Bad tenants are something that every landlord will experience and be forced to deal with at least once during their real estate career – and that’s if they’re lucky. A bad tenant can cost landlords thousands of dollars in missed or late payments or damages, hours of valuable personal and professional time, and many headaches dealing with the legal process.
Even the most experienced landlords and property managers have regular experiences with bad tenants – the team at Highgate Properties have experienced a number of unfortunate run-ins over the years. We here at Highgate have decided to chronicle some of these experiences for readers in order to demonstrate the correct way to go about dealing with these tenants and the important role that can be played by property management companies like Highgate in these situations.
Bad tenants: More than meets the eye
One of the most compelling aspects of property management is the ability to get a snapshot of a tenant’s life, in most other industries, you never truly get to know your clients – in real estate, every new interaction with your tenants adds something different to this snapshot.
One of our most surprising experiences with a bad tenant involved a cash-rich tenant who had sold his house and was now renting a house for several thousands of dollars per month. What nobody knew was that this tenant was actually in the beginning stages of a three year descent into financial demise. This tenant had easily passed the appropriate credit checks prior to renting the house and kept an outward appearance of having a good deal of money to his name. Eventually, this tenant could no longer meet their monthly rent payments due to a long-term habit of misspending large sums of money on extravagant items.
Taking immediate action
The issue went to Ontario’s Landlord and Tenant Board (LTB) as soon as the tenant’s first rent check bounced – this provided an official paper trail of problems with the tenant which could later be recalled by the property manager if the issue went to the LTB. The tenant would go on to routinely be able to pay his rent and then submit checks which would again bounce, leaving the landlord to continue chronicling these missed or late payments with the LTB – in total, six notices were given to the tenant.
This behaviour continued until the tenant was finally evicted after a final unpaid rent payment – once he had begun living a lifestyle that involved spending money on extravagant items, he couldn’t go back to his old way of living. After his eviction, the property manager found item receipts for clothing over $650 that would cost around $60 at a regular store, among other things. The six filed notices with the Landlord and Tenant Board helped the property manager’s case, as it clearly showed that the tenant had a history of missed payments and was not going to overcome these issues.
Although this tenant appeared to be able to consistently make rental payments at first, it became apparent over a period of time that this was not the case. The income earned by tenants generally does not indicate whether or not a person will make a suitable tenant. Whether it’s a low-income or high-earning tenant, the only deciding factor for landlords should be the ability to pay the rent on time and in full amounts.
The important role of property management
One of the most important roles played by property management companies like Highgate is the ability to get to know tenants, building relationships with each and every one. This allows property managers and landlords to better understand when a tenant is heading down a path similar to the tale above, or if anything else is going off the rails. The only way this property manager was able to identify and understand the problems experienced by the bad tenant was through the careful building and fostering of a landlord-tenant relationship.
Building relationships is a time consuming process, as it requires trust from both parties which is built up through a variety of interactions over a long period of time. Independent landlords simply don’t always have the time needed to foster relationships, as they have more important matters to attend to like their career and family life. Property management companies like Highgate know how to build relationships that will allow them to identify potential problems with tenants down the road, and know how to proceed with the Landlord and Tenant Board as well as other legal avenues should any issues grow to become unmanageable. Filing notices of missed payments with the LTB is something that a busy property owner may not have the time to do, or may think isn’t needed – it’s something we take the time to do as we know it can help speed the eviction process if it comes to that.
For more information about how the property management services offered by Highgate Properties can make your life easier through experienced and knowledgeable management and relationship building, visit our website or contact us today.
Over the course of your career as a landlord, you’re bound to experience at least one serious problem with a tenant. This may be due to rent or utility payment disputes, noise complaints, pest infestations, or a general lack of respect for your property or other tenants. No matter what the problem happens to be when it arises, it’s important for you to handle the issue promptly and effectively to minimize any potential damage, and to avoid a potentially lengthy process dealing with the Ontario Landlord & Tenant Board.
With the legalization of marijuana on the horizon for Canadians, there’s plenty of reason for some to feel apprehensive about the changes that will follow the coming legislation. Many Canadian landlords have expressed concern about the possibility of future tenants growing marijuana within their homes or units, and how landlords are expected to deal with this – bringing with it a number of potential complications.
Ontario’s marijuana legislation
With Ontario’s Cannabis Act taking effect on July 1, 2018, the legalization of marijuana across the province is coming up quick. The rules prohibit anybody under the age of 19 from buying recreational pot, limit purchasing of marijuana to exclusive retail stores and online distributors, and will restrict the use of pot to private residence only. Special restrictions have been placed on marijuana use in vehicles, public spaces, and workplaces in order to keep roads safe and protect Ontario’s youth.
Federal marijuana legislation will allow Canadians to possess and share up to 30 grams of legal cannabis, purchase pot legally from provincially-licensed retailers, grow up to four marijuana plants with a maximum height of 100cm for personal use only from licensed seeds and seedlings, and to make food and drink products containing cannabis at home.
What do Ontario landlords need to know about pot legislation?
One of the biggest concerns being expressed by Ontario landlords is the ability (or lack thereof) to control marijuana use and the growing of plants within their units. While medical marijuana will be allowed anywhere that cigarette smoking is legal, recreational pot will only be allowed in private residences, complicating the matter for landlords who don’t allow smoking on their rental premises. While landlords will be allowed to ban smoking of all kinds in their units with new leases, it is illegal to make changes to existing leases – leaving plenty of room for tenants to smoke and grow pot in their units.
