God Help Us All – Ontario’s “Fair” Housing Plan

April 21st, 2017 · Landlord Advocacy, Property Management, Rental Property

Here’s the real problem people. Politicians in Canada will never stop this property bubble, because they will ensure their complete and total obliteration in the voting booth, regardless if it’s the proper avenue to pursue. The idea is to look like you’re doing something without actually risking doing something that might blow up the gargantuan property bubble because that would seriously screw shit up on a major level we all can’t understand. Our entire economy is based on selling real estate to each other, to foreigners, to dogs, kids in kindergarten, in fact anyone with a pulse, a job and a decent credit rating is prey for the voracious monster of the great canadian real estate lottery.

So this is the exact plan as published on the government press release site. My comments are in italics.

Ontario’s Fair Housing Plan

April 20, 2017 9:00 A.M.

Ontario’s Fair Housing Plan introduces a comprehensive package of measures to help more people find affordable homes, increase supply, protect buyers and renters and bring stability to the real estate market. The plan includes:

Actions to Address Demand for Housing

  • Introducing legislation that would, if passed, implement a new 15-per-cent Non-Resident Speculation Tax (NRST) on the price of homes in the Greater Golden Horseshoe (GGH) purchased by individuals who are not citizens or permanent residents of Canada or by foreign corporations. Ontario’s economy benefits enormously from newcomers who decide to make the province home. The NRST would help to address unsustainable demand in this region and make housing more available and affordable, while ensuring Ontario continues to be a place that welcomes all new residents. The proposed tax would apply to transfers of land that contain at least one and not more than six single family residences. “Single family residences” include, for example, detached and semi-detached homes, townhomes and condominiums. The NRST would not apply to transfers of other types of land including multi-residential rental apartment buildings, agricultural land or commercial/industrial land. The NRST would be effective as of April 21, 2017, upon the enactment of the amending legislation.
  • Refugees and nominees under the Ontario Immigrant Nominee Program would not be subject to the NRST. Subject to eligibility requirements, a rebate would be available for those who subsequently attain citizenship or permanent resident status as a well as foreign nationals working in Ontario and international students. See technical bulletin for further information.

Ok this NRST has so many loopholes, it’s like a collander, but it makes it look like the government is actually trying to cool foreign speculation. I wonder if it will allow these nasty foreign buyers to continue to buy up new condos like the Vancouver tax does?

  • Actions to Protect Renters (and completely screw landlords)Expanding rent control to all private rental units in Ontario, including those built after 1991. This will ensure increases in rental costs can only rise at the rate posted in the annual provincial rent increase guideline. (I’m sure you’ll also pass similar legislation to control landlord’s costs like maintenance fees and hydro and water bills that transfer over to property taxes because this is the “fair” part of the act right?) Over the past ten years, the annual rent increase guideline has averaged two per cent. The increase is capped at a maximum of 2.5 per cent. (This is because in a year that followed a less than one percent increase (0.08%) we had a year that was over 3% and tenants weren’t going to elect us so we just made landlords responsible for sucking up the difference in inflation)  Under these changes, landlords would still be able to apply vacancy decontrol and seek above guideline increases where permitted. (Small landlords will not be able to cost effectively access above the guideline rent increases because the application fee and the legal costs will be more than you collect in the increased rent. The most you can get is 3% per year. Maintenance fee increases are NOT a reason to apply so if you own a condo just get a second job to suck up that negative cash flow) Legislation will be introduced that, if passed, will enact this change effective April 20.?

Here I must add that some landlords have been abusing the exemption for Guideline increases for properties built after 1991, however a more equitable way to deal with this issue might be to require the rent increases to be based on actual cost increases such as increases in maintenance fees or even market rents. Tenants have a new form they can use called “Notice in Bad Faith” if they have a problem with landlords abusing the N-12 (usually by requiring the property for their own use but then renting it out for more money or selling the property.) First tenants should be allowed to give the notice to the landlord before they move out, in response to what they think is an excessive illegitimate exempted rent increase, a fake N-12 or a fake N-13. Seriously realtors are making great commissions, they can go deliver notices of entry if the landlord needs the property sold. Conversely tenants who try to block showings once properly notified should be evicted. The amount of time the landlord should have to live in the unit ? A full year, and you have to live there.

