Where have all the tenants gone?
A recent post online asked this question. The landlord was surprised that they have a vacant property and are having trouble finding a tenant. When they rented it two years ago there were multiple applications at the first showing.
The economy is always changing and has adjusted causing a tenant favourable rental market. This means there is more product for rent than there are tenants looking for a place to rent. Over supply compared to current demand. Two years or even a year ago when your property was advertised many people were viewing it and applying almost immediately. Today tenants have time to view a property, and look at multiple other units before they choose to apply for one they like.
Why has this happened and when will it end?. There are many factors why this has occurred. The first is the high interest rates have slowed the sales market back to normal type of selling activity. With less product selling, more rental products are not leaving the rental market, and some owners are choosing to rent their property instead of selling. Combine this with developments which have recently completed and owner/investors who expected to sell their newly built condos are finding they are unable to obtain the sale price they expected. This is causing them to add their product to the rental market and seek tenants until the market returns to a price level they want to achieve. These two factors are adding significant amounts of rental products to the market.
We expect this pattern to continue for the next two to three years until development of the current product comes to completion and slows down the new product entering the market. A number of planned projects have elected to not move forward with development due to cost of building which will eventually slow the amount of product entering the rental market.
The lowering of the interest rates will spur some sales activity though we don’t expect to see covid like market conditions again anytime soon. This will not be enough to raise the sales prices to levels inventors feel comfortable with selling their property.
Another factor affecting the market is legislative changes to rental housing. The change for a new owner taking possession after purchasing a tenant property increasing the notice to vacate from two months to three months will restrict the sales of rental properties. The increase of owners occupying a unit from two to four months will also restrict when an owner can reoccupy their own property. This will lead to more properties sitting vacant when a tenant leaves making it easier for the owner to sell or occupy again.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
What is the solution to affordable housing?
Let’s talk about three issues that affect the housing market including rental properties.
The first is CHIP Reverse Mortgages. The CHIP or reverse mortgage is a financial product that was created to help people stay in the home they have lived in for a long time and don’t want to move. I understand why people want to stay in the home they have raised their children or lived in for long periods of time. They have memories from that home and want to keep those memories. Unfortunately memories dont pay to fix the roof, the hot water tank or pay the remainder of the mortgage.
The CHIP reverse mortgage was created to help people who are not in a financial position to afford the home they want to stay in. If we eliminated the chip reverse mortgage a number of those houses would be sold due to the fact that the people are unable to afford the home.
The second item is basement suites. Basements suites are seen as a great way to add more rental housing to the market. Similar to the reverse mortgage most people rent out the basement suite in their home due to the fact they are not in a position to afford the home they want to buy or live in and don’t want to move. If you are renting a portion of your home to a non-family member it means you don’t need a house that is the size you have purchased. Basement suites mask the government’s assessment of what type of housing needs to be developed in the future. If single family homes are built and people buy them and rent out a portion of the homes then developers will keep building this type of product. If basement suites were not permitted, developers would not be able to sel the homes they are building and would push governments to change the zoning to allow smaller housing products to be built in areas where single family homes are built. Eliminate basements suits to build more right sized housing needed in the market.
The third item is the most important and is the one the government could control more than either of the previous two examples.
For many years in many parts of Canada major cities have not built purpose built rental properties annually to keep up with the need of the rental market. This means that the majority of the rental housing is in basement suites, or individually owned condos which can be removed from the rental pool when the property is sold to new owners. This situation creates a very fluctuating rental market. Federal and provincial governments should fund the development of entry level rental housing for young and lower income people. This needs to be assessed annually to the need and producer need to be built annually. Building regularly would keep the rental and sales prices in a more competitive market.
What do you think if we made these changes to the housing market?
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Red Flags
The tenant selection process is a time-confusing process that needs to be performed thoroughly when selecting tenants for your rental property. What are some of the red flags you should look out for?
Recently we were reviewing an application for one of our clients. We contacted the tenants’ references and most were good references. The tenant landlord refused to speak with us until they had given notice, which made us wonder what the relationship is between the two parties.
Due to the landlord not speaking with us we requested further information and the tenant sent us six months of bank statements showing they have paid their rent on time each month. This was great. We could easily see that they had paid the rent on time. What the tenant didn’t notice or realize is that two of the six months his bank account was in a negative balance, meaning they had spent more than they brought in. On one of the statements it was clear that their car payment was NSF, the most recent month. We elected to perform the credit check and found further information that made us elect not to move forward with this applicant.
The credit report does start with a “score” but that is not the only thing one should review on the report. In this case the score was poor. The report also showed that they had a high ratio of credit utilization used. It showed two credit cards and another loan, which with some online research you can see this is from a short term payday loan. All of the debt added up to more than one year’s salary for the applicant. All of this information allowed us to make a decision not to rent to this person who was showing high risk of not paying the rent on time.
It is not one thing that makes a decision, it is all the factors involved in the process of selecting a tenant.
