It seems like you can do everything on the internet these days. Airbnb is and has been a wonderful way to make a bit of extra cash when it comes to renting out your home, cottage, or vacation property. Things can get a little dicey though, when you don’t own the property in question. In Quebec, you need to get your landlord’s approval first. The province’s rental board (Régie du logement) recently reached the decision when it ruled on a case involving a Montreal tenant who rented out his downtown condo to tourists on Airbnb.
The landlord rents the luxury one bedroom unit for $1,770 per month. After receiving numerous complaints related to transiency, smoking in hallways, and a general change of pace, the landlord determined the tenant was renting out his unit on Airbnb for more than double the rent he was paying. Landlord gets miffed. Increases the rent by $1000 a month. Tenant refuses said rent increase. Bad bing/bada boom – you’re in front of a judge.
The province handed down the landmark precedent setting decision in one fell swoop. The board ruled that tenants cannot rent out their apartment to tourists without getting the landlord’s approval first.
“The message that these lucrative sublets sends to landlords is that the value of the unit does not represent the value of the rental market,” the board concluded. “The frequency, the difficulty in verifying the identity of sub-tenants, the inherent risks … are all issues that can be raised,” the judgment read.
A cornerstone element of this decision was that the province felt that it was clear the dwelling was being rented out for commercial purposes, not residential, which is what the original lease itself was predicated on. The ruling indicated that tenants are required to get their landlord’s approval prior to doing anything on Airbnb, and that the landlord has 15 days to refuse if they don’t approve. The ruling also indicated that the landlord cannot spike rent because a tenant decides to list a unit on Airbnb, which in essence is encouragement by the province to get tenants and landlords to partake in a healthy meal of being reasonable and co-operative. All in all – tenants can’t do anything without clearing it by their landlord first. A logical ruling. Lastly – a tenant who lists their unit on a home-sharing site cannot charge more than the price of rent.
In an effort to be fair and balanced, Airbnb does provide some good tips for using their service, which include but are not limited to, maybe mentioning to your landlord that you’re sub leasing your place to strangers for an assumed profit. If you’re thinking about starting an Airbnb business on the back of your landlord, you might want to consider reading this paper by Lapointe Rosenstein Marchand Melançon.
Douglas Hsiao, a Colorado lawyer and occasional columnist with the Washington Post, successfully achieved writing a sort of pointless piece about the “challenges” associated with being a landlord in Washington D.C.
As you may or may not know, the U.S. national capital has been going through a bit of a resurgence to some degree. It’s become a trendy place to live. He wrote this piece about how he can’t make money on his unit – even though $3000 a month is common for 2 bedrooms in his Dupont Circle neighbourhood.
Some gems from Hsiao’s piece:
As I admitted before, I’ve refinanced the property several times, so much of the cash flow problem is my own fault; I’ve used the condo as a bank once too often, and thus I have a fairly substantial mortgage on it. But more than that, the growth in expenses has outstripped rents for several years now, and I rent it out with nearly no cash flow.
Um. Ok. Well refinancing the unit for a Porsche will do that. Here’s another one:
As some may recall, I chose a couple who were moving from Denver to Washington, and they turned out to be the “responsible, clean, quiet, long-term, reliable, uncomplaining” dream tenants I was hoping for. I received hopeful signs throughout this past year that they would renew their lease; they e-mailed me that they loved the apartment, the Dupont Circle neighborhood and the residents. They even had the property manager prepare the renewal papers. Just when every indication I was getting seemed to suggest that they would renew, they were lured away. And not by a real estate agent waving a luxury downtown high rise or a house in Chevy Chase in front of them but by an apartment in my own building!
So you found good tenants, had the unit paid for for a year, and then they decided to buy a unit in the building you own because they loved it so much? This isn’t exactly a problem. You own a unit in a building where “responsible, clean, and quiet people” decide to buy. Clearly, you’ll never be able to find another tenant, right? Oh wait….I don’t think you’ll have a problem. Also..you live in Colorado – don’t manage the unit yourself, and are complaining about having to pay the property manager?
Geez man. You own a unit in a rich part of a relatively rich city. Tenants love your building so much they look to buy the units. You’re mainly attracting an affluent tenant with this place. You’re admittedly running in the red because you refinanced the hell out of the unit. Expenses are going up for everyone on utilities and such. Maybe if the place wasn’t mortgaged to hell – you’d have a bit more money available to run in the black.
