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Sudbury’s Landlords Have Had Enough

A combination of Covid 19 and the province’s budgetary restraint are to blame for ridiculous eviction hearing backlogs

Months long waits for tribunal hearings are leading the Greater Sudbury Landlord Association to take to the streets. CBC and the Sudbury Star both reported irate landlords protesting outside of city hall, where the province’s reduction in provincial adjudicators is making a pandemic backlog worse.

“Our main focus is to get the LTB to listen to us here in Sudbury. When tenants are clearly in arrears, evictions have to be processed. We’ve got landlords who haven’t been paid rent for four, six, 10 months, and these people are stressed to the max. We need to get more adjudicators up here.” – Ray Goulet, President, GSLA.

This association has been vocally critical before. In March of 2019, CBC reported on the closure of Sudbury’s provincial landlord and tenant office. The association expressed concern about delays being introduced as a result of this. When backlogs those delays occurred before the pandemic, they expressed support for an Ombudsman’s investigation in January, which is currently ongoing.

Goulet claims there are about 80,000 cases in Ontario that have yet to be resolved through the Landlord and Tenant Board, with about 400 in Sudbury alone. Tribunal Watch Ontario warned in May that the Landlord and Tenant Board, which makes close to 80,000 decisions a year, had shrunk from 53 members to 40 in April 2018.

Ontario’s tenancy board has received almost 6,000 applications to evict tenants since the start of April, adding to a backlog of cases the understaffed tribunal this week resumed processing amid the COVID-19 public health crisis – National Observer

About 90 percent of cases at the LTB are brought by landlords, primarily seeking to evict tenants for non-payment of rent. The Landlord and Tenant Board are supposed to schedule a first hearing date within 25 days of receipt of an application for the most common rent disputes. In the 2018-19 fiscal year, it met that standard just 35 percent of the time.

From mid-March to mid-September of this year, Sudbury police responses to calls related to tenant and landlord disputes in the city’s downtown — more than doubled in the same period in 2019.

The Definitive Guide To The Housing Stability and Tenant Protection Act of 2019 in New York City

The 2019 Housing Stability and Tenant Protection Act ushered in significant changes to New York’s rent regulation system. Among the new restrictions implemented as part of the sweeping state tenant protection law, landlords can no longer raise rent on rent-stabilized apartments by up to 20% when a tenant leaves, which was known as a vacancy bonus. Allowable rent increases associated with rent-stabilized building and apartment improvements have also been capped. Here’s some other things to note…

New Rights for Tenants

Landlords cannot reject tenants because they had been in a court case with a prior landlord. The courts cannot sell eviction court data. Records of evictions that were the result of a foreclosure are sealed.
Landlords must give tenants the opportunity for a walk-through before they move in and before they move out, and return the security deposit within fourteen days with an itemized list of any deductions.
Landlords cannot evict or otherwise penalize tenants who complain about conditions.
Landlords must give receipts (on request for personal checks) within specific time frames and notice by certified mail when rent is not received.
Landlords cannot charge late fees until rent is five days late and the late fee cannot be more than $50 or 5% of the monthly rent, whichever is less.
A landlord must make reasonable efforts to re-rent an apartment before they can charge a former tenant who left before the end of the lease for the rent for the rest of the lease.
Starting in October 2019, landlords must give 30, 60, or 90 days’ notice of lease termination or a rent increase of 5% or more, depending on how long the tenant has lived there.
“Self-help” eviction is a crime.

New Rights in Eviction Court

Rent demands must be in writing and served fourteen days before the landlord can start a court case for non-payment.
Court papers have to be served at least 10 days before the court date.
The landlord cannot get any non-rent charges in a non-payment proceeding.
A non-payment proceeding stops if a tenant pays all the rent before the first court date.
Tenants who raise defenses have a right to a fourteen-day adjournment before trial.
A warrant of eviction must be served at least fourteen days before the tenant can be evicted.
A tenant in a non-payment proceeding can pay all the rent due before the eviction and end the proceeding.
If a court finds that a tenant breached her lease, the court must give the tenant thirty days to correct the problem.
Under certain circumstances, the court can give a tenant up to a year to relocate as long as the tenant stays up to date with rent.

