Tag Archives: landlords

Is a rental property a good investment?

Q:  I own a condo in my hometown of Duncan, BC, but my partner and I have just bought a house across town and have moved into it together. Should I keep the condo as a rental property or sell it and invest the equity?

Every time I ask friends or family what I should do with the property, they tell me I should keep it because ‘property values keep going up and one day, I’ll just own it!’ But my rental income wouldn’t cover my cost for keeping the condo and I feel like sinking money into the unit every month just to keep it afloat is a bad idea, no matter what the long term gain might be.

The two-bedroom condo was built in 1993 and it’s in a highly rentable part of town (most units in the area are renter-occupied). I think I could charge about $800/month for it. Vacancy rate is pretty low here, so I probably wouldn’t have too much trouble finding a tenant. The building is well maintained (I chair the strata council) and has a solid contingency reserve. I expect strata fees to increase at a rate of about 2% per year for the foreseeable future.

—Harmony

A: One of the best things about investing in real estate is that it is generally much more empowering than investing in stocks. Stocks are difficult for a lot of people to understand, whereas real estate can be more intuitive.

It helps to understand what you’re investing in and when it comes to a property you’ve already lived in and a neighbourhood you know, I can appreciate the appeal, Harmony.

I prefer condo investing over detached houses, because condo expenses are pretty predictable. Expenses for a house can be a lot more sporadic.

I think that real estate investors are probably better off focusing on cash flow than capital appreciation. In other words, avoid owning on speculation to sell the property in the short-term for a profit. You appear to have a long-term cash flow approach, Harmony, but the cash flow–or lack thereof–seems to be a cause for concern.

A property that runs cash flow negative can still be a good investment though, so I think you need to consider why the rent won’t cover the costs. Do you have a short amortization on your mortgage? You may be able to reduce your costs by extending the amortization on the mortgage back to 25 years so that the property runs neutral or positive.

 

I like to project the after-tax cash flow and net equity for a rental property over a number of years in order to fairly evaluate the property. To me, this is a true representation of the investment, rather than simply looking at the cash flow in isolation or speculating on the appreciation in the property value.

If a property runs cash flow negative, you may be able to claim a deduction on your tax return that leads to a tax refund. I say “may” because the mortgage principal is not tax-deductible and once you back that out, your property might be running cash flow positive for tax purposes, Harmony.

After you have determined the tax implications of your rental property’s cash flow, you need to consider the change in the net equity. If your property is running cash flow negative by $2,000 after-tax annually but you’re paying down your mortgage principal by $4,000 annually in the process, that’s an important consideration.

But does that mean you’ve invested $2,000 and earned $4,000? Not really. You also have to take into account how much equity you have tied up in the property. In other words, if you have $48,000 in equity in the property and you’re cash flow negative $2,000, you’ve made a $50,000 investment to earn $4,000. That’s an 8% return. Add in a bit of property value appreciation and you might have a double-digit return (at least on paper) in this notional example.

On the other hand, are the rents just not high enough in the neighbourhood to justify the carrying costs on the property? It may just be a renter’s market. In some cases, the all-in return on a rental property just isn’t enough to beat out other alternative investment options. If the condo proceeds could enable you and your partner to put down a larger down payment on the house and avoid CMHC insurance premiums, or provide cash to make an RRSP or TFSA contribution, I think you need to be sure the cash flow/net equity return is enticing.

The point is, you can’t just focus on top-line cash flow for a rental property. Dig deeper, consider the tax implications, mortgage principal repayment and your existing equity.

And while I hate to be a pessimist, the realist in me can’t help but point out that your condo represents a reasonable back-up plan in the event things don’t work out with your partner. Also keep in mind that after two years of cohabitation, the same laws that apply to married couples apply to common law couples in B.C. when it comes to a division of assets. In your case, you may both be entitled to half the house as well as half the appreciation during your relationship on your condo. So consider a consultation with a family lawyer as well.