Our advice to tenants would be not to submit bank statements that show your account in a negative balance. This is not the first time I have received information like this from an applicant.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Who does the rental manager work with?
Cartref Properties provides rental management services to investor owners renting their properties. What does this mean?
We enter into contracts with owners of the rental property to assist them in finding tenants for their properties. We advertise the property for rent, show the property to prospective tenants, screen applications and select tenants for the property. We then complete the move in process at the start of the tenancy. During the tenancy we manage the communication between tenants and landlords. At the end of the tenancy we complete the move out process as required under the tenancy laws.
We are often asked by Real Estate Agents to help their clients find a rental. A rental manager works for the owner of the property and therefore we are permitted to work for tenants who are looking to rent a property. The ironic situation is that licensed Real Estate Agents who are permitted to assist tenants to find a place to rent, often ask us to assist their clients find a rental.
Why are rental managers not permitted to assist a tenant locate a rental property. This would be considered dual agency if it was one a rental that they were managing for their clients which is prohibited by the real estate council rules.
If you are an owner looking to find a tenant for your property a rental manager can assist you with this task. If you are a tenant looking to search for a rental, a rental property manager can’t assist you with this task. They can show you properties they have for rent, but as they represent the owner, their client they are not able to provide advice on the rental of the property.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Residential Tenancy Laws.
The BC Provincial government has announced plans to amend the Residential Tenancy Act to help protect tenants. We wanted to try to explain why they are making these suggested changes.
These changes include amendments restricting rent increase when a minor is added to the home, providing tenants a longer period to dispute an eviction notice and increasing the time an owner must occupy the rental property after an eviction for personal use.
These changes are “targeted” to protect tenants from bad landlords. Governments have in the past and will in the future change laws when the general public has concerns over how they are being treated. Many government changes are reactionary to actions landlords are doing at that time and how they are perceived to be manipulating current legislation.
The proposed change of restricting landlords from increasing the rent simply due to a child being born is due to many landlords seeking options to increase the rent outside of the tenancy agreement. Why are landlords adding an increase in the rent when a newborn child is born”. The landlord’s argument is that more people creates more wear and tear on the property. A new born child is not going to add very much wear and tear, so is this really necessary. This is being brought forward due to some landlords increasing the rent by a significant amount. If the increase was reasonable, tenants may not care about it. Cartref Properties advises landlords not to increase the rent based on a child entering the property.
Why has the government proposed a change of increasing the length of time from six months to one year for personal use occupancy?. Many landlords have evicted tenants for personal use with the full intention of re-renting the property after six months or sooner if they can find a reasonable reason. An eviction for personal use is intended to remove the rental unit off the market. This change is a reaction to many landlords trying to manipulate the tenancy laws and re-rent their property at an increased price while the economy is pushing rents higher. Currently there is an over supply of products and I am sure we will see less of these evictions in the next two years. Cartref Properties won’t work with a landlord who wants to evict a tenant under three conditions and re-rent the property in the less than required time frame.
Providing a tenant a longer time to challenge an eviction slows the process down as some landlords try to use the quick times to evict a tenant. It appears this increase is going to be related specifically to the personal use evictions or two month notice as that is the eviction that currently has a 15 day requirement to dispute the notice. There may be a time when a landlord tries intentionally to send a tenant a notice knowing they are not going to be able to dispute this notice due to being on vacation or some other reason. If the eviction is legitimate it should not be an issue for a landlord if they dispute in 15 or 30 days. For these evictions the government needs to speed up the hearing as it impacts many people outside of the tenancy including purchasers and or family members who are expecting to move into the property. A better solution here would have been to extend it to a three month notice for personal use, still with one month’s free rent. That would give the tenant longer to find a place and time to dispute the notice and have a hearing.
What are other areas the government could target in the future. Cartref Properties has experienced many landlords removing parking stalls and storage lockers from the tenancy agreement and renting these for an additional cost to the tenants. This provides the landlord the option of increasing the cost of these to any amount as they are outside the agreement. Although this provides landlords with potentially more revenue in good times when tenants have less choice of rental properties, it creates a dilemma during the tenancy. The parking stall and locker are not part of the agreement and the tenants may do things to the stall and locker which you have no right to evict them for as it is not part of the tenancy agreement. This potentially means more headaches and a need to pursue correcting these actions through other legal means including the Civil Resolution Tribunal. Creating an agreement that creates animosity between a landlord and a tenant often leads to a negative experience for both parties. It also leads to tenants leaving when the market changes and they are able to find lower rent that includes these amenities with their tenancy.
If the tenant chooses not to rent the locker or parking now the landlord needs to put more effort into renting that stall or locker to another person. In a stata corporation that must be someone residing at the building and this creates another relationship for the landlord to manage. This relationship would also be outside the tenancy agreement and require other forms of legal recourse if there was a dispute between the two parties.
As a landlord it is important to understand the laws, and that they can change at any time during your tenancy agreements. Cartref Properties have found that when landlords and tenants both follow the laws, the experience is a positive one for both parties.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com