The Definitive Guide To The Chicago Landlord Tenant Ordinance

A Municipal Law That Governs Most Tenancies in Chicago

If you’re a landlord in the Windy City, it’s essential you know the Chicago Residential Landlord and Tenant Ordinance, also known as the RLTO.

The ordinance has been in effect since 1986 and outlines many of the city’s regulations and rules that govern the relationship between a landlord and tenant. Understanding the municipal ordinance can help in avoiding unnecessary conflicts and disputes with your tenants. A summary of the ordinance, by law, must be attached to the lease. If you are a landlord in Chicago and fail to provide a summary of RLTO, your tenant has the right to terminate the lease upon notice.

The RLTO applies to all apartment buildings in Chicago unless:

the building has 6 or fewer units and the landlord lives there.
Hotels, motels and rooming houses (private houses where rooms are rented for living or staying temporarily), unless the tenant pays rent on a monthly basis and the unit is occupied for over 32 days.
School dormitories, shelters, employees’ quarters and non-residential rental properties.
Co-ops and condominium that the owner occupies.

What Tenants Need To Know:

43 percent of Chicago residents rent according to the most recent data from DePaul’s Institute for Housing Studies, and the RLTO dictates that they have to pull their weight as well.

Some of the basics of what tenants are required to do are:

Buy and install working batteries in smoke and carbon monoxide detectors within the tenant’s apartment.
Keep the unit safe and clean.
Use all equipment and facilities in a reasonable manner.
Not deliberately or negligently damage the unit.
Not disturb other residents.

Landlord Remedies:

If your tenant fails to pay the rent you can terminate the rental agreement after giving a 5 days written notice.
If the tenant fails to comply with the Code or the rental agreement, the landlord, after giving 10 days written notice to the tenant, may terminate the rental agreement if tenant fails to correct the violation.
If the tenant fails to comply with the Code or the rental agreement, the landlord may request in writing that the tenant comply as promptly as conditions permit in the case of emergency, or within 14 days. If the breach is not corrected in the time period specified, the landlord may enter the dwelling unit and have the necessary work done. In this case, the tenant shall be responsible for all costs of repairs.

Security Deposits:

As a landlord, you are legally required to provide a receipt to your tenant for a security deposit. A receipt must be provided when the deposit is made and it must be signed by the person receiving the deposit, include the name of the person receiving the deposit and the name of the landlord, if the person receiving the deposit is not the landlord. The amount of the deposit is also a requirement as is the date it was made. The tenant must also be given the name and address of the financial institution where the deposit is maintained. If a receipt meeting these requirements is not given, the tenant is entitled to return of the security deposit and to damages against the landlord of double the amount of the security deposit plus interest at 5% per annum.

Read a summary of the ordinance here or download the whole thing here.

An Argument Against Rent Control To Deal With Ontario’s 1991 Rent Exemption

Living in Downtown Toronto Condos Is Not A Right.

We made the news this week! The CBC’s Lisa Naccarato called me on Monday to offer a comment on Ontario’s 1991 Mike Harris rental “loophole” – apparently a controversial topic for many who live in Toronto. Toronto city councillor Mary Fragedakis moved a motion Tuesday that would see council come out in support of a private member’s bill at Queen’s Park that would extend rent control to apartments built after 1991. Her motion supports NDP MPP Peter Tabuns’s private member’s bill aimed at eliminating what he also refers to as the “loophole”. I don’t agree with eliminating this exemption and I’ll tell you why. Before we get into that…let’s start with a few facts.

FACT: Rent control in Ontario only applies to units that were first built or occupied before November 1, 1991. If the rental unit is in an apartment building constructed (or converted from a non-residential use) after November 1, 1991, then the rent control provisions of the Residential Tenancies Act, 2006 do not apply.

FACT: The post-1991 rent exemption was originally introduced by Bob Rae’s Ontario NDP government. It’s been maintained over time by Mike Harris’ PC provincial government (they made it permanent) as well as the governing Liberals. A low vacancy rate dropped even lower as developers were disincentivized by the regulated rental market for the freedom of condominiums. The exemption provided the incentive that private developers needed to build much of the existing condo stock as we know it and to recover from years of virtually no rental increases at all. Any changes to this incentive will undoubtedly have a negative effect on the market and real estate development (especially outside of Toronto where vacancy rates can vary) – not to mention the construction that is currently in the pipe. In the realm of construction, the foundation of any project lies in the quality of materials used. Opting for a provider that specializes in on-location blending of cement offers unmatched flexibility and efficiency. Such a method allows for adjustments to be made in real time, catering to the unique demands of each project. For an in-depth exploration of these benefits, consider reading an insightful guide on the advantages of on-the-spot concrete mixing solutions.