  • The government will introduce legislation that would, if passed, strengthen the Residential Tenancies Act to further protect tenants and ensure predictability for landlords. (I heard a lot of landlords ask for things but really predictability?) This will include developing a standard lease with explanatory information available in multiple languages, ( Why? 99% of stuff you can put in lease is already legislated and can’t be enforced and the Tenant & Tenant Board doesn’t enforce anything you write in a lease anyways, including non smoking provisions) tightening provisions for “landlord’s own use” evictions, (This over used and abused form should actually carry stiff fines and not even upon sale if the unit is subsequently rerented) and ensuring that tenants are adequately compensated if asked to vacate under this rule; prohibiting above-guideline increases where elevator work orders have not been completed; (Ok is this even a widespread problem we need a law for?) and making technical changes at the Landlord-Tenant Board to make the process fairer and easier for renters and landlords. These changes would apply to the entire province. (How about filling Adjudicator positions when they become empty instead of waiting and waiting and waiting so that the entire system clogs up and landlords can’t get court dates for months)

Actions to Increase Housing Supply

  • Establishing a program to leverage the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable and affordable housing supply. Potential sites under consideration for a pilot project include the West Don Lands, 27 Grosvenor/26 Grenville Streets in Toronto, and other sites in the province. This builds on an agreement reached previously with the City of Toronto to ensure a minimum of 20 per cent of residential units within the West Don Lands are available for affordable rental, with an additional 5 per cent of units for affordable ownership.

Wow a whole three sites in the whole province and a whole 20% is going to be available for “affordable” rental and 5% for affordable ownership. This sounds like a whole lot of not very much. If there’s 100 units involved I’ll eat my shoe.

  • Introducing legislation that would, if passed, empower the City of Toronto, and potentially other interested municipalities, to introduce a vacant homes property tax to encourage property owners to sell unoccupied units or rent them out, to address concerns about residential units potentially being left vacant by speculators.

Sigh this is another non-problem most of the empty homes are empty because they are waiting for a condo to be built there.

  • Ensuring that property tax for new multi-residential apartment buildings is charged at a similar rate as other residential properties. This will encourage developers to build more new purpose-built rental housing and will apply to the entire province.

What about the existing mutliresidential buildings with existing tenants? Why should those Parkdale tenants pay more than 3 times the property tax rate than some rich guy in a multimillion dollar house? That’s because the tenant doesn’t know that half or more of his rent goes into City pockets. This is completely inequitable. Property owners should start posting their property tax bills so tenants can understand where their rent goes, and their propertyhydro bills too.

  • Introducing a targeted $125-million, five-year program to further encourage the construction of new rental apartment buildings by rebating a portion of development charges. Working with municipalities, the government would target projects in those communities that are most in need of new purpose-built rental housing.

The average development charge is about $60,000 per unit. $125,000,000 will be a rebate for a whole 400 units per year. I’m impressed with your ability to sound like you’re doing something when you are using a bubble wand to throw sprinkles on a forest fire.

  • Providing municipalities with the flexibility to use property tax tools to help unlock development opportunities. For example, municipalities could be permitted to impose a higher tax on vacant land that has been approved for new housing.

Again is this a substantive problem?

  • Creating a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions. As well, a multi-ministry working group will be established to work with the development industry and municipalities to identify opportunities to streamline the development approvals process.

This actually sounds promising meet with the REITS and Developers but keep in mind you just gave them a swift kick in the gonads by eliminating the Above the Guideline Exemption for Rentals  built after 1991. Why should they build stable long term rental housing for you instead of building condos? Fun Fact: You’d better have an answer to that question before you meet. 

Other Actions to Protect Homebuyers and Increase Information Sharing

  • The province will work to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market such as “paper flipping,” a practice that includes entering into a contractual agreement to buy a residential unit and assigning it to another person prior to closing.

Yeah, no one wants to pay your stupid HST.

  • Working with the real estate profession and consumers, the province is committing to review the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. This includes practices such as double ending. The government will modernize its rules, strengthen professionalism and improve the home-buying experience with a goal to make Ontario a leader in real estate standards.

It should start with regulations about truth in advertising, including telling people “they can’t lose, guarantees” and other advertising practices that are prohibited when describing other investments such as stock and bonds. Developers who claim their condos are investments should have to follow the exact same prospectus requirements and rules as any other investment.

  • Establishing a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures in the Fair Housing Plan and any additional steps that are needed. The group will have a diverse range of expertise, including economists, academics, developers, community groups and the real estate sector.

So my invite is in the mail then?

  • Educating consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.