Source: MoneySense.ca –

 

by 

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

Advertisements
Tagged , , , ,

Would legal cannabis become a rental property nightmare?

Would legal cannabis become a rental property nightmare?

Canadians will soon be able to add marijuana to their collection of household herbs, and that’s creating a nightmare for the country’s landlords.

With Prime Minister Justin Trudeau set to legalize recreational weed in July, apartment owners are concerned about safety and potential damage to their buildings if tenants grow plants and smoke up in their units. Landlords are lobbying provincial governments for legislation that would ban marijuana use in rental units or allow them to add restrictions to lease agreements.

“We’re hammering away at this pretty tirelessly,” according to David Hutniak, chief executive officer of Landlord BC, a housing-industry group in the province of British Columbia.

“Can you imagine you’re living in a 100-unit apartment, and in theory, there could be 100 grow-ops in that thing? I mean, that’s ridiculous,” Hutniak told Bloomberg.

Cannabis stocks have jumped and businesses are primed to cash in on Canada’s long-awaited pot party. Yet federal regulations on recreational use of the drug in the country, where medical marijuana has been legal since 2001, are still being worked out. Proposals include allowing people to smoke in private residences and to grow as many as four plants per rental unit. Provinces have the right to set rules in their own jurisdictions, including age limits for possession of weed and whether landlords can restrict use on their properties.

Read more: Legal marijuana shops could boost nearby property values – study

One reason landlords don’t want tenants lighting up is that many rental buildings are fairly old, so “smoke and smells are easily transmitted through hallways between units” and can disturb others who don’t want to partake, Canadian Federation of Apartment Associations president John Dickie explained.

Growing pot requires certain humidity levels that may damage apartment walls, and the electrical wires required to run the operation can start fires, according to Hutniak. Budding plants also give off a pungent aroma that can seep through door cracks.

Failing to implement regulations that allow landlords to ensure smoke-free, grow-free units could lead to higher rents, according to William Blake, spokesman for the Ontario Landlords Association. Some provinces, including Ontario, block landlords from extracting damage deposits from tenants, said Blake, who once spent more than $5,000 to clear the smell from a marijuana smoker’s unit.

“This is not a political issue for us – we care about taking care of our tenants and keeping costs low,” Blake said. “When we have to pay out thousands of dollars, landlords will want to raise the rents for the next tenants.”

Finding an affordable apartment in supply-squeezed cities like Toronto and Vancouver is already challenging, and vacancy rates are at record lows. For people who use pot, the search may get even tougher: It is “legal and legitimate” for landlords to select tenants who don’t smoke, Dickie argued.

Source: MortgageBrokerNews.ca – by Ephraim Vecina13 Feb 2018

 

Would legal cannabis become a rental property nightmare?

Tagged , , , ,

Surprising facts every renter should remember

_

Did you know that three of the leading causes of financial losses for renters are fire, crime, and liability suits? Lucky for you, tenant insurance can help you keep your bank account in tact — and get things back to normal as quickly as possible.

Let’s take a moment to consider the facts:

Fire

With tenant insurance, you can rest easy knowing that a fire in your apartment won’t leave you out in the cold. Not only could your policy cover the belongings you lost in the fire, but it could cover other unexpected expenses like a roof over your head and food in your belly while you wait to get back into your home.

_
(Viewing this from your smartphone? Click here to enlarge.)

Fast Facts for Renters: Fire

Fire doesn’t care whether you rent or own your space. Thankfully, tenant insurance covers all the things that make your rental a home.

  • Nearly one quarter of all residential fires in Canada happen in apartments
  • The average cost of damages in an apartment fire is over $65,000
  • The most recent study of fire losses in Canada found that in 2007 alone, fires in apartments led to more than $185 million in damages
  • That same year, Ontario had more apartment fires than any other province: a total of 1,650 fires that led to more than $55 million in damages
  • In British Columbia, the average cost of damage caused by one apartment fire is over $140,000 — that’s more expensive than in any other province

Source: “Fire Losses in Canada (Year 2007 and Selected Years).” Council of Canadian Fire Marshals and Fire Commissioners.