FACT: 85% of rentals in Ontario are covered by provincially mandated rent control.

FACT: It’s an exemption – not a loophole. These are two fundamentally different things. A loophole is defined as an ambiguity or inadequacy in the law. There are plenty of those in Ontario’s Residential Tenancy Act. This exemption was intentionally legislated. While it is undoubtedly true that many tenants have seen their rents increase significantly and at considerably more than the mandated provincial increase, there is no evidence to suggest there is widespread abuse of the exemption or that it qualifies as enough of an urgent issue that it needs legislative intervention.

FACT: Ontario’s Residential Tenancy Act heavily – almost hilariously – favours tenants. It always has. It favours tenants so much that Ontario Superior court justices have called for the provincial government to adjust the law and end what is a growing issue of tenants gaming the system. In 2014-15, the Ontario LTB received 79,740 applications. The ratio of landlord to tenant applications has remained relatively constant since 1998. 2014-15 was no exception, with 90% of applications filed by landlords. 70% of those landlord applications filed were related to non payment of rent. A stated purpose of the Residential Tenancies Act, 2006, is to balance the rights and obligations between landlords and tenants. It’s plainly clear that the law in fact does the opposite. The last thing landlords need is another short sighted unfair law that hobbles their ability to run their property portfolios as a business.

FACT: This issue is logical hogwash and is politically motivated. As per Martin Regg Cohn at the Toronto Star, “…rent hikes are a result of reduced supply and increased demand, which is what puts pressure on politicians for rent controls, which then depresses supply even further. Extending rent controls to newer (costlier) units would benefit the middle and upper class more than the working class (who tend to be stuck in older units anyway). Why target rentals while exempting the rest of the real estate market, notably the housing speculation that is driving much of the current crisis? It’s much cheaper and politically popular for governments to make landlords swallow foregone rent increases by imposing or extending price controls (vs. housing subsidy vouchers).”

“In the mid-1970s, NDP firebrand Stephen Lewis seized on media accounts of landlords gouging tenants. He goaded the government of then-premier Bill Davis into promising rent controls lest his Tories lose power. It seemed like a good idea at the time. But history is littered with good political intentions — and contortions — that create economic distortions.”
– Martin Regg Cohn, Toronto Star

FACT: Condo landlords have it tougher than the average landlord. The owner of the condominium will have fixed, predictable costs in the form of mortgage payments and property taxes, but the maintenance fees (commonly called condo fees) can and often change – sometimes dramatically. Condo landlords are bound by two pieces of provincial legislation. The lease agreement is between the owner and the tenant and that relationship is still governed by the Residential Tenancy Act, 2006, in Ontario. However, within the building itself, the Condo Act has precedence and landlords are responsible to make sure that their tenants follow condo rules.

FACT: Landlords want tenants. If they raise prices above what the market is willing to pay then rent will adjust accordingly. The vacancy rate is low for a reason. It takes an average of only 17 days to rent a condo in Toronto. The city averagely sees 200,000 new people move to the 416 area code each year. This issue is supply and demand. Not greedy landlords.

Housing speculation is driving much of the current crisis. Toronto is clearly a city where people want to live. Hundreds of thousands have come here from around the world. Young people want to live where the action is as gentrification has firmly rooted itself.

I admire ethical landlords. I admire ethical tenants even more. Most landlords and most tenants are both. My solemn advice to any landlord who has a Toronto unit that falls under the exemption: Act in good faith. Be straightforward and upfront with your tenants. Tell them that your unit qualifies as exempt and explain the degree of exposure that exists. Be empathetic about having to potentially uproot your living arrangement and consider the discomfort, hassle, and inconvenience associated with losing your home after a year. Ultimately – a happy long term tenant is better than expensive turnover. Exercise common sense, and demand that politicians do the same.

A big update for Renting Well

Man! Four years just whipped by.

