Rent vs Buy
Rent vs Buy
I hear this all the time and don’t understand the question.
The question is asking is it better to buy then to rent. The reason I don’t understand the question is that for every person their situation is different and this will provide a different answer to this question. The question should not be answered by numbers first, it should be looked at after you have decided where you are going to live.
For tenants trying to decide if they are going to buy instead of rent is not the question that needs to be asked. The first question is where do I want to live and how long am I going to live there. If you anticipate moving in the next five years the answer is rent, irrelevant to what the numbers say.
How does this translate to landlords? It is the same question. If you are looking to buy a rental property. The question is how long are you prepared to hold the rental property. If you are not prepared to hold the rental property for five years, you should not buy an investment property. If a person who wants to own a property to live in and they are planning to move in the next five years they will be hit with many transactional fees during the buy and sell process and they won’t make any money, the same happens with an investment property.
This is true with rental or investment properties as well. I speak to many potential clients who have bought a condo and say we are going to rent it for one or two years and then sell it.
I advise them you will not find it profitable to do that. In fact some who have rented for one year have come back and said it is not as profitable as they thought. Investment in real estate is a business and with any business it takes time to grow and make a profit. The real profit in investment real estate is in the length of time you hold the property, no different than any other investment.
Landlords often fail to consider all the expenses related to owning a rental property. There will always be repairs needed at the property, tenants may fail to pay rent and cost for owning the property including strata fees, mortgages and property taxes may change.
When you factor all of these issues you can make an informed decision, to buy the rental investment 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
Why cash for Keys by landlords is bad for the industry.
Why cash for Keys by landlords is bad for the industry.
One of the most common complaints we hear from landlords is, I wish there was a bad tenant list. My response is, there is one, landlords just don’t use it.
Where is the bad tenant list, it is the credit report and I don’t mean rent should be reported on their credit reports. The complaint is based on the tenants who failed to pay the rent then damaged the property on the way out the door. This is a common complaint about bad tenants.
As a landlord what can you do? In some of these cases landlords have been given an order of possession from the RTB which includes a monetary order against the tenant. If you have been given a monetary order and the tenant refuses to pay, a landlord should send this to collections. I hear many people say this won’t do anything as you can’t get blood from a stone. Well in fact sometimes you can get what you need even from a stone.
What landlords miss in this approach is that when you send it to collections, that is then reported on their credit report, and stays on their report for many years. Therefore if this person goes to rent another property, or borrow money for another reason this will appear on their credit report. That provides the next landlord the information to make an informed decisions and say we can’t rent from you as you owe a previous landlord money. If the landlord before you had sent the tenants order to collections you would have made a different choice.
If you don’t have an order of possession what can you do. During the application process you should collect data on the individual allowing you to perform a credit check to verify their information. There are sources who can assist landlords to find people in these situations. Often the credit report provides other details including address information on the party. If a person owes you money you have the information you need to locate the individual after they have left your property. After you have found them then you can serve the documents for the hearing at the RTB. Finding the tenant and taking them to RTB is important as it gives the landlord the opportunity to obtain the monetary order.
When landlords provide cash for keys all they are doing is pushing the problem to the next landlord to deal with the same issue you have dealt with.
Does the stone bleed? Sometimes yes. Often people’s lives change for the better. They may leave your property and a few years later are in a better financial position, trying to lease a car or rent another property when they are denied due to your application on their credit report. At this time they may choose to pay off the debt, and you may receive some funds from this transaction. More importantly the individual learns the importance of paying the rent and treating properties they rent respectfully moving forward.
We have rented to people who have had a debt on their report that shows they went and paid it off. This shows responsibility. We have also turned down people who have a debt on their report which has not been paid as this shows a lack of responsibility.
We have sent monetary orders to collection agencies which have reported it on a past tenants credit repair and years later they settle as it is the only way to have it removed from impeding their life moving forward.
Offering cash for keys is not solving any problems, it is passing the buck.
This is why I don’t like to hear landlords saying they offered the tenant cash for keys to vacate. If more landlords took their monetay order to collections these people would need to adjust their behaviour. Without enforcement they will never change.
Being a landlord is a long term endevour and it may take time to recover the funds you are seeking. Help the community out by following the law to help everyone.
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
Should I increase the rent?
Should I increase the rent?
We are in tough market conditions in BC at this time and it is not the first time we have experienced this.
I often tell clients of a story not long after the 2008 financial crisis. That market was similar to the current market. Against our advice a landlord requested we increase the rent by the allowable amount which was about $50 per month at that time. The unit was rented for $2400 but the current market had comparable properties listed for around $2100. We sent the tenant the rent increase notice and immediately the tenant gave notice to vacate.
A potential new renter offered $2100 to start a new tenancy the day after the old tenant moved out, which our client refused. Our client demanded we rent it for $2500. Six months later we rented the unit for $2100. The landlord lost over $14,000 seeking a $50 rent increase.