Crime

Coming home to find that a stranger has been there — and worse, that they’ve stolen your TV and smashed your glass coffee table — is something no one should ever have to experience. But if something like this happens to you, know that renter’s insurance has your back — your insurer could pick up the tab for your stolen or damaged belongings.

_
(Viewing this from your smartphone? Click here to enlarge.)

Fast Facts for Renters: Crime

Burglars don’t discriminate — and rental properties aren’t exempt from break-ins. Do your best to deter those pesky thieves, but know that tenant insurance has your back when you need it most.

  • In Canada, renters experience the greatest number of break-ins per household, with a whopping 125,000 cases reported in 2014
  • That same year, there were 248,000 reported cases of theft of personal property from rental homes
  • Cases of vandalism are decreasing year after year, but there were still 143,00.0 cases of vandalism to rental properties reported in 2014

Source: “Household victimization incidents reported by Canadians, by type of offence and selected household, dwelling and neighbourhood characteristics, 2014.” Statistics Canada.

Liability

Of all the types of coverage in your tenant insurance policy, liability coverage could be the most important when it comes to protecting your finances. This is the coverage you need when, for example, a court decides you’re legally required to pay for your friend’s Ray Bans and medical bills after you break his nose and glasses at one of your weekly baseball games. Plus, it can cover any legal fees you encounter in the process. Accidents happen, and battles over money are never pretty. Talk to your broker to make sure you’re covered.

_
(Viewing this from your smartphone? Click here to enlarge.)

Fast Facts for Renters: Liability

In the event of a liability lawsuit, tenant insurance can protect your savings — and your credit rating.

  • A lawsuit can virtually bankrupt you if you’re held responsible for covering expenses that result from an injury or damage you caused to someone’s belongings — say goodbye to your savings and your credit rating
  • If you’re taken to court for a liability issue and need to pay a lawyer, you could be in the hole for thousands of dollars in legal fees
  • When your toilet backs up and the questionable puddles in your bathroom start to trickle into the apartment downstairs, you’ll have to pay for the damage
  • Don’t forget your landlord: if she claims that you ruined part of your rental unit, get ready to forfeit your damage deposit plus additional repair costs

You have options

Get protected before the unexpected happens. If you’re ready to get set up with your very own tenant insurance policy, connect with a licensed broker to learn about your options.

Source: Economical.com – Stephanie Fereiro  |  Published on: December 12, 2016  

Tagged , , , , ,

Thinking of becoming a landlord? Here’s what you need to know

Being a landlord isn’t without its challenges, but covering one’s bases in the following ways is bound to yield quality tenants and rents.

Every real estate professional understands the importance of location, and so should every landlord. Steve Arruda, a sales agent with Century 21 Regal Realty, has been a landlord for 18 years and advises taking one’s time performing due diligence on prospective neighbourhoods.

“You want to know where you’re investing in and what the demographics are in that neighbourhood, and whether there are universities and families there,” Arruda told CREW. “I’ve rented in depressed neighbourhoods, and it’s challenging. The price may seem really tempting, but then you attract a lot of renters who may not have the best incomes, and they could become problematic because there are issues each month with payment. Location is one of the most important things. Make sure you know where you’re investing and what the demographics in that neighbourhood are.”

If investing in a house rather than a condominium, ensure big ticket items like furnaces, wiring, roofs and windows are updated “because those are the things that are quite costly to repair,” added Arruda. “It’s good to have those larger items updated, otherwise if they fail, it’s always at an inopportune time like winter, and you’ll be left with an angry tenant.”

Beyond material concerns, Arruda says landlords invariably become arbiters in disputes between tenants, unfairly or not, and that managing personalities is a delicate art.