Some of the post’s readers have also been critical of Hsiao’s writing. A comment on the original article goes a little something like this..
Seriously, are you only keeping this place so you can write articles for the Washington Post? This has nothing to do with real estate. This article should be in the finance section as an example of how people were using their homes like ATM’s and that is how the housing market got in the mess it is/was. This has very little if anything to do with being a landlord. If this had been going on any where else other then (sic) DC Mr. Hsiao would be talking the hard times he went through with his short sale or his foreclosure. Sell this property and be done with it and stop whining about how your (sic) not making money as a landlord because of your own financial irresponsibility’s (sic).
Well….it’s done. 3 months, $33,000 later, and about 700 views on this video – the basement apartment from hell has been transformed. Check out the gallery of before – midway – and after images I’ve included here. You can also reference the previous posts here, here, and here about the whole process.
The budget doubled – namely because of some essential items that needed attention. Things like surprises that were found behind drywall (critical masonry and waterproofing that was needed), a required visit from a structural engineer, and a complete rewiring (including the removal of a fair amount of knob and tube electrical). In an effort to create an accurate characterization of this project, these things increased the budget on what was more in line of a common spruce up, and don’t reflect the requirement of any other unit except mine.
The place was a complete mess before – so I’m viewing this as a key investment bringing a unit up to operational cruise control for a while. Considering I was getting $450 a month for an apartment that was technically suppressing the value of the house considerably (something the appraiser told me prior to buying the building), and which was renting for below market average for the area, the fact that this renovation cost more than I was anticipating doesn’t really bother me. Here’s a quick recap of what was done.
A complete down to the studs renovation. The removal of all drywall, insulation, and carpeting.
The reconstruction and masonry work on interior stone walls (former outside foundation walls prior to an addition in 1981).
The addition of an I-beam support for the ceiling.
Masonry work on outside entrance.
Interior stone wall masonry repair and parging
The replacement of water pipes running through the unit to the boiler, which increased the amount of natural light into the unit (they ran across windows).
The reconstruction of a full kitchen and bathroom.
The complete re-wiring of the entire unit – including the removal of knob and tube electrical and the addition of 18 insulated 20 year L.E.D. pot lights. Estimated energy savings vs. prior to the renovation on electrical consumption with these along is about 10%.
The removal of old baseboard heaters and the addition of highly efficient Dimplex electrical convection heaters with wall mounted thermostats. An estimated energy savings of about 20% vs. prior to renovation.
Custom kitchen cabinetry and counter top courtesy of the good folks at Ottawa Cabinet Co. This ended up being 10% cheaper than buying pre-assembled cabinetry and a counter from Home Depot AND they were able to fabricate exactly to a measured space.
140 square feet of solid tile courtesy of the folks at Vesta Marble and Granite. The tile was used for a half wall set up in the bathroom, floors, a shower stall, and the kitchen.
Full re-plumbing, including the pin back of major drain pipes in the bathroom that impeded access to the shower and which the previous owner questionably built around.
New toilet, basin, kitchen sinks, taps, faucets, etc.
Creation of badly needed closet space
New carpet and appropriate under pad for a cement floor.
I was getting $450 a month. I’m aiming for $749 a month now, and just put up the listing. Couple of interesting things post renovation. The unit was originally a badly laid out 1 bedroom apartment. After doing all the work, and actually adding about 15 square feet to the place, I decided it was a better bachelor/studio unit, and I’m going to market it as such. Technically – the definition of a 1 bedroom apartment includes a separate and distinct living and bedroom area. In most cases, it also includes a door separating the bedroom. I feel a lot better about having a good sized and nicely put together bachelor unit than I did about a badly laid out and dingy 1 bedroom basement.
Looking at this as a long term exercise – and taking into account the increase in rent this will yield versus what I was getting before – without putting this down on paper – it will take me about 9 years to recoup the investment I made. This doesn’t take into account rent increases over that time or tenant turnover and a new set rent price. It also doesn’t take into account the value that’s been added to building (according to the appraiser I spoke with, it’s around $45,000). Lastly – it doesn’t take into account the reduction in operating attention I need to apply to the unit. All this to say, I’ve decided not to blow a gasket about how much this cost. From an operating perspective – I have a basement apartment that’s easier to market and rent now, and I’ll be earning an extra $3600 a year.