Rent increases are important when rents are stable and or continuing to increase. If rents are increasing in the market and you are not raising the rent a property will quickly be hundreds of dollars below the current market rent. At the other end if you raise the current rent in today’s market where the rents are decreasing everywhere tenants may take the opportunity to move. The market has an excess of product and tenants have the time and choice to make a decision to move or not to move. It has been about a year now since we rented a property to a tenant who did not have to provide notice to their landlord after signing a lease to rent our properties.
If you are trying to raise the rent for the sake of the increase you may need to be prepared to receive less rent and have a vacancy for multiple months in your property. We are advising landlords if tenants are good people and they want to stay, negotiate a lower rent in return for another fixed term lease. That way the landlord gets a commitment for another fixed term, usually a year and the tenant gets some stability in the market.
The market will only pay what the market is willing to pay. Meaning you may want to rent your place for $3000 to meet your expenses but if the market is only willing to pay you $2500 for your property it will sit vacant for a very long time waiting for the person to pay $3000.
In markets like this where rents are on a decline, each month you wait the price you will obtain decreases. Pricing your property correctly in today’s market is very important.
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
Is it the Property Managers job to rent the unit fast?
Is it the Property Managers job to rent the unit fast?
Many landlords ask how long it will take to rent my property. We always reply that it depends on the market and we are unable to guarantee when we will find a tenant for the property. We see other management companies using advertising terms like maximising your profits or revenue. Does this mean they place the first person who applies to ensure that your unit is not vacant? Or does it mean they find the best person to live in your unit? These are often not the same person.
In BC licensed property managers are not allowed to make promises or guarantees about their services. The two questions we are always asked are when can my unit be rented and for how much?. We are unable to guarantee either of these questions. The market will only pay what the market will pay for the service provided. We also can’t force a potential tenant to rent a property, they have to want to live there.
I have read and heard people saying our manager rented it really quickly. Does this mean they rented to a good candidate, for a good price or just rented it to the first person who applied? We could rent any property tomorrow, it is unlikely that the applicants will pay rent on time, that they will take care of the property or would be for a rent the client would like to rent for.
We recently turned down an applicant. Our reference checks were turning up good responses to the inquiries we made. Then we completed credit checks on the three applicants. One of the applicants had an outstanding debt owing on their credit from two years ago and another had just filed for bankruptcy. Our advice to our client was to avoid them. The difference in rent from where they were to our place was close to a $1000 increase. Their credit showed that in the recent past they were having issues paying bills, which means there is a high probability this will be an issue at our clients location.
We like to follow our lawyers’ advice which is: “The best way to remove bad tenants from your property is to not let them in”. If we had approved this applicant there appeared to be a high probability of missed rent payments and other issues at the property. In this case we could have provided a tenant for our clients, renting it “fast” or we can protect our clients from a negative experience. Once a tenant is in your rental property it is not an easy process to remove them even with legal justifications. We have seen landlords make poor decisions that cost them 20K or more to remove a tenant. A few vacant months to avoid 20K in unpaid rent or damage to your property along with the headache of removing the tenant is worth it.
We believe our role as the property manager is to provide our clients with a positive experience for their rental property. Putting in tenants that are questionable and may not pay the rent will not be a positive experience for the landlord and or the property manager.
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 should be a Landlord
Who should be a Landlord
Recently I attended a meeting of various landlords discussing the needs of being a landlord.
Two perspectives were repeated by many of the people.
The first is the law says you are able to do this and they would respond, I don’t feel comfortable doing that. This is the first problem we experience with landlords who often have had bad experiences. They are not prepared to make the hard decisions and follow the law to manage their tenants.
An owner indicated they had an elderly tenant living in their basement who needed assistance to live there. Multiple people provided her some information about solutions including raising the rent which would provide a legal opportunity for eviction but she said I just can’t do that because he doesn’t have the money. People suggested contacting health care providers to engage them to help him move to another location. They provide hospice type care to this individual who is just a tenant in their rental property. Well beyond the responsitibilty of the landlord’s duties.
The second issue, I was deperate so I rented to them. Patience is a supper power in rental management. Many stories we hear of people talking about a negative tenancy experience start at the beginning. When the unit is vacant landlords are feeling the pain of no rent coming in for the property. This creates anxiety for many landlords expecially the small mom and pop landlords. This is when mistakes are made and tenants are good at sniffing out desperate landlords. In all aspects of life when we are desperate we often make poor decisions.
The most important trait you need to be a landlord is patience. When your unit is vacant, take the time to continue to do the due diligence to make sure the people you are renting to are “good people”. When the vacancy rate is high and landlords are deperate the bad tenants seek these landlords out and take advantage of them. When you have a tenant that is not following the law and you are not prepared to enforce the laws then you will end up with a negative situation. Take the time to follow the law, sometimes it takes longer to get the result you want but it always provides a positive experience.
In many aspects of life rushing the process often leads to a negative experience, being a landlord is not different
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