“When you have a house with four units, like a multiplex, it’s hard to get everybody to get along, and you’re their first line of defence,” he said. “So, managing personalities, managing expectations and being able to handle that
stress level are crucial, because for an inexperienced landlord, the first call they get because of an issue with a tenant or an issue with a clogged toilet can make their already stressful life even more stressful. Always be prepared for anything, whether issues with tenants or the property itself.”

Additionally, tenants need to be thoroughly screened, and Arruda recommends landlords run their own credit reports and confirm bank statements are real. Even calling an employer to confirm the information provided by potential tenants isn’t beyond the realm of the reasonable. As well, call their previous landlords to find out what kind of people they are.

Over 18 years, Arruda also learned that units with dishwashers, washers and dryers are not only highly sought after, they attract good-quality renters.

Renu Ashdir, a sales agent with iPro Realty Ltd., says clients for whom she seeks rental accommodations flock to buildings with amenities like gyms, but warns too many amenities—especially swimming pools—result in higher condo fees.

“If you’re a person in your 20s and 30s, fitness amenities are the most used,” she said, adding older tenants prefer the security of a concierge. “People care about the kind of neighbours they have in a building and whether or not there’s transit nearby.”

Most importantly, says Arruda, “Look after your renters and know rental laws.”

Source: Canadian Real Estate Wealth – by Neil Sharma12 Jan 2018
Tagged , , , , ,

5 ways to tame your landlord

 

Here’s how to keep the ‘lord’ out of your landlord

It’s the age-old question: Should you rent or buy? With housing prices still sky-high in Vancouver and Toronto, many are looking towards renting as a permanent solution. Michael Thiele, an Ottawa-based lawyer, suspects the new minimum down payment rules are pushing even more people to rent, making it a landlord’s market. Here’s how to keep the ‘lord’ out of your ‘landlord’.

1. Make your case

If you point out to your landlord that something needs fixing, make sure you get it in writing. That way, if it goes unrepaired, forcing you to take the case to a tenancy board, you have evidence that the landlord was told. Keeping pictures of the unrepaired area is also important, says Karen Andrews, a lawyer with Advocacy Tenant Centre of Ontario. A successful case may result in a reduction in rent, if the tenant can make the case that they’re not getting what they are paying for.

2. Knock first

“Tenants have to be careful that they are covered by their provincial tenancy legislation,” says Thiele. For instance, shared apartments or renting a room in someone’s house may not be covered. To be sure, call your provincial tenant’s board.

3. ‘No girls allowed’ is not allowed

So you see a sweet apartment that you’d like to rent, but notice the listing forbids people of your gender or race? The law is clear: If it’s considered discrimination under the Human Rights Code, it’s forbidden for the landlord to do it. That includes rejecting you based on sex, age, religion or marital status.

4. Law trumps lease

Rental agreements and leases don’t reign supreme in the renting realm. It’s tenancy law, not contract law, that matters, explains Andrew Sakamoto, executive director of the Tenant Resource and Advisory Centre. Next time you see something unfair in your rental agreement, check with a free community legal clinic to see if it’s allowed under provincial legislation.

5. Heat, please

There’s a requirement to maintain heating, but not for providing air conditioning. Still, if there is air conditioning, it can’t be taken away, as the landlord is also expected to maintain the services that were provided when the tenant moved in.

Source; Money Sense – by 

Tagged , , , ,

8 Things You Should Always Do Before Signing A Lease

things to do while apartment hunting

Make sure you know the full picture before you move in with all your stuff.

Finding the perfect rental can be a challenging process— scouring listings, cramming multiple viewings into a single day, and feeling like your ideal place is a needle in a haystack. So it’s understandable to quickly pull the trigger when you find that dream home in the perfect neighborhood with a reasonable monthly rent.

But before you sign on the dotted line for the keys to that perfect apartment for rent in Dallas, TX, there are some things to keep in mind. Pay attention to these 8 details, and you’re bound to be a happy camper once you’re all moved in.

