Should You Rush To Give An Above The Guideline Rent Increase?

April 10th, 2017 · 1 Comment · 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

Tags:

Get Your Free Landlord Documents Now! 

One Comment so far ↓

  • H. Marshall

    Thank you for your advice for condo investors. The advice on rent increases and the long-term benefits of retaining good tenants is something that is hard to find.

    As far as renting goes, unless one is looking for a short-term rental unit, a purpose-built rental building is the better choice. People have lived in good rental buildings for 30 years and more and have been perfectly happy in their homes.

    With condos, you can get kicked out every time the lease expires.