What price can I get for my rental property?
We are asked this question often and our standard answer is what the market will pay for it.
Many owners who seek out our services advise they need a specific rental amount for the rental to make a profit and won’t rent below that amount. This is a difficult process for a landlord, or their agent to manage.
The market will dictate the amount of rent a tenant is willing to pay for the rental property. During covid, sales increased and a number of rental properties were removed from the rental market in BC which increased the rental rates to higher levels. To combat the market the Provincial and Federal Governments have made some changes which are affecting the rental market. The increased interest rates have slowed the sales market, meaning more products are reducing the selling prices of newly completed developments and owners are bringing those products to the rental market instead of selling upon completion. The Provincial Government introduced a ban on short term rentals which takes effect May 1st, 2024. A number of properties have entered the selling market and the long term rental market.
What effects are these situations having on the rental market?.
The increase in the number of rental properties has created a market where there is more supply than there is product. We are seeing more properties being vacant after a tenant moves out and taking multiple months to find the right tenant for the property. This is causing downward pressure on the rates for rental properties. When a landlord indicates they need a specific price they are limiting themselves to the number of tenants who can afford the property. Anytime you put a restriction on the property you are limiting potential rental prospects.
What many landlords fail to understand is that if you are demanding a rental amount of $3000 per month and you won’t rent it for $2900, it will take 30 months to make up that $100 difference in rent. Landlords fear the option of putting a tenant in the property who stays for many years and they are not able to move them out of the property. Most tenants stay in properties less than five years. The Residential Tenancy Act also allows for annual rent increases and tenants don’t like to move if they don’t need to, so small increases annually could bring that to $3000 in a few years. Owning an investment rental property should be a long term perspective not an annual financial evaluation. If you look at the annual costs of owning and managing a rental property most of the time they are not positive.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
How much deposit can you collect?
In British Columbia the Residential Tenancy Act and the Regulations outline Landlords responsibilities for landlords and Tenants. When renting a property landlords are permitted to collect a Security and Pet Deposit when renting their property. The tenancy act restricts the amount of security and pet deposit landlords can collect.
A security deposit can only equal half of the total of the first month’s rent. This amount can’t be amended during the tenancy even when the rent is increased. Landlords often try and request tenants increase the deposit amount when they increase the rent. In some cases we have seen advertised properties listing the security deposit at one full month’s rent, which is a violation of the Residential Tenancy Act.
Another important factor to understand about the security deposit is that it doesn’t belong to the Landlord. They hold it in the event it needs to be used. We have seen some landlords say they used the security deposit to complete repairs during the tenancy caused by the tenants. The security deposit can only be used by the landolrd at the end of the tenancy when agreed upon by both parties. Both the landlord and tenant must agree that a portion of all of the deposit can be given to the landlord to pay for damage to the property or other factors including unpaid rent or utilities.
For pet deposits the maximum amount is the same as the security deposit, half of one month’s rent. The difference with the pet deposit is this can be collected during a tenancy if a pet is added later. If the tenant has lived at the property for two years and the rent has increased during that time then the deposit amount collected, a landlord is permitted to request the amount be the equivalent of 50% of the current rental amount not the amount at the start of the tenancy. If a tenant adds a pet during a tenancy it is important to perform a new condition inspection report to understand the differences between when the pet arrived and when the tenant vacates the property.
As with the security deposits Pet deposits are funds owed to the tenant at the end of the tenancy if there is determined not to be any damage caused by the tenants pet. These funds do not belong to the landlord to use for repairs at the property during the tenancy. A landlord is not permitted to keep any funds from the security or pet deposit without either permission from the tenant or an order from the residential tenancy branch. If both parties are in a disagreement at the end of the tenancy as to how much should be kept for damages then the landlord must file a claim with the tenancy branch to keep any portion of the deposits.
Landlords are also required to pay the tenant the interest earned on the deposits during the time the tenant occupied the rental property. If the landlord files a claim with the RTB, a hearing will be held and the landlord holds all the funds until the hearing is heard and an arbitrator determines an amount to be kept or returned to the tenant.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Can we build enough housing for everyone?