There’s a lesson I learned from this whole process. It’s essential to look at this as a long term thing. If you’re doing this – you might be inclined to finish it as quickly as possible, panic about budget, and neglect paying attention to details. You might also be inclined to jack up the rent unreasonably (especially after having not earned any money from the unit while you were doing the work) without doing some research on the rental market and taking into account the vacancy rate. Ottawa, a historically stable rental market and one of the best cities to be a landlord in – has experienced a significant increase in the vacancy rate. There’s way more selection. There’s also been a noticeable increase in landlords publishing astronomical and unrealistic rents post renovation to units. I don’t agree with this philosophy. Charging $1200 a month for a basement bachelor unit isn’t reasonable – even if you’ve spent $50,000 on fixing it up. You’ll just end up reducing the rent and getting desperate as you sit on a newly fixed up place in your search for a tenant – especially if it falls outside of the best times to rent an apartment. If I were to summarize the whole experience up – I’d give this advice…
Plan everything out before you start. Invest in drawings if you think it’s necessary. Have a clear understanding of what you want to do, what’s reasonable to do, and work towards a concise and air tight plan of action while simultaneously ensuring any essential and glaring things are accounted for and addressed to make it an appropriate environment for a tenant.
Hire good contractors and make sure the work is done properly and to code. Don’t skimp. It will only end up costing you more money.
Assume there will be a 15% increase in your estimated budget. This helps with setting expectations and not panicking.
Consider items that add long term value to the building and incorporate them into the project if it’s reasonable and makes sense.
Mentally prepare yourself for surprises and avoid a panic. This includes a clear understanding that you’ll be working in a monetary negative – i.e. you won’t be earning money from the unit while also spending money on it.
Don’t overkill it. Know your space. Adding marble floors and stainless steel appliances might look nice, but it’s a rental. Those kinds of things might make sense if you’re renting out a premium spot with a premium rent. For most of us though – this isn’t the case.
Set a date and understand there are optimum times through the course of a year to rent a unit. Doing a major renovation and having it wrap up smack in the middle of January isn’t doing you any favours. There are considerably fewer people looking to rent an apartment in the middle of the winter. Plan the job at a time when it will end at least 30 days out from the best time to find a tenant.
***Last little update. Today – August 31st, 2013 – the day I published this post, I had 7 showings and ended up renting the unit to a new tenant at about 4:30 in the afternoon.
Have you renovated a unit from top to bottom? Worked on a basement apartment? Share you stories with us. How did it go for you?
So the continuing saga of my basement apartment renovation moves forth. I say continuing saga because it feels like a journey to Mordor. Since my last post about this, I’ve managed to get a lot done. The walls were all covered up, mudded, sanded, and painted with what I think is a wonderful eggshell colour I picked up at Benjamin Moore paints (2026-70 for all the paint nerds). I fell in love with this colour after having used it in my kitchen at home, and since I feel a bright but neutral colour is essential for a basement apartment, I figured this was a logical choice. I think it looks good, but it also plays off the natural light in the unit.
Another recent element of this renovation was insulation. This was something important that I wanted to address, as prior to the work being done and when the old tenant was in there, I noticed a significant transmission of sound between the main floor and the basement unit. I took a cue from Scott McGillvray on this one and used Roxul Safe’n’Sound insulation. After putting the drywall up, and packing the ceilings with the stuff (hence the necessity to use insulated pot lights), it’s as quiet as a library.
The big main thing that was finished in the last couple of days was the completion of the wiring and the installation of some high efficiency electric convection heater systems by Dimplex and coupled wall mounted thermostats (3 to be exact). I didn’t want to go the regular route with electric baseboard heaters and am big on efficiency, especially if it’s electric, and especially if tenants are shouldering the hydro cost (which they are in this case). There’s a total of 4500 watts of heat in the unit, which is more than comfortable.The insulated pot lights were finished and all 18 of them use LED bulbs which are meant to last for 20 years. Considering the unit was also completely rewired, I’m curious to see how energy efficient the apartment is going to be.
What’s on Deck:
I’m doing a black and white tile kitchen and entrance, coupled with a contrasting darker colour for the bedroom carpet. Both the tile and the carpet have been ordered. I also have to buy some appliances, and get some kitchen cupboards and a counter top. I’m thinking of hitting up Restore from Habitat for Humanity for some of the last essentials. Beyond that, it’s taps, a bathroom basin and vanity, shower heads and handles, and a low flow toilet. I’m figuring I’ll have the place finished in the next two weeks.
Have you renovated a basement apartment? Challenges? Hurdles? What were some of your experiences? Share your story with us!