I’m going to say this once, many real estate agents are liars, they claim there is another bid, when there is not. In a multiple offer situation, the parties should have an open bid auction situation to ensure transparency and equity. Double ending should never be allowed.

  • Partnering with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.

This is half the battle right here why the hell hasn’t this been done before? 

  • Making elevators in Ontario buildings more reliable by establishing timelines for elevator repair in consultation with the sector and the Technical Standards & Safety Authority (TSSA).

Elevators suck. I have never worked in a building where the elevator repairman was not a daily visitor. Want job security? Repair elevators, they are just the most unreliable shit ever built on this planet. I can’t believe we managed to go to the moon and can’t even make it to the third floor reliably. I’m just going to say that planned future employment through lucrative service contracts is a problem from the manufacturer level.

  • Working with municipalities to better reflect the needs of a growing Greater Golden Horseshoe through an updated Growth Plan. New provisions will include requiring that municipalities  consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes. This will help support the goals of creating complete communities that are vibrant, transit-supportive and economically competitive, while doing more to address climate change, protect the region’s natural heritage and prevent the loss of irreplaceable farmland. As part of the implementation of the Growth Plan for the Greater Golden Horseshoe, 2006, enough land was set aside in municipal official plans to accommodate forecasted growth to at least 2031. Based on discussions with municipalities across the region, the government is confident that there is enough serviced land to meet the Provincial Policy Statement requirement for a three year supply of residential units. The Greenbelt provides important protection of natural heritage and farmland, and neither the area of the Greenbelt or the rules about what can occur inside of it will be weakened. The upcoming Growth Plan will promote intensification around existing and planned transit stations and will promote higher densities in the suburbs to support transit.

Yeah it wouldn’t kill anyone to build some sixplexes in suburbia either or allow the existing 3 plexes, 4 plexes, and 5 plexes scattered illegally throughout Ontario to get legalized as long as they reasonably meet fire code. By reasonably I’m saying not that nitpicky dick Fire Inspector I had in Whitby. (You know who you are) but some of the decent Fire Inspectors who just want drywall in the furnace room, fire resistant doors and smoke carbon monoxide detectors.

See map “Greater Golden Horseshoe”.

Actions to Date

The government has taken a number of actions over recent months and years in order to support home buyers, increase supply of affordable and rental housing and promote fairness. These include:

  • Helping more people purchase their first home by doubling the maximum Land Transfer Tax refund for eligible first-time homebuyers to $4,000. This means eligible homebuyers in Ontario pay no Land Transfer Tax on the first $368,000 of the cost of their first home.

It seems hard to understand how giving this Tax refund is going to help cool the market. You need to stop encouraging young people to buy at this point. You need to give them alternatives, like decent affordable housing. Most people don’t need a concierge or party room or a lot of the expensive bells and whistles that condos have but they might not want to live in a 50 year old building either. Options would be nice. 

  • Modernizing the Land Transfer Tax to reflect the current real estate market, including increasing rates on one or two single-family residence over $2 million. Revenue generated from the increased rates is being used to fund the enhancements to the First-Time Homebuyers Refund.

Let me correct that for you… Revenue generated from the increased rates is being used to fund the enhancements to the First-Time Homebuyers Refund. Fix the cesspit known as the TORONTO COMMUNITY HOUSING CORPORATION. The City of Toronto is by far the biggest and the worst slum lord in this city. 

  • Making it easier for not-for-profit affordable housing providers to buy surplus government lands.

I’m going to define affordable as 30% of the wage of the median family living in Ontario. As long as the new building meets those parameters, why not lease the land to the building? No development charges either. Family housing with more two and three bedrooms than one bedrooms. Community common areas and child play areas etc. No reason it has to be a non profit, right now your best bet is to talk to the pension funds.

  • Introducing an inclusionary zoning framework for municipalities that will enable affordable housing units as part of residential developments.

All those swathes of houses in suburbia should have basement apartments in them. Agreed. This would be simpler if the cities stopped stupid policies like requiring two furnaces, and only allowing 70% of the basement to be used, or not allowing parking in the neighborhoods. Triplexes too.

  • Amending the Planning Act and the Development Charges Act to support second units, allowing homeowners to create rental units in their primary residence and creating additional supply.