We launched Renting Well back in 2012 with the novel idea that we wanted to create simple and cost-effective software for landlords to manage their rental properties. It took many months of working nights and weekends but when we finally launched it was to some modest fanfare in the startup community. We were featured in Betakit and Techvibes called us “Freshbooks for Property Managers.” Flattering!

From those early beginnings we were pleasantly surprised to find out that customers appreciated our product and were actually using the software but we quickly realized that weren’t just providing a tool. We spent – and continue to spend – a considerable amount of time talking to our users: learning about their individual challenges, answering their questions, and listening to their feedback and suggestions. We discovered that the landlords and property managers we work hard to bring on board are a diverse and ambitious group who are keen on engaging with us more than we ever thought.

Along the way we encountered countless configurations of rooming houses, carriages houses, condos, basement units, apartment buildings, duplexes, triplexes, and vacation properties. We discovered that landlords are a communicative and social bunch, most of whom place great importance on having a productive and respectful relationship with their tenants. We continue to spend a lot of time talking with landlords and it’s always satisfying to discover that Renting Well helps them to do that.

Four years in, the time has come for us to roll out the red carpet for a new Renting Well. We’ve been working on this for over a year and we’re excited to finally share it. Along with an updated app, we’ve also streamlined our brand with a new logo and marketing site that we’ll be launching in tandem.

On the app front, here’s a rundown of some of the new features:

Renting Well now supports multi-unit and single-unit properties – condo owners rejoice!
We’ve made whole whack of updates under the hood resulting in a huge boost in performance. The app just feels a lot faster.
New and improved (and mobile-friendly!) rental listings.
You can now easily create a “series” of transactions (ideal for backlogging old rent and mortgage payments).
Better (and printable!) reports, including a new rent roll and income statement report.
Units can now be marked as unoccupied when you’re between tenants. This disables the automatic logging of rent until a new lease is added.
Finance categories can now be easily renamed.
You can now use Renting Well in your local currency of choice. We’ve added a handful of new currencies to start like CAD (French), Yen, Euros, and GBP.

These updates to Renting Well are undoubtedly a boon for property owners and landlords, providing enhanced functionality for managing both single-unit and multi-unit properties. With improved performance and user-friendly features like mobile-friendly rental listings, the app is now more efficient than ever.

The ability to create transaction series, generate printable reports, and mark units as unoccupied during tenant transitions streamlines financial management. Moreover, the option to use the local currency of choice, including CAD, Yen, Euros, and GBP, caters to a global user base.

To stay ahead in the dynamic world of finance and real estate, it’s essential to keep an eye on real estate market news, which can offer valuable insights into emerging trends, investment opportunities, and economic factors affecting the property market. These updates from Renting Well exemplify the industry’s commitment to adapting to evolving needs and technology, ultimately benefiting both landlords and tenants.

To top it off we’ve scrapped the old help section in the app and created a brand new dedicated help site at help.rentingwell.com, containing answers to some of the most frequently asked questions in an easy-to-follow instructional format. It’s a growing list that we’ll be adding to much more regularly.

And in an effort to help new (and existing customers) get better acquainted with the platform we’re now offering to do walkthroughs via screensharing service join.me. If you’d like to have our community manager give you a tour of the updated app we’re ready and able.

We’re more committed than ever to helping landlords and property managers operate more effectively and efficiently. If you’ve never used Renting Well, we hope you’ll give us a try.

Mayor Naheed Nenshi Thinks Calgary’s Landlords Need To Take It Down A Chevron

Mayor Naheed Nenshi is a great mayor. The majority of Calgarians think so. He’s a responsive and witty guy, and clearly he’s doing something right. I’m personally quite fond of him too – especially with some of these gems on Twitter.

Last week, he propped himself up on the soapbox to talk about Calgary’s landlords (“too many landlords” to be specific), and how they’re screwing tenants and gouging them on rent. There are some alarming rent increases going on in the city. To put this into perspective, one needs to consider a few things.

In July of this year, the CMHC indicated that Calgary has one of the lowest vacancy rates of any major city in the country. That rate is 1.4 percent. The average cost of a one-bedroom apartment is just over $1,130 per month. An average two-bedroom apartment goes for just under $1,300 per month. Alberta’s provincial residential tenancies act doesn’t limit how much landlords can raise rents, but they have to give three months’ notice for monthly renters and they can only do it once per year. If you’re a tenant on a year long lease, you wouldn’t see a rent increase inside of the year of your lease. Here’s a few other facts about Calgary as well…

25,000 people a year are moving to Calgary. You heard that right. The city’s population is surging. Property taxes and utilities have also increased in the city, not to mention other municipal and residential costs for residents – both landlords and tenants.

