Wholesaler · Pickering, Ontario · Member since 2015 · 13 posts · 3 votes
Ontario Canada has recently declared war on small businesses and in particular Landlords. Landlords will soon be unable to raise rents to reflect market conditions even if a tenant moves out. Given the rising cost of real estate, punitive taxation and high maintenance and operating costs, what can a real estate investor do to cash flow?
Would love to hear your creative ideas where conventional wisdom no longer applies
Rental Property Investor · York, PA · Member since 2017 · 377 posts · 315 votes
9y
@Richard Raghoo - to increase cash flow, you only have two options: raise the gross income, or decrease expenses.
If you are set on sticking to residential, you will have to find creative ways to decrease expenses. Split utilities between tenants, improve the property management, etc.
Another option would be to do lease options, or rent-to-own. I don't know your specific laws and conditions, but there may be some options if the tenant is working towards owning the property.
If you are not set on residential, you could look into self-storage units or other options that will not have locked rates.
Other than that, @Matt K. has the right of it: change markets.
Wholesaler · Pickering, Ontario · Member since 2015 · 13 posts · 3 votes
9y
Thanks for the reply Ben. reducing cost is probably not an option since I do 90% OF the work myself. The rent to own option may be a good alternative though
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
9y
@Richard Raghoo rent control has its downside, but it does have its upside. Its hard to see the silver lining, but there is one. I invest in the San Francisco Bay Area, more specifically Mountain View and Oakland. There is a very strong push in the area for RC. What people do not understand is that it artificially shields existing tenants at the expense of future tenants. Basically tenants become less fluid, therefore rental supply goes down and when units open up market rents are way higher.
You need to understand the RC ordinances in your city: do you have the ability to pass improvement cost to your tenants, what is the rental increase cap per year, what are the "just cause" rules, etc. There are ways to increase cash flow, you just have to follow the defined rules.
In the end it is sad because the personal relationships landlords use to have with tenants is now dictated by rules. Basically RC creates an atmosphere where landlords can no longer give any leeway to tenants. You have to follow the rules extremely closely for everything and document everything. The landlords that don't increase yearly will find themselves in a bind years from now when they try to sell or refinance.
Rental Property Investor · Oakville/ Brantford, Ontario · Member since 2015 · 147 posts · 91 votes
9y
This is not firmed up yet ..... just one of the stupid things they want to do. But yes I am just as annoyed as you but doubt this one will actually go through not allowing us to raise rents after they move out.
We need to join forces and stand against this bs.
Rental Property Investor · Oakville/ Brantford, Ontario · Member since 2015 · 147 posts · 91 votes
9y
http://realestatetaxtips.ca/war-small-business-owners-landlords/?inf_contact_key=ae6d70129a0c07cec709b369a17916f2c9b63b7d8709fcb6c0f932c72337f00f
Please see this article from Cherry Chan. It summarizes it very well and gives you the next step so we can fight this nonsense together.
Residential Real Estate Broker · Kitchener, Ontario · Member since 2014 · 687 posts · 370 votes
9y
Rent to Own is a very good option in this situation. I have specialized in it since 2007. And we set the rental rate high to be able to help the tenant save for downpayment so cashflow is always strong. It helps with Debt coverage ratio as well so that we can continue to buy and finance more properties.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
9y
there is a difference between rent control and vacancy control (where you can't raise the rent even after a tenant moves out.) we have strict RC in San Francisco, and as @Arlen Chou mentioned, there are various ways to work with it. A few others are buying out tenants, condo converting, waiting them out, and selecting tenants that will probably not be "lifers" in your unit like upwardly mobile singles, visiting professionals, students,etc., etc.
Vacancy control is illegal in CA, and I'd bet most states. Not sure about Canada, but it's very extreme, and certainly a recipe for future slums, so I'm sure there is strong opposition to it in Canada.
But best thing about owning investments in an RC city is owning units at market rents. As mentioned before, RC drastically reduces the supply of available units (as many folks of limited means are stuck in their low rent units and won't move.) But you the smart LL works around that, so a vacant unit rents for an artificially high rent due to market inefficiency. And the delta in rent could be huge, $2000-3000 difference in rent per unit. Get a few turn overs and it's possibly game over for you!