Yeah this didn’t work because tenants don’t have to follow any rules such as not smoking pot in the house or not partying or not parking in the middle of the drive. Most small landlords have heard and experienced so many horror stories, they just don’t want it. It would be helpful if you and any of the ministers rented out a portion of your home for a while to experience the reality of landlording in your own home. I’m sure you’d love it just as much as I did when you come home and it smells like someone just lit a joint in your living room. People can follow rules if you give landlords some ways to feasibly enforce them. 

  • Freezing the municipal property tax burden for  multi-residential apartment buildings in communities where these taxes are high.

How about a rebate if the building agrees not to increase rent with an Above the Guideline Rent Increase but needs funds to improve the building?

  • Collecting information about Ontario’s real estate market to support evidence-based policy development

I have said that we need to rework the vacancy rate (not to sell condos) but to accurately reflect the amount of rental supply that’s been created by investors in condos and do the necessary research. Condo corporations could be asked to disclose (in conjunction with CRA) which units are for lease, and how many days they have been vacant per year.  Every condo requires every investor to send in a copy of the lease and register the tenant and book the elevator. It’s just sitting there in files waiting for collection.

Appendix: Data and Trends on the Real Estate Market

Ontario’s housing market has seen very dynamic growth in recent years, with prices in the Greater Toronto Area and the Greater Golden Horseshoe rising significantly. This has been supported by economic fundamentals, including a growing population, rising employment, higher incomes and very low borrowing costs and lots and lots of speculation.

House prices have been rising at a robust pace in the Greater Toronto Area since the end of the 2008-09 recession. Some people would even say completely unsustainably. 

After two consecutive years of double-digit gains, average house prices in the Toronto region reached $916,567 in March 2017, up 33.2 per cent from a year earlier.

Bubblelicious.

See image “Toronto Home Resale Prices”

The Greater Toronto Area showed the sharpest rise in home prices in Ontario over the past two years.

While the growth rate of prices of homes in the Greater Vancouver Area have been slowing since August 2016 after the introduction of B.C.’s foreign-buyers tax, home prices have been climbing steadily in the Greater Toronto Area.

It’s almost like people from other countries don’t mind staying in the plane an extra 2 hours.

See image “MLS Home Price Index”, “Greater Toronto Area Price Increases Outstrip Other Cities” and “Housing supply in Ontario seems to be aligning with demographics”.

According to Urbanation, the average rent per square foot for new leases in the Greater Toronto Area condo market rose 11 per cent in the last quarter of 2016 compared to a year earlier, the fastest pace of growth since at least 2011.

Yes and Urbanation also said prices went down the last quarter. Neither Urbanation (Developer linked consultant that sources data from TREB) or TREB is a reliable source of facts. They are in the business of promoting the buying and selling of real property. They almost never report bad news about the housing market even when the rental market is really bad. 

The media and the realtors are also to blame for this by reporting when there’s a bidding war on rentals. I have never had one and I spoke to my colleague at Speedy Rental Agency and she doesn’t have any either. We’re just glad if we can get 2-3 people to come at the same time. Of course if you under price a unit by $400 per month, you may have a multiple offer problem. Occasionally I might get 2 or even 3 applications, I don’t use this as an opportunity to gouge the tenant, I pick the best application.

For those of you who want to tell me the MLS or Realtor.ca is different, and I don’t know because I don’t use it, I now use it and have access and we are able to market our properties on there. Kijiji is better for most properties (but not all) Toronto is a big city and there are also bound to be outlier situations. This isn’t news and even if you think it is, it just isn’t balanced to include just that information without including the places that linger for months without tenants. I had a lovely 3 bedroom at Yonge & Eglinton that took 2 months to rent. I had a full house with no parking at Bayview and Lawrence take 6 months through the winter, but no one ever talks about those properties. Nor do they talk about the fact that 50% of all the properties on the MLS don’t rent during their listing periods. 

And when is the government going to step in and regulate the amounts maintenance fees go up? Landlords are already in a terrible cash flow position and with no way to recoup increases in maintenance fees they will be forced to sell.
See image “% change, year-over-year, GTA”.

The number of owners with more than one residential property has been rising steadily since 2000.

This is because the rest of our economy is complete crap and housing is one of the only ways people have found that they think is safe to invest in. They are terrible wrong, but we don’t want to tell them or they might not specuvest another condo unit. 
See image “Number of Owners With More Than One Residential Property in the GTHA: 2000-16”.

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Property Management – What you don’t know will kill you (and me)

April 19th, 2017 · Kids & Family

I love the real estate business and I’ve been working as a property manager for 20 years. The last few months have been a real struggle. I have traced the problem down to the plethora of new owners who want to rent out their property. They don’t want to be landlords or know anything about it, they just want the the money. So here’s some things I’ve learned.