On Friday, Mayor Nenshi clarified that his statement on rent gouging was largely based anecdotal evidence and not, in fact, a systemic problem.

“What I’m calling for is ethical business more than anything else. If you’re a landlord and your costs have gone up … then of course you pass that on to your tenant. That’s part of your business. But every day I get calls in my office from people who have been given no notice, a month’s notice, of 30, 40 per cent increases in their rent,” Nenshi added. “And nobody’s costs have gone up that much.”

Nenshi’s comments drew the ire of Gerry Baxter, executive director of the Calgary Residential Rental Association, who considered the comment an inaccurate characterization of the majority of Calgary’s landlords.

What do you think? Do you live in Calgary? Are you a tenant or landlord? Do you think it’s the city’s responsibility to provide more affordable housing? Do you think that Alberta’s Residential Tenancies Act should change to cap increases that landlords can impose? Share your thoughts with us!

Arkansas: Bad For Tenants…But Is It Good For Landlords?

The U.S. state of Arkansas was recently featured in an excellent Vice News piece on what tenants in Bill Clinton’s home pasture deal with when they rent. The piece – entitled “Arkansas” The Worst Place To Rent In America” – was a fascinating look into a place where the lack of laws regulating the rental market work backwards. As founders of a software that serves landlords – not really tenants – and as landlords ourselves, we’d be lying if we said we didn’t sympathize more with the plight of property owners renting out to tenants. As we’ve said before, it’s a thankless job most of the time. With that said, we’re also advocates of healthy and productive relationships between landlords and tenants. Relationships that are fair, follow the law in whatever province, state, or district you happen to be in, and that include methods and approaches that are reasonable and equitable.

Here’s a few key things in Arkansas. It’s the only state in the entire country that has no “implied warranty of habitability”. In english, that means landlords have no legal obligation to repair or maintain their properties – unless there was a written or oral agreement to fix something. It’s also the only state where you can be fined and jailed if you don’t pay your rent on time. Seriously. Here it is. To real estate investors – this could be perceived as an ideal place to invest your money. The existing law favours landlords heavily, and repossessing property there is fairly easy to do when tenants don’t pay rent. On the other side of the debate, a 3rd of Arkansas’ almost 3 million residents are renters, and a high percentage of those renters have serious concerns and issues with the properties they rent. Most renters are agreeing to take their units “as is”. By law – tenants are required to pay their rent no matter what – even if landlords don’t repair or maintain their buildings and units. Taking into account that Arkansas is the second poorest state in the U.S., and that 18% of the population live below the poverty line, this creates a situation where in arrears renters get swept up into the criminal justice system.

As a tenant, if you don’t pay your rent – even if your roof has holes in it and your windows are broken, not paying gives you 10 days to vacate. If you don’t – you could go to jail. Don’t bother contesting the order to vacate, because in the vast majority of cases, tenants don’t get the opportunity. The legal process for getting in front of a judge is convoluted by the black and white insistence of whether the money is owed, and if it is, for whatever reason that might be, you’re more likely to see the inside of a jail cell than a judge. The state’s unique “failure to vacate” law sees tenants charged as criminals purely on their landlords’ say-so, without any independent investigation by prosecutors. That’s why 90% of tenants who receive an order to vacate decide to just leave. It’s simply a criminal issue immediately. To boot – Arkansas is one of only 10 states that don’t prohibit retaliatory eviction. For the uninitiated – retaliatory eviction is when the landlord doesn’t like something you’ve done..like the reporting of a health or building code violation…and wants you out of the unit. So, in short – if you’re landlord doesn’t like your face, you can be evicted. If you make a complaint, you can be evicted. If your landlord simply wants you out of the unit, and you’ve been paying on time – they can rip up a good check or make themselves conveniently unavailable to accept cash from you on whatever agreed upon date, and you’d technically be evictable.

