The Money Machine - Landlords Under Siege

Forgive me, but today I am going to rant! I think you all know I believe in real estate investment. That hasn’t changed. And the basic premise of the Money Machine seminar is developing an investment portfolio, largely composed of residential rented property that will provide you with a steady stream of passive income into retirement. That hasn’t changed. But I believe I have a responsibility to tell both sides of the story. The good as well as the bad. And while being a residential landlord has always had its challenges, in some ways, it’s getting tougher still.

The Residential Tenancies Act, among other things, controls rental increases. It dictates that for existing tenants, the rent can only be raised once a year and must not exceed pre-set guidelines laid out by the Province. This current year, the maximum increase was set at 2.2%, the largest increase we’ve seen in years. Next year, 2021, it’s pegged at zero. That’s right. No increase. The reasoning is the COVID-19 Pandemic. The feeling is that tenants are finding things tight due to the economic impact of the Pandemic. Maybe so, but so are landlords and they continue to see their costs going up. And when you consider the tremendous increase the market has seen over the last 5 years both in sale prices and in market rent, this latest approach to rent control really intensifies our already critical problem and further widens the spread between market rent and existing rent for currently occupied properties.

I had a salesperson in my office the other day sharing a rental issue he was having. He occupies the main floor of a duplex he owns. The basement apartment is rented. He recently arranged for a new tenant to move in. He made the mistake of giving the new tenant the keys early. The tenant moved in but paid no rent. Not first, not last. No rent. A couple of months have gone by and still no rent. He contacted a paralegal in the area who specializes in landlord-tenant issues. He was told, you can issue an N-4 and begin the eviction process, but be aware the Board is so backlogged they won’t get to it for at least 5 months. By the way, they added, if you decide to take the matter into your own hands and change the locks, for example, the tenant can complain to the Board and you’ll be charged within 48 hours. The same Board by the way that is too backlogged to deal with a Landlord issue for almost ½ a year. Hardly seems fair.

 
Now let’s drop down to the city level and talk about water and sewer charges. In most cases, if a landlord has a multi-family building he/she pays the water and sewer. But generally in the case of single-family, semi-detached or townhouse the tenant is responsible for all utilities including gas, hydro and water. And generally, if the tenant does not keep up with their payment obligations, the service gets turned off. But in the City of St. Catharines, that situation has changed when it comes to water/sewer. Now, instead of the City shutting off the water when the bill gets in arrears, they send the overdue bill to the landlord giving him a few days to pay it. If he does not, the city no longer shuts off the water – even if the landlord requests it. They simply add the arrears to the landlord’s tax bill. The tenant gets to continue using all the water they want, ignore the bill and the landlord has no choice but to pay.
 
I could go on and on if space allowed, but rather let me sum things up. I began by saying that I believe in rental real estate and I do. Very much. But if you are a landlord or about to become one, you need to realize that now more than ever before you need to use the utmost discretion when selecting a tenant. Do everything in your power to get it right. Remember if and when you make a mistake you’ll get no help from the Province, the City, the Residential Tenancies Board, the Human Rights people and so on.
 
When you have a vacancy or are about to have one, the rental process can be torturous. Probably the least enjoyable of the various tasks a landlord faces. Prospective tenants not showing up for appointments. Existing tenants not always available to accommodate showings. A host of marginal applicants. It's tempting to just approve one and end the process. Don’t do it. Listen to your gut. If the applicant is marginal, pass on to the next. Take your time. In the short-haul, it’s a lot better to have a vacant unit than wish you had. The right tenant is out there. Wait for him. Find him. You’re in it for the long haul. With good tenants, the landlord-tenant process is both enjoyable and profitable. And by getting it right at the outset the negatives we’ve discussed won’t even be a factor.
 

Wayne Quirk, Author, “THE MONEY MACHINE”, wayneq@remax-gc.com