  1. Your basement apartment tenant is not a shareholder in your 8,000 square foot house, you have 4 apartments and one meter, it’s going to cause you a world of grief to charge extra for utilities, and I know I wrote that blog post about how people who pay utilities use 30% less, without meters, with 4 different apartments, just no, it’s a terrible terrible idea. But your internet landlord friend said it was ok, and you shouldn’t even charge per square foot, you should charge per set of appliances, because that’s what uses the electricity, I’m sure random internet landlord friend will help you stalk your basement tenant when you try to collect. What could possibly go wrong?
  2. I know that space under the counter with a big hole and a drain in the side is for a dishwasher, you can’t just leave it there and that’s why I assumed that you would be putting in a dishwasher where it goes. No, you can’t leave it because your wife doesn’t even use her dishwasher, just no.
  3. How would you feel if you bought a lovely new high end Porsche or Lamborghini and the previous owner wanted to keep his luggage in the trunk? No, you can’t store your furniture and crap in the basement. I know you will have to pay for storage but newsflash, no one will agree to pay full price for an expensive sports car (or large high end home) with your junk in the trunk. So no, just no.
  4. Ok, if you hire me to rent your house as quickly as possible, and I rent it a month later (so not even that fast) you shouldn’t be pissed off and threaten to sue me because I did what you hired me to do. Your failure to plan and do what you were supposed to do, is not my problem or my fault. So no, just no.
  5. Many people should not be landlords. No, just a big fat no. Yes I know “your friends have done it and it’s no problem” I’m sure that’s a sure recipe for success. I had a friend one time who was a race car driver, that’s why I got my car impounded last week driving 160 km on the 400, what could possibly go wrong?

The landlord business is one of the most legislated business environment there is. If you’re going to invest good money into a property, I think it’s prudent to buy a book, spend a day the Ontario Landlord & Tenant Board, or read some of the many brochures they have on their site specifically for the purpose of educating landlords.

Oh and for the love of all that tastes like blueberries, if you are leaving the country, no: your income property will not manage itself. What make you think that you should leave your $500,000 condo to the winds like dandelion seeds? No one is going to “put your tenant in jail because he bounced a check”. FYI we also don’t have debtor’s prison or chop off people’s hands for stealing.

Yes, you have to go to the Landlord & Tenant Board, no I don’t have a magical method to “speed everything up” except invent a time machine and properly screen your tenant for something more than a pulse, first & last in cash and a willingness to move in right away. No, I don’t “know a guy” and even if I did, it probably costs more than a paralegal and collections and may well land you in jail and worse it may land me in jail, and that documentary I watched said they didn’t have manipedis so I’m not going.

I have fallen in love with the lovely properties I’ve been renting, but I can’t help feeling like this spring’s crop of ill-prepared owners is a symptom of our frenzied real estate market and a “keep properties at all costs” attitude.  Sometimes you should just sell.

Property Fundamentals

  • Great tenants that pay the rent and take care of the property.
  • Great property maintenance by the landlord
  • Great properties
  • Bring value to the rental market
  • Don’t be crazy (Landlords & Tenants)

That about covers it.

Happy Renting !

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Are Rents Are Down? (Yup)

April 13th, 2017 · 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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Should You Rush To Give An Above The Guideline Rent Increase?

April 10th, 2017 · Property Management, Rental Property

I just got two phone calls from two clients who are very concerned about losing their above the guideline rent increase. Every day there is a new article about how shitty landlords are and how they are gouging tenants. Both landlords had their properties rented last year so it’s not like they are vastly under market.  But with people like Urbancorp (which went bankrupt last year)  giving out 100% rent increases it’s hard to be sane.

I feel like our real estate market has hit a new level of crazy.

Landlords are going to lose the above the guideline rent increase because of other landlord’s self interested, selfish behavior. This nothing new, just like the way landlords hand off the most terrible tenants to other landlords while giving them the most glowing references.

Here’s the math using our clients using our services to rerent the place. Generally people who can afford the rent won’t move for an increase of less than $40 per month or $500 per year. For certain tenants on a low income that’s not true however I hope that’s not the case with your luxury condo tenant. This $500 is the actual cost of moving to another apartment, changing your services and renting a truck etc.