The Non-Legislative Commission on the Study of Landlord-Tenant Laws, created in 2011 by the state legislature, released a report on Dec. 31st, 2013 that recommended 15 tenant-landlord law reforms. Lynn Foster, professor at the William H. Bowen School of Law at the University of Arkansas at Little Rock and a member of the study commission, said, “If you’re on a month to month lease, maybe it says the landlord makes repairs, maybe it doesn’t — but if you report something to code, the first thing the landlord is going to do is try and evict you. That’s why it’s imperative that if we adopt a warranty of habitability, we also adopt a statute prohibiting retaliatory eviction.”

Human Rights Watch, an organization that follows rights violations worldwide, issued a report in 2013 called “Pay the Rent or Face Arrest: Abusive Impacts of Arkansas’s Draconian Evictions Law.”

This is all a far cry from some of the provinces and states that have laws that in some cases favour tenants. Good laws achieve as much of a possible balance possible between the obligations of providing habitable and functional dwelling to people paying for them while also protecting the landlord’s rights and property. The lack of this in Arkansas has police being involved with evicting people for not paying their rent – an almost ridiculous waste of that resource – and people who don’t pay their rent for whatever reason in many cases entering the criminal justice system.

What do you think? Are you an Arkansas landlord? Are you an Arkansas tenant? Share your thoughts with us.

Acorn Calls For Burnaby Standards Of Maintenance Bylaw

Burnaby, British Columbia renters require more protection against landlords who don’t keep their rental units safe and healthy, says ACORN Canada. The reason? Landlords are sometimes keeping their rental units is abysmal shape – affecting low income people the most. Acorn Burnaby chairwoman Monica McGovern said the provincial Residential Tenancy Branch’s lack of enforcement is very well documented, and that has driven some cities to create their own bylaws to levy fines against landlords who don’t maintain their properties.

“We want an act because the province and the residential tenancy branch doesn’t seem able to handle the issue,” McGovern said. “We want the city to take responsibility.”

Read the story at 24 Hours Vancouver here. You can also read about the issue at the Burnaby Insider here.

Why You Can’t JUST Look At A Cap Rate

I sat down for lunch at Union 613 with Ottawa realtor Dimitrios Kalogeropoulos (a.k.a Agent DK) a couple of days ago and took the opportunity to discuss income properties and some other real estate stuff in the Nation’s Capital. Agent DK works with Royal Lepage and returned to Ottawa from Toronto last year (where the market is quite different). He’s a fountain of knowledge and full of good tips when it comes to rental properties in Toronto and Ottawa, and he’s a guru to any potential landlord looking to add to his or her property portfolio. He brought up a few really great points over a discussion about what to look for when purchasing an income property and debunked some buying myths along the way. One myth in particular is that the only real thing that matters when sizing up a property is the cap rate.

First off, what is a cap rate? I’ll explain…

A cap rate is a measure of the purchase price of an investment property compared to the net income you make from that property. Or, the rate of return on an investment property based on the expected income that the property will generate. This is calculated by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property.

If you want to get technical, it is basically the discount rate of a perpetuity.

But if you want it in layman’s terms, you could consider it the official return on the property if you bought it outright in cash. The amount after fixed costs — what is typically referred to as the net operating income — that would go into your pocket with no loan to service. This amount (if you had no mortgage) would go into your pocket. This is how you compare the placement of your money to other investment vehicles like RRSPs, stocks, etc. For the majority of investors, the cap rate is what you would use to determine how much you have to service a mortgage with — and if you play your cards right — what you have left over.

Agent DK brought up that the capitalization rate on a property — while important — is not the only thing you should be looking at. Different areas of any given city will tend to have different cap rates and they’ll vary quite a bit. This is why you should also consider the following:

Tenant Quality – this is a huge one. Inheriting tenants is the passage of a relationship between one individual to another. Reliable tenants who take care of a property, who are reasonable, and who pay appropriate market rent should be a big consideration when mulling over a purchase. Evictions and chasing rent cost money, so if that’s what you’re in store for maybe you should think twice. Just because a property has a big cap rate, it doesn’t mean you can’t suddenly find yourself in a difficult situation with bad renters in exchange for that big return. Is it worth it? I have a friend who endures 6 enraged voicemails a month from a tenant who can’t control his emotions, but he pays the rent on time and contributes to an 11% cap rate on a triplex. Yikes.
Property Condition – houses, like anything else, deteriorate. It’s inevitable. Some houses will be more expensive to fix than other ones. What condition is the place you’re buying in? If it’s a fixer-upper then you’ll have some work to do. But if it’s a turnkey property your overall maintenance expenses will be low. A big cap rate is great, but not if you’re looking down the barrel of a major renovation or a glaring structural issue that will need to be eventually addressed.
Appreciation Potential – this is another huge one and particularly applies to areas of a city that might be improving, gentrifying, or seeing other commercial development that might have benefits to residential property values in the next 2 to 5 years. Appreciation potential is equity potential, and equity potential is beneficial not only in net worth to the buyer, but in the ability to refinance and purchase something else — or pay off a personal residence.
Income Potential – see above. If you can determine that a 10-20% increase in the rent roll is a possibility then this absolutely needs to be considered.