8 Steps All Renters Should Take Before Signing a Lease:

  1. Read the entire lease

    Reading your entire lease will help prevent simple problems from popping up. But you can take this one step further and make sure you’re signing the right lease for your city or state. Ordinances vary by city and state, so be sure to call your local government to find out local regulations for landlord-tenant law. Fortunately, there are nonprofit renters’ rights organizations in most major cities, so a quick phone call can help make sure you’re on the right track.

  2. Remember: It’s a partnership

    The landlord-tenant relationship can be friendly, especially if it gets off to a good start. Present yourself well on viewing day and be as polite and professional as you would be for a job interview. They are probably showing the property to many prospective tenants — and you want to stand out in all the right ways. Also remember that as much as your landlord is trusting you with their property, you are trusting them to maintain a safe and healthy living environment. Don’t be afraid to ask questions or request repairs and note the response. If they’re not willing to hear your concerns or write repairs into the lease, it could foretell problems down the road.

  3. Visit the apartment at different times of day

    Maybe the master bedroom gets gorgeous morning sunlight — but also sits right under a street lamp, throwing off even the best sleeper’s circadian rhythms. (Potential solution: blackout shades!) Visiting a unit more than once and at different hours will help you get a better sense of the space, from changing noise levels to noting the best hours for soaking up the rays. And while it’s not possible to stretch out your visits over multiple seasons, it’s always a good idea to ask the landlord about the apartment under different weather conditions. He or she may be able to prepare you for a loud radiator come winter or give you the scoop on a lifesaving cross-breeze during the summer months.

  4. Ask about alterations (no matter how small)

    Most lease agreements will specify what changes you’re allowed to make to an apartment, but it’s always a good idea, before signing, to get specific. Whether you’re hoping to install patio stones in the backyard or just put some nails in the wall, be sure to bring up those enhancements at the first viewing. Landlords can differ greatly in what customization they will allow; taking it for granted that you can “make your rental home your own” could put your security deposit at risk. And if there are things you feel compromise the safety or integrity of the apartment, have your landlord agree — in writing — to make those repairs.

  5. Understand the rules for subletting

    Subletting can be a great option for renters who might need to move out early. Maybe you’re renting while planning to buy, and your dream home comes along mid-lease, or a job unexpectedly takes you to a new state. Subletting can help you avoid breaking your lease by letting someone else pay out the remaining months — but make sure your landlord allows it or would consider an exception to the rule. Penalties for subletting can range from a hefty fine to eviction, so best to be in the clear before passing off the keys to another renter.

  6. Ask what’s included (and be clear on what isn’t)

    Utilities and other hidden costs can add up if they’re not included in the monthly rent. Even if you determine that the basics like gas and electric come with the rental, be sure to ask about hidden fees like garbage pickup, on-site parking, or monthly pet fees. Or if the property hosts an on-site gym or free laundry, factor those savings into your household budget. If no utilities are included, try to get a ballpark idea of what they might cost and budget accordingly. Asking a neighbor or the previous tenant can help give you an idea of what others spend.

  7. Talk to your new neighbors

    Get to know your neighbors, even before you sign. If they’re in the same building, you can get an expert opinion on the ins and outs of your prospective rental. They can let you know what utilities usually cost, weigh in on the dependability of your landlord or property management company, and tell you what to expect from the neighborhood. Ask how long they’ve lived in their apartment: It’s a good sign if your neighbor has found reason to renew their yearly lease. Neighbors can be good for so much more than a borrowed cup of sugar!

  8. Have your papers in order

    Competitive rental markets like New York, NY, and San Francisco, CA, often see many qualified candidates vying for the same apartment. In these cases, the most crucial thing you can do before signing a lease is to be 100% prepared. Having your paperwork ready to go with your application will expedite the process and increase your chances of signing that lease.

