. [Co-owner] … and I thought you came across as professional and responsible and a good overall fit for the house.

We have had one applicant come back and offer us more than $1875 for the unit. To be fair we will see if anyone else on our short list who mentioned they were flexible wants to submit a different offer before we move forward.

I know this isn’t an ideal situation for you. It wasn’t long ago [Co-owner] and I were in the same boat when we were trying to purchase this house. If you’d like to submit a different offer please let me know by the end of the day today. We met so many wonderful people yesterday. I wish I had more units available but I guess this is just the reality of the market. Either way, please let me know how you’d like to proceed.

I happen to know the High Park area and I manage a 4 plex on Grenadier Ave, this intersects with Indian Road. Last year I rented a one bedroom on Grenadier, for $2250 per month. I’ve had realtors argue with me about how they get bidding wars on condos in Liberty Village but they list them for $1500. I list average one bedroom condos in that area for $1750-$1800. It’s not really hard to understand how some landlords are getting bidding wars if they list for $200 and more under market value. I’ve actually been messed up when I do market surveys by some of these super low listings.

Honestly, it’s the same BS that leads realtors to price a house for $800K when the neighbor’s house sold for $1.3 million the week before. In my opinion, it’s not an auction it’s a rental. I like my tenants to be financially prudent and reflective of what their rental budget is. Nothing about that  says “rental auction”

For the most part, I would say that any bidding wars are a result of bad pricing or a strategy to get people to over bid. Toronto is obviously a big multicultural city, and a few bidding wars incited by landlords and realtors doesn’t make it a market issue. Canadians as a whole aren’t a very barterful bunch so I doubt this will catch on. Certainly I’d recommend any tenants being urged to participate in bidding wars of any kind run away as fast as you can. Just don’t reward bad behaviour.

Honestly, I feel a little better about the press after this article, it’s literally the first article I’ve read in years that doesn’t make it sound like renting a condo doesn’t require any skill, you can just maybe hang a flag off the balcony and you’ll have 11 rental applications an hour. Meanwhile, we’re out there busting our butts, month after month, year after year, and not experiencing any of this rental excitement or bidding wars. For us, it’s the fundamentals, great tenants are the number one thing. With good tenants you will have an easy time of landlording.

Property management should be boring as hell when you are doing it right. It’s got the simplicity of great art, tenants pay the rent, we put it in the bank, every once in a while something breaks, we fix it. Boring and next thing you know it’s 10 years and your property is half paid off, rents have gone up, and you get to trade in your 20 year old Toyota Corolla for a 10 year old Honda Fit.

Renting success is hard work!

 

 

 

 

 

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3 Comments so far ↓

  • H. Marshall

    Interesting article and a nice follow up to your last one.

  • Adam Hoffman - Hoffaco Property Management

    Great article Rachelle!

    Ethics matter and pricing is an ethical decision.
    The goal should be to market a unit in a way that will find a renter that will be setup for financial success.

    To add a different perspective, in North York City Centre / Willowdale I’ve seen reasonably priced newer, smaller condo’s rent with multiple offers. However often they are renting at list price or $25-$50 above.
    Many older units and houses sit for 60+ days until being rented, many with price decreases from initial asking price.
    There are markets within markets all throughout the GTA.

  • CAROLYN

    Wonderful article. It would be timely to to inform the ones who make the rules – the ones with their heads in their a__es!