The media keeps reiterating there is a housing crisis and the only way out is to build more houses. Every region of our country has experienced growth in development and we still dont have enough housing.
Maybe the issue is not enough houses but are there other solutions?.
One solution is what type of housing are we building?
I have lived in the Greater Vancouver area for over 30 years and have seen tremendous growth in the development of housing throughout the area. The majority of the housing built in the Vancouver area has been with townhouses and condo towers development due to the restriction in the land space available. These properties are smaller spaces than single family homes compared to other areas of the country where the development is suburban areas with single family homes. The argument I hear is we have the land so why should we not build single family homes?. Just because the land is there should we use it all for housing.
All areas are losing valuable land for growing food to develop housing.
The housing issue has many factors and developing only one or two styles of properties in an area limits people’s choice, whenever consumer choice is limited costs are increased. The development of suburban areas where people need a vehicle to get to work, school or shopping also increases the cost of living. All regions need to have a better mix of single family homes, duplexes, townhouses, condos and purpose built rental apartments to facilitate the needs of all the people needed to make an economy work effectively.
People grow up in an area with their families then want to move out of the home to live on their own and start their own life. In many areas of the country this means they need to move far away as housing in that area is only one type mostly family homes and they need a smaller property to start out in. When children move out of the family home they should have an option to rent or buy a product that is in close proximity to where they lived with their family. In addition, on the other end of life if elderly parents want to move closer to family it would be helpfull to have different types of housing in all areas. In both of these situations having family closer can help families support each other when needed.
Another question asked in recent years is, are we using the current housing correctly?.
Governments have changed laws to add empty homes taxes, speculation taxes and limiting short term rentals to ensure housing is used for people to live in and not for other uses, which I think are all good things. There are a few areas the government could help with the cost of housing.
One area I would like to see the government consider changing is people who are unable to afford their homes and want to continue living there. I am talking specifically about reverse or CHIP mortgages. The basic concept of these programs are for people over 55 a financial institution will loan you money based on the equity in your home to allow you to stay in the home you have lived in for a long time.
The reality of these programs are, “financial institutions are lending people money to stay in a home they are unable to afford”. If you are unable to afford the home, should you borrow money to live there? Part of the problem with this program is related to the first issue here which is the development of various types of housing. When areas are limited by the types of housing owners residents are forced to move from an area they like and are familiar with living in. They choose to borrow funds to stay in a house that is too large for them or build a basement suite to rent to help afford the property. Both of these situations lead to potential financial issues for the homeowner and housing potentially not be used to its full potential. If these owner’s moved, a family who needs that much space would use the full property and the homeowner would have a smaller home in the same area with no debt and not being forced to be a landlord. In many areas there are limited options for homes and a senior or elderly person who wants to stay in the same area they have lived in for many years struggle to find suitable places to live. If the seniors could sell their property and move five minutes down the road to a smaller place and keep the family, friends and support network around them as they had before.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
What is Affordable Housing?
Politicians use this term like they are ordering fries at McDonalds.
“We need more affordable housing!”
The question is, what does that term mean?
If the renter can’t afford to rent the unit then it is “unaffordable”. The issue is how do we build rental products that people can afford? The difficult issue is everyone has a different opinion of what is needed for housing.
Many stories refer to the governments of the past subsidising developers to build rental apartments. This was done as a way to encourage the developers to build a product that in their mind was not profitable. In any business if it is not profitable then how does the government expect people and businesses to build and operate apartment buildings.
The emergence of the condominium in the market allowed developers to build a product that was profitable for the developer, and unaffordable for the renter. The downside to this is the condo is a product the developers keep improving and trying to make better than the last one, which naturally increases the cost of the product. All levels of government have permitted the development of condo buildings due to the development fees they are charging over the development of purpose built rental buildings. How has this led to unaffordable housing?.