Two years ago, we all teamed up in Vancouver with two things. A revelation and an idea.
The revelation was that we knew that the web could make what we considered to be the thankless job of being a small landlord easier. We also knew that easier and simpler didn’t have to be mutually exclusive.
The idea was to make a nifty web based software that actually achieved this fine balance. We were on our second tour of duty after having sold our first web based app- a little referral marketing product called Hello Referrals. We decided to use the proceeds from the acquisition of that product to develop what would eventually become Renting Well. There was a couple of months of us deciding over names. Rent Well. Rent Cloud. Renting Simple. Renting Easy….the list went on. Besides the fact that we couldn’t secure domain names for any of these, we felt the name Renting Well better suited the vibe of something active and didn’t fall into the dearth of other products that claimed to take years off of your life and seemed to also dwell with Lando Calrisian in cloud city.
One of the first considerations we had when building the app was how we could include less of everything. Less questions and set up. Less complication. Less of a wait to see important metrics. We felt the best course of action was something that you logged into, and essentially “got” within the first 2 minutes. We also knew that there was a necessity for the user to perform data entry in order to get those very things that we wanted quickly visible. Developing a flow to Renting Well that took this into consideration was also high on our list of priorities. Not an easy task. Some people prefer more complex analysis of what’s going on. Some people also aren’t jazzed about back data entry. As the old adage goes, you can’t please everyone – but we were still determined to get this off the ground in a broadly effective way.
We decided to focus on 3 core initial features.
An easy to reference chronological logbook to track events, incidents, problems, and resolutions.
A bank statement accurate month to month, quarter to quarter, or year to year financial snapshot based on cash flow and profit and loss.
Sexy listings to reduce to vacancies and get prospective tenants amped about renting a unit.
These core features are of course supported by other useful tools, but this made up the essence at the beginning. The reason we chose these cornerstones was because collectively, we knew what going to a board hearing was like without a detailed account of events. We knew how much of a pain in the ass it was to to do a year end with a shoebox full of receipts. We also just knew that landlords needed something to make available units for rent more attractive. We felt these were the most sore pain points.
So here it is – two year old hand drawn wire frames that sketched out what we saw as a simple solution for landlords and property managers – conceived on the table of a Kitsilano coffee bar, between 3 guys who couldn’t stand the variety of perplexing property management softwares that required you to have a masters degree in computer science. Managing income property is already complicated. In our minds, if you’re going to use something, you should want to use it and recognize it’s value.
The software is now actively tracking more than $85 million dollars worth of real estate and almost 2 million bucks worth of monthly expenses and monthly rental revenue. We’ve earned a healthy clip of paying customers so far and we’re getting ready to push out an updated version of the software in the next month.
Are we the biggest or the best property management solution for everyone? No. We’re a flavour in a Baskin Robbins ice cream shop full of other alternatives. We just happen to be simpler and less expensive than most of them. There’s nothing wrong with being the chocolate against the strawberry cheesecakes and caramel tiger tail swirls of the world. We’re landlords. We’ll take a scoop of simplicity.
Came across this interesting piece this morning. The vacancy rate in Prince Edward Island’s urban centers hit 7.8%. According to the CMHC, this is a 3% increase versus last year. The number of vacant rental units in Charlottetown (the province’s capital) jumped to 8.7 per cent in April, which isa 5% increase in the same month last year. The CMHC cited the developments of new units as the biggest factor in the increase. No kidding.
The country’s a bit all over the place in parts when it comes to vacancy rates. Ottawa’s vacancy rate has increased. Hotbed Calgary has seen a significant decrease. Overall, Canada’s vacancy rate has seen a slight increase according to the CMHC.
Construction on the basement apartment is continuing. In my first post on the project, I discussed some of the obstacles I was facing as I transformed a dank and crappy basement unit into something someone will be proud to live in. Well, since then, there’s been a significant amount of progress. Insulated pot lights are in. Framing is complete. Sound proof insulation is in. The entire unit was re-wired, and I brought it up to code. Part of bringing the electrical up to code included replacing the breaker panel with a new one, and completely eliminating all of the knob and tube electrical that was in the place.
So – all this to say, this past couple of weeks was about the bathroom.
Bathrooms are important. Seriously.