However what does this “move” cost the landlord ? Usually one month’s rent for vacancy, and in our case, another month for leasing commission plus HST, then there’s painting and cleaning which adds up to another $1500 to ??? depending on the quality of the place. Assuming the rent is $2000 per month, you’re looking at $3500 in costs/lost revenue if you DIY the rental, and $5700 in costs if you use a rental agency.  That’s roughly $300 monthly increase or $500 monthly increase to get your money back in one year. Chances are your tenant cannot afford to pay you that much more and even if they can, they’re going to move. Also when they give notice they are going to be hostile about it so good luck with showing your place to new tenants with the old tenant telling the new tenant what a douche their landlord is for raising their rent $500 per month. That’s not at all awkward and I’m sure the new tenant will love the idea that you feel comfortable giving out $500 rent increases.

My suggestion is not to believe all the crap you read in the newspapers, I really don’t care what the realtors are doing and their continued lack of ethics giving out these eviction notices when the law is very clear that tenants aren’t supposed to be evicted to put the property on the market for sale. Are we all kidding ourselves that there won’t be serious repercussions? I can assure you there will be.

Our position here at Landlord Rescue, we will continue to use above the guideline increases and not abuse them. We will continue to counsel our clients to have long sighted and long range plans and treat tenants with the respect they deserve. We will cease to work for clients who want us to give out increases that are not supported by market rents and damage the interests of landlords in general.

We actually don’t even give out N-12’s for the owner to get back the property for their own use anymore. We refer out to the paralegal we use. There is a new form out for “Giving Notice in Bad Faith” with administrative fines of up to $100,000 for corporations. Landlord Rescue Inc is a corporation, we don’t sell properties or profit from the sale of properties in any way. However we can and will be named as landlords after our client moves in for a month and decides to sell because that was their plan all along. So we will have all the fun of dealing with these court case and associated legal fees with none of the money from the management or the sale.

I’ve been in this business for over 20 years now, and I’m not about to let all this craziness change one iota of how I operate. I know what’s required to provide great service at a reasonable price and I know what’s required to manage tenants for the long term in the owner’s interest.

And frankly, this is why we need rental buildings and not condo buildings. The idea of all this displacement (tenants being forced to move) is not going to sit well with the Social Justice Tribunal agency known as the Landlord & Tenant Board. Landlords can sell their rental buildings all  day long without moving one tenant furthermore they will make very careful choices about their rent increases because they don’t get to sell their unit, if it’s not rented it’s a big fat zero on their balance sheet.

I don’t know what the future holds but even though I think the removing the Exemption to the Rent Increase Guideline will destroy any chance at all of any rental building construction, it’s only been a few years since the city of Toronto equalized property taxes on new buildings for multiresidential. There certainly hasn’t been enough time for the market to transition to planning, financing and building rental buildings in favour of condos. Condos are like crack to building developers, they get in and out and aren’t responsible for anything 3 years after the building is finished. As long as it’s pretty and sells to investors, that’s the major part. Landlords will want buildings that last years and years and don’t require for every hot water pipe in the building to need replacement 5 years in for example.

I’m not against getting more rent, but I am against “economic evictions” that in my opinion is very short sighted and the “rush to get your increase in before the rules change” is going to make things worse not better.

At the very least do a proper market survey before jumping the gun, while the MLS might show higher prices it doesn’t mean it rents at that price and I’m not saying that the people who see these “bidding wars” on rentals are liars, I suspect it’s not necessary, last time I checked there were 15,000 rental listing on kijiji and only 4,000 on realtor.ca and that’s only one site. TREB statistics only reflect realtor marketed properties and that’s a fraction of what’s out there on the market.

My old boss used to say, “Never jump on one foot” and in these frenzied times, I think that advice is still some of the soundest I’ve heard.

Think Twice, Increase Once

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They Aren’t Rent Increases!

April 6th, 2017 · Kids & Family

I haven’t been writing that much lately about the controversy of rent increases above the guideline. There’s recently tons of stories about how tenants are getting huge rent increases in condos and there is no regulation to limit the amount of the increase.

I wrote an article myself a long time ago now about how to go about doing these rent increases and keeping your tenant.

First of all, I can’t help but be angry at the realtor press, on one hand they spend all their time fanning the flames of how awesome the condo rental market it and how busy it is and how Urbanation says this and that about the rental market. I am so sick of them. They are far from impartial their ownership is related to Urbancorp the recently defunct developer and it is my belief that one of their principal is a Realtor as well.