Now with all of this to say it’s important to be balanced in your view on a cap rate. The above are a few of the things you should consider with respect to a purchase. If you’re selling, you need to be sensible and recognize that the cap rate is an important part of the equation and undoubtedly will be seriously considered by any smart investor. If anything, this is the best way to ensure you’re maintaining a market-appropriate rent roll and keeping your building in good shape — regardless of where it is. A good rental property purchase will have a favourable rating on all of the above five points.

Questions? Comments? What are your thoughts on cap rate?

Why Landlords Need To Change Their Perspective On Energy Efficiency

Came across this great piece about two Chicago landlords who decided that energy efficiency was going to be a central focus on their investment. Sandeep Sood and his wife own Chicago’s Jeffery Parkway Apartments, a 55 unit, 7 story building. They acquired the South Side building four years ago. They explain how the building was in bad shape, and one of the first orders of business upon purchase was the replacement of the building’s boiler.

“The first year we got this, we were able to retrofit a new stainless steel boiler. A little different design than your typical boiler. But we were able to increase our efficiencies by more than 60 percent with just this one measure,” says Sood. This and other efficiency upgrades cost about $110,000. Sood claims his total pay back on this investment occurred in about 2 years. Pretty impressive. In most cases, payback on efficiency investments like this occur in about 5-7 years. The Sood family’s units are all inclusive – in that they are paying the utility costs on rented units, but don’t assume that’s the only reason a landlord would do this. The piece goes on to mention a bit of a difference between older and younger landlords when it comes to stuff like this, and emphasizes the need for perspective with respect to investments in energy efficiency – even if your tenants are paying their own utilities.

Investing in energy-efficient upgrades, such as the replacement of outdated boilers with modern, high-efficiency models like the Vaillant ecoTEC Plus, can yield significant returns for landlords like Sandeep Sood and his wife. Beyond the immediate financial gains, these upgrades also contribute to sustainability efforts and enhance the overall quality of the property. The decision to opt for a stainless steel boiler with a unique design demonstrates a forward-thinking approach to property management, reflecting a commitment to both cost-effectiveness and environmental responsibility.

Daniel Olson, the Senior Energy Efficiency Planner with the Chicago Metropolitan Agency for Planning has a supporting consideration when it comes to putting money down on energy efficiencies and consumption with rental units. Even if you aren’t covering the utility costs.

“When you have happy tenants who have lower bills. They are going to lower your vacancy rates, so that you actually keep your buildings full with tenants which will increase the funds you have available,” Olson said. This is true. Keeping tenants in a unit can be less expensive than turning a unit over year over year. The agency mapped out a regional plan that identifies energy efficiency as one of the easier measures that can move the area toward sustainability. Things like upgrades to a high efficiency hot water heaters, insulating buildings and simply changing light bulbs to compact fluorescent lights and L.E.D.s.

But it’s not all on landlords either…sometimes tenants don’t care.

The conflict between landlords and tenants stemming from “split incentives” to install upgrades has been identified as one of the top barriers to capturing energy savings in commercially leased buildings, according to an indicator survey published by the Institute for Building Efficiency in 2012. The same thing applies to small residential landlords too. What’s a “split incentive” you might ask? It’s when tenants often pay the energy costs, leaving the owners with no interest in efficiency. Or conversely, if landlords pay the energy bills, the tenants have no incentive to conserve energy.

British Columbia has focused on this issue of split incentives. They started up something called the Green Landlords Project, and they published a compelling executive report on it. Check it out here.

What’s your take on energy efficiency? Have you made investments into your rental property with respect to it? Share with us!