The old bathroom sucked. It was like a bathroom in a plane. After literally taking the entire place down to the beams, I framed a proper stand up shower stall that was a perfect square, versus the angled and uncomfortable one that was there before. I opened up the bathroom significantly by having a plumber pin some elaborate pipe work against an interior wall, creating a bigger space to have a bathroom. Check out the picture to the right here. This is a glimpse of what it used to look like. I didn’t even want to take a full photos of the catastrophe.
What’s up next? Well – drywalling is continuing into this week. Tile work is being done in the bathroom next week, and I’m going to be purchasing some appliances in the next couple of weeks for the kitchen. All in all, on schedule. I’m planning on having the place available for rent for September 1st.
The province has committed itself to making a push for affordable housing for Ontario tenants, amid what The Toronto Star reported as a crisis across the province, 4 days ago.
Here’s the kicker with all of this – the rental market vacancy rate is calculated by looking at apartments in buildings that are three units or larger, and does not include condos or homes for rent. Uncertainty in the national capital region’s public service job market is speculated to be lending itself to the rise in the rate. Some analysts also suggest the increase of condo rentals could be contributing to the high vacancy rate as well, as condo units compete with traditional apartments. Kind of hard to dispute this if you ask me. Condo landlords are offering tenants pretty nice amenities and brand new units. This is all kind of upping the game for landlords who enjoyed minimal efforts with marketing centrally located units that kind of leased themselves.
What do you think? Share your comments and thoughts.
I’m going to share a progressing story with all of you. I’m renovating a basement apartment that desperately needed some attention.
3 weeks ago, I had a tenant move out of said basement apartment. He’d been there almost 12 years. The place was in pretty rough shape to say the least. The drywall was peeling, the lighting was dim and uninviting, and logistically, the layout of the place really didn’t make a lot of sense. It was dank, dark, and the rent that I was getting in the unit wasn’t reflective of the market norm. I was less concerned with that though. I just hated the way this place was laid out, and it looked and felt like an isolation cell on Riker’s island. When I got the tenant’s notice, I felt like this was an opportunity to give the unit the TLC it deserved. I decided to put together a budget to make my basement unit awesome. There are a few challenges with this though…which I thought I’d share with all of you.
Basement apartments are often thought of as problematic. They typically see a high turnover. Many are dimly lit. They often don’t show well because of the lack of natural light. They have a tendency to be colder and less inviting. There’s a reason for that. They’re below ground. I like to look at basement apartments, if done properly, as a place where you can have some of your best tenants. You just have to appreciate that basement units need a bit of a different approach. This is going to be a first in a series of posts dedicated to the renovation. Read on…
First order of business: Height!
This unit had more drywall boxes and creative ceiling and wall shapes than a modern art exhibit. Once I took the drywall down, it revealed a series of entombed obstacles in creating a spacious and well laid out space.
Back in the day they used to run humungous pipes made out of iron as supply and returns for water. Basements had all sorts of insane arteries and veins for heating, drinking water, etc. In old radiator systems, these pipes would run through a boiler. Pretty typical, except for the fact that any height that you might have is severely cramped with these massive pipes. One of the old owners of the building decided that just boxing all of these pipes up would do the trick. Well…this is 2013, and most people don’t want to live in a cubby hole. These pipes and their associated boxes did nothing but diminish the natural light out of the two windows, and decreased the height of the unit.
Allowing as much natural light into the unit as possible, is essential. One of the first orders of business was to ditch these pipes, and replace them with updated copper pipe, which was both significantly less stacked, shorter in height, and allowed a whack load more natural light into the unit. Even after putting drywall back up, I’ll have added about a half a foot of height and opened up one of the three windows in the space. At 7 feet and 2 inches of ceiling now, I was still beyond the minmum of 6 feet 5 inches for height, but it’s made a huge spatial difference so far.
In the coming week, we start on the bathroom and begin re-framing. Stay tuned.
We rolled out a cool new feature for our active trials and current customers. It’s a rent receipts feature in Renting Well, that makes supplying receipts for rent received from tenants a *snap*.
As you may know, come income tax time, you may get a lot of requests from tenant for receipts. You’re obligated to provide a receipt if a tenant asks for one. All that to say, adding this feature was something we were keen on getting to post launch, and is part of a series of additions we’re going to be moving forward with over the next few months.
Firing off a rent receipt is dead simple. Next to each revenue item marked “rent”, you’ll notice a small button labelled “receipt”. Click that – and it’ll give you two options to either email the receipt directly to the tenant associated with the rent payment, or to print the rent receipt if you wish.
Questions? Comments? Share with us. We’d love to hear your feedback.