  • First of all MLS and realtors have a fraction of the rental listings downtown. For instance kijiji currently has 12,000 listing and realtor.ca has 4000 listings in the GTA. Kijiji is only one of many many listing sites. Virtually none of the realtors rent in purpose built rental buildings.
  • Realtors don’t want to rent anything close to affordable housing. Their statistics are there fore skewed towards the more expensive listings.
  • Lots of the places on MLS are for sale and for rent so not even legitimately on the rental market!
  • Articles about rental bidding wars, again fanned by the press. If I have a bidding war it’s because I didn’t do a proper market survey. It’s great when I can get 2-3 people to show up at the same time.

A few years ago I posted about how the vacancy rate for condos is completely and totally inaccurate because we have no idea how many condos are in the rental market. Using the numbers of condos built as the amount of condos for rent is misleading and inaccurate. The bulk of condos built are occupied by the owners. How many of the others are occupied by renters?  we have no idea.

If we know that in Toronto 4000 condos are for rent but we have no idea how many are rental properties, you can’t determine the vacancy rate. I’m waiting for someone to actually rectify this large gap in our knowledge but so far, no dice.

RTA & Rent Increases Exempt from the Guideline

You can raise the rent as much as you want but if you raise it too much you lose your tenant. You have to paint, you have to rerent, you have to get a new tenant who is an unknown quantity and it’s not generally a paying proposition for 2-3 years. That’s a bad deal for owners.

So why are so many of these rent increases happening now?

Negative Cash Flow

Almost every condo owner I know is putting money into their property on a monthly basis. $300-$400 per month and I even have one who is putting in $600 per month. Yes, their equity is going up but you don’t get to spend that money until you sell.

All these condos are not part of true “rental stock” they are temporary rental stock just waiting for the owner to cash out and get his money out. They’ve been paying into their investment for years and they may just be done. Don’t forget there are a lot of rent thieves out there and every landlord victim almost always sells.

Tenants don’t even know that their landlord is putting hundreds of $$$ per month towards their true housing cost and if they do they don’t care.  Instead of being super nice to the people who put thousands per year towards their standard of living, they think that’s normal and even desirable because their landlord is “rich” Unfortunately the only way to crystalize those paper gains is to sell.

Selling a Condo and Eviction

I wrote an article about that how in Ontario if you want to sell your condo, you have to sell it with the tenant in it. If you have a tenant who doesn’t want to move or who is a jerk about showings or even exists on the actual law being followed (Which is that you have to deliver a written notice for every specific showing, and now you can’t take pictures) you’re screwed.

Also a lot of realtors don’t want to even take a listing with a tenant, lots of agents don’t bother with showing units with tenants, you can’t stage it to get maximum profit, and if the tenant is dirty, smokes, smokes weed and is generally an average person and not an OCD clean freak on a daily basis the owner is going to leave a bunch of money on the table when it comes to the sale.

The tenant has no skin in the game, chances are after the sale they get evicted so what’s in it for them to deal with tons of strangers traipsing through? Nothing good that’s what.

Bad Tenants

Lets say you have bad tenants sometimes they pay rent, but late and maybe they smoke weed and party too much and leave pizza boxes in the garbage room and you get calls from the condo board.

Let’s say you have an entitled rude tenant who doesn’t cooperate with reasonable requests.

Using the Above The Guideline Eviction

You just give them a $600 monthly rent increase, and they either pay or go. So most of these increases are not to get tenants to actually pay $600 per month more, they’re being evicted for some other reason. That’s all.

We’ve created a market where money is not made on rent, it’s made on capital appreciation, but forgot that tenants are going to have move and have unstable housing because the entire market is being subsidized on the back of mom and pop investors.

The answer to that is a clear path and incentives to purpose built rental housing. The most dangerous thing we could do is put in rent controls because the solution is sustainable stable rental buildings. For that to happen, policy makers need to figure out the path to incentivize rental buildings. From the get go, condos were always stop gap measure designed to promote home ownership of a luxury product for people who didn’t want to shovel snow and wanted to be part of a community. As an investment? Terrible. As a rental? Terrible.

On an unfortunate note for tenants the new rental buildings, will not be subsidized, there will be no security, no pool, no gym. All that stuff costs money tenants can’t afford to pay for.  Buildings that have two and three bedroom units as a majority of the rentals with a childcare and a convenience store and hair salon downstairs.

Happy Day!

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