The main difference to condo owners renting out their properties to purpose built rental properties is the market is always fluctuating. When the condo market increases in price, owners sell the properties to take profits. That is great for the owners, but it puts pressure on the rental market as many rental properties leave the market, reducing the supply when there is a high demand and that naturally increases costs. When purpose built rental properties are built they never leave the market keeping a stable number of properties in the rental market. This means the governments should be requiring purpose built rental each year to offset the condo development market. Developers won’t like this as it would reduce their profits and they may choose to stop building, which then increases the cost of purchasing a house.
In recent years governments have approved the development of rental buildings to increase the rental stock, which is a good move. The problem with the newer developments is that they look like “condo buildings”. They have insuite laundry, marble counters, high end appliances, fitness and recreation rooms. This is all great but that is not what the market needs. That is the same market as the condo market, which tenants are advising is unaffordable.
Let’s compare this to the auto market. Car manufacturers are always pushing the higher end of their lineup and reducing the entry level cars in the market. This increases the cost of the products being sold. Now imagine if car dealers were not allowed to sell used cars. The only car you can buy is brand new, the cost of the cars would be increased further. This is what has happened in housing, there were no used cars for sale for too long and now the industry is trying to bring in more used cars to help the market, except they are only bringing in cars that are two or three years old and are only the best models. This would not reduce the cost of buying a car.
Governments need to push developers to build a certain product that the market needs for purpose built rental housing. When left to their own devices the developers will build the higher end product which allows them the greatest return on investment, I don’t blame them for that everyone else would do the same. Maybe what needs to happen is each year the government contracts to the private sector to build a specific purpose built rental product and then it is managed by a third party. Every five or ten years the government sells these products to the free market using the funds from the sale to build more products. These products need to be entry level type products. No fitness rooms, shared laundry etc. Like an entry level vehicle.
Allowing the developers to dictate what they want to build will only result in unaffordable housing.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Who is the Landlord on the Tenancy Agreement
The Government of BC offers a standard tenancy agreement. Cartref Properties always uses the standard agreement along with an addendum. Why do we use the standard agreement? The Residential Tenancy Act has requirements on what must be included in all agreements. The standard agreement meets all the basic requirements of a tenancy agreement.
One important requirement of a tenancy agreement is properly identifying the legal names of the landlord and tenants. The first section of the standard agreement is the section you fill in the proper names of the landlord and tenant. This section indicates if the landlord is a company, use the last name section for the company name. What we have experienced recently is some property management companies are indicating their company name in this section when they are managing a unit for an individual owner. Is this the correct use of this section? We don’t think so.
After identifying the landlord the agreement asks for the names of the tenants, the address for the rental unit, followed by the address for service and has the option of identifying if the address is for the landlord or the landlord’s agent.
In multiple cases we have seen property management companies identify themselves as the landlord then indicate their business address for service and check the box that they are the landlord’s agent. On a tenancy agreement the landlord and landlord’s agent are two different parties, the landlord can’t also be the landlord’s agent, these two parties must be different people. Why is this important? If the owner of the property elects to move on to a different property management company there could be issues as the landlord is not listed as a party to the rental contract. If the tenancy has an RTB case it could be identified the contract has an issue with the proper identification of the parties involved.
We are unsure what this could mean in a RTB hearing though it would not look favourable on the landlord or the property management company. Often in a hearing it might be a requirement to submit a copy of the tenancy agreement. With property management the RTB expects landlords to have more knowledge than tenants and property management companies to have even more knowledge than landlords. The higher the expectation the higher the standard the RTB holds for understanding the Tenancy Laws, which can lead to the RTB making a decision not fully based on facts but based on misrepresentation on a tenancy agreement.
Understanding the difference between who a landlord is and who the landlord’s agent is, is an important part of managing a property. Filling out documents incorrectly leads to potential negative experiences in a tenancy.
Need assistance managing your rental property.
Cartref Properties can assist you, call today to discuss your needs.
You can find more information about us at: www.cartrefproperties.com