Absolutely false! The majority of jurisdictions in Canada do not have rent control.
Additionally, rent control in Ontario has been around for decades, the current provincial government has just extended the scope (actually, unrolled a previous set-aside/exemption, introduced 3 decades ago, on existing rent control).
Vacancy control is illegal in CA, and I'd bet most states. Not sure about Canada, but it's very extreme, and certainly a recipe for future slums, so I'm sure there is strong opposition to it in Canada.
From landlords, of course, but from the voting population as a whole? Keep in mind that even people that don't rent think that all landlords look like the Monopoly Man. We're in this no-exemption rent control situation because landlords got bowled over hard. There was zero voice of landlords in the media, despite the efforts of landlord groups. The media repeatedly said how "landlord friendly" our legislation is here in Ontario, yet we have the most tenant-friendly legislation in North America (go ahead, try me, California).
@Richard Raghoo rent control has its downside, but it does have its upside. Its hard to see the silver lining, but there is one. I invest in the San Francisco Bay Area, more specifically Mountain View and Oakland. There is a very strong push in the area for RC. What people do not understand is that it artificially shields existing tenants at the expense of future tenants. Basically tenants become less fluid, therefore rental supply goes down and when units open up market rents are way higher.
You need to understand the RC ordinances in your city: do you have the ability to pass improvement cost to your tenants, what is the rental increase cap per year, what are the "just cause" rules, etc. There are ways to increase cash flow, you just have to follow the defined rules.
In the end it is sad because the personal relationships landlords use to have with tenants is now dictated by rules. Basically RC creates an atmosphere where landlords can no longer give any leeway to tenants. You have to follow the rules extremely closely for everything and document everything. The landlords that don't increase yearly will find themselves in a bind years from now when they try to sell or refinance.
Wholesaler · Pickering, Ontario · Member since 2015 · 13 posts · 3 votes
9y
Thanks Arlen, I agree with your assessment. The type of rent control being proposed in Ontario limits rent increase to government calculated inflation and not real inflation. Its very difficult to make a case to raise rents to reflect capital improvement costs. Painting an apartment or fixing broken stuff would not qualify. The new proposed bill will not allow for landlords to raise the rents even after a tenant has moved out!!. You will be required to charge the same rent as the tenant who moved (and you will have to fix the place up after the tenant who moved may have trashed it). The proposed Bill will implement both rent control and vacancy control
Wholesaler · Pickering, Ontario · Member since 2015 · 13 posts · 3 votes
9y
Sarah, I read Cherry's article (I am on her mailing list). Bill 144 has already had its first successful reading! In the end, tenants outnumber landlords and so you can guess who the winners will be. This simply a vote buying exercise at the expense of the economy of Ontario, the housing sector and tenants themselves as this Bill will create slums.
Real Estate Broker · Hamilton & Toronto, Ontario · Member since 2016 · 9 posts · 5 votes
9y
I contacted FRPO asking for how their lobbying is going against bill 144. This was there (somewhat reassuring) response:
"Bill 144 is a private member’s bill by Peter Tabuns of the NDP. It is not a government bill. Recently the government sent a letter that stated their support for vacancy decontrol. Both the Liberals and PCs are on record as keeping vacancy decontrol.
Nevertheless we must be active and involved. This summer we are meeting with MPPs, public servants and those writing the parties platforms for the next provincial election.
Of our key points, the maintenance of vacancy decontrol is at the top."
Investor · Ottawa, Ontario · Member since 2017 · 145 posts · 52 votes
9y
I strongly doubt we'll see Montreal-style vacancy control in Ontario. I like the rent-control that exists as a person, obviously as a landlord I'd prefer to be able to set market rent monthly. However, vacancy-control hurts cities as landlords have no reason to upgrade property, and I would be shocked if the Liberals in Ontario would pass it. If the NDP get a majority, I'll be concerned.