Is there anything you wish you’d asked a landlord before signing on the dotted line?

 

Source: Trulia.com – By Christine Stulik | Apr 12, 2017

Tagged , , , ,

Landlord licensing needed to fix ‘unacceptable’ conditions for low-income renters, report says

Cheryl Horne points out a hole in the bathroom of her Scarborough apartment that has gone unfixed for five years.

ACORN surveyed 174 low-income tenants about conditions in their units

Cheryl Horne is paying more than $1,000 each month for cockroaches, broken cupboards, an unsealed door that lets cold air in and gaping holes in her walls and ceilings. And her rent is about to go up.

The single mother of five calls the conditions of her Scarborough apartment “ridiculous.”

“It’s hard. It’s driving me mad,” Horne said. “But there’s nothing to do. I have to just live with it,” she said in an interview with CBC News in her unit at 3967 Lawrence Ave. E., which is near Orton Park Road.

A new report released by ACORN, a national organization of low and moderate income families, says the plight of tenants like Horne highlights the need for the city to move forward on landlord licensing.

Their State of Repair survey was distributed to 174 ACORN members across the city to measure the extent of substandard living conditions in Toronto’s rental apartments. Results reveal the majority of tenants have major deficiencies in their homes.

Cheryl Horne Acorn report door

Cheryl Horne said the hole in her door is making her feel unsafe in her Scarborough apartment. (Laura DaSilva/CBC )

Andrew Marciniak, a lead organizer at ACORN Toronto, spoke on CBC’s Metro Morning about the severity of the situation.

“People are living in squalor and paying high rent,” he said.

Of the members surveyed, 95 per cent reported violations of Toronto’s property standard bylaws in their apartments and nearly 70 percent said repairs were needed in their unit the day they moved in.

Marciniak said that cockroaches rank among the most common complaints.

“83 per cent of people say they have seen cockroaches in their home, and about a third say they see them every day,” he said.

In addition, half of respondents lack heat in winter and a quarter have mold in their apartments. Marciniak said that bed bugs, poor ventilation and faulty elevators also plague about a quarter of the tenants that were surveyed.

Basic repairs seen as hurdle

ACORN wants the City of Toronto to implement mandatory annual inspections of all buildings with three or more floors and more than 10 units. The program would be similar to the DineSafe restaurant licensing system. Landlords that fail the inspections would face large fines.

“That would teach them a lesson,” Horne said. “They live happy wherever they live and they own a building. Why can’t they make people happy the same way?”

Getting basic repairs done is a hurdle nearly 70 percent of respondents said they struggle with.

Horne said numerous written requests to her landlord have gone unfulfilled.

Although there is a complaint system for tenants through the city’s 311 system, nearly one third of respondents said they see no point in calling.

‘I’m not going to keep silent’

“Because they’re afraid,” Horne said. “A lot of people are complaining about it, but they’re keeping silent. I’m not going to keep silent.”

Horne said her building manager sends maintenance workers who are not qualified to do repairs, and they often make them worse. “You can’t bring people in to do the work of electrician or plumber that don’t have a licence,” she said. “You have to bring professional people.”

ACORN has been pushing for a policy to ensure landlords face the same scrutiny as other business owners in Toronto.

“We’d like to see landlord licensing,” said Marciniak. “Also, an engagement program for tenants so they know their rights and they know the city is looking out for them.”  

In June, Toronto city council voted 33-6 to ask municipal licensing staff to start public consultations on a plan to crack down on bad landlords.

ACORN Canada president Marva Burnett said ACORN members will be at city hall over the next two months as city council reviews a staff report to ensure any new program is the best one possible.

“Toronto city council and Mayor John Tory have a golden opportunity to leave a legacy and ensure all tenants live in a healthy home,” Burnett said in a statement.

Source: By Laura DaSilva, CBC News Posted: Nov 01, 2016 8:00 AM ET

Tagged , ,