Many Toronto landlords are concerned about the effects of cannabis smell on their other tenants – much like cigarette smoke, it can be very costly to remove the smell of pot smoke from rental units. The growing of cannabis plants can also damage units through the trademark strong smell, humidity levels, and increased electricity usage. While there are rules on the recreational growing of marijuana plants to tackle these concerns, many Ontario landlords are concerned about the enforcement of such restrictions.
What can Ontario landlords do about marijuana?
For landlords who are concerned about the smoking and growing of cannabis in their rental units, there are some recommended precautions you can take. It’s recommended that landlords restrict hydroponics or hydroponic equipment in future leases, screen tenants to ensure that you will not be renting to people who are likely to start a grow-op in their unit, and seek out tenants who will adhere to the four plant limit and smoke outside. With screening comes complications, as many landlords will not have the time or knowledge needed to select ideal tenants to rent to – this is where property management services come in.
The important role of property management
For landlords who are concerned about how the new Cannabis Act might negatively affect their rental units or tenants, property management companies like Highgate Properties are here to help. Only property management companies have the knowledge and experience necessary to effectively screen tenants, enforce rules and regulations found in leases, and take care of any marijuana-related issues that stem from the new legislation. In the end, it’s all about screening tenants properly and ensuring that leases are clearly written – something Highgate has extensive experience with.
With post-secondary school application deadlines quickly closing in, it might be time for parents to start thinking about where their children are going to be living during their first years away from home. One of the most attractive approaches to student housing is a very common one – parents purchasing a home for their children to provide a long-term, worry-free home for the entire length of their educational career.
What to consider before you invest
It’s important to weigh the pros and cons of any real estate investment, especially when the safety and happiness of children are concerned. It’s important to discuss the possible investment with your child in order to determine whether or not it’s something they are comfortable with, and if they are willing to undertake the amount of responsibility needed. Your child may desire the freedom allowed by being their own landlord, but also might want to experience more carefree life in dorms during their college years. Both parents and their student children should understand the benefits and opportunities that a student housing investment can provide.
Understanding the real estate market in the area your child will be living in is important, as is finding an ideal property that will be attractive to other tenants and will require little upkeep during their time in school. Purchasing a house for your student child will provide them and others with a reliable place to live during their years as a student, and can prove to be highly beneficial to your own bottom line.
A worthwhile investment for all sides
Purchasing student housing for your child can be a good investment for everybody if handled correctly. You and your adult child will be able to rent out the other rooms of your new investment home to other students in the area, giving them a reliable place to stay and helping to recoup the costs of the investment. The rental income generated from the other students living in the house is a great way to help you quickly pay off the mortgage without putting too much of your own income into the investment – meaning that this investment will be able to pay for itself and provide your child with a permanent and attractive place to live.
Being a landlord may also mean that you can claim certain expenses during tax season, and gives you the freedom to choose what kind of people are sharing a home with your children. The idea of investing in student housing is to build your own equity rather than somebody else’s, freeing you and your child up from costly residence fees and putting more money in your own pocket. Not only can this be a profitable investment for you as a parent, but it is also a great way to teach your children about responsibility, real estate, and investing – making it an invaluable experience for them. Once your child is finished with their schooling and ready to move onto the next stage of their life, the property can be sold, and the profits can be put towards future investments.
Property management services take the pressure off parents and students
Investing in a student housing property for your child can seem like a time-consuming process, especially for parents living away from where their parents will be going to school. Things like rent collection, utilities, maintenance, and sudden vacancies are sure to arise during your child’s educational tenure, creating potential headaches for you and your kids. Luckily, property management services are an ideal solution to help take the pressure away from both parents and students, dealing with these inconveniences as they arise. Only property management companies like Highgate have the knowledge and experience needed to deal with problems promptly and professionally, overseeing the day-to-day landlord duties and freeing you and your children up for the more important things in their lives.
The Toronto Real Estate Board (TREB) have recently issued its monthly market figures, where it was revealed that the total number of Toronto real estate sales in 2017 had fallen quite dramatically in comparison to the record numbers in 2016. TREB has laid the blame on government policy decisions, which it maintains played heavily in influencing consumer behaviour throughout the year.
Real estate sales down from 2016 records
After a drop of 18.3 percent in Toronto area real estate sales, TREB President Tim Syrianos was quick to level the blame at the provincial government. This overall drop in sales comes after record sales in Q1 of 2017, and strong sales to cap off the year in Q4. Syrianos stated that policy decisions made by the Ontario government had a significant impact on prospective real estate investors, and that current policies would continue to have a “psychological impact” on the market.
Even though the overall amount of Toronto real estate sales were down in 2017, the average selling price was up 12.7 percent from 2016. The average price of a home sold in Toronto last year was $822,681, likely stemming from a hot housing market early on in the year and steadily high demand for housing. The final months of 2017 saw fewer sales and an increase in real estate listings, leading to a slowdown in average price growth. The latter half of the year also saw a major slump in the sales of luxury detached homes, with sales falling by up to 56 percent from the first half of the year.
Implementation of government regulations to blame for sales slump
While Statistics Canada found that foreign home ownership did not have a major influence on real estate sales, the Ontario Fair Housing Plan included a foreign buyer tax which may continue to influence investor behaviour over the coming year. The Fair Housing Plan also included rent control expansions, and a host of other measures in the name of cooling the then red hot Toronto housing market. Syrianos also said that the effects of the recent changes to Canada’s federal mortgage lending guidelines, which will have a major effect on first-time buyers, will be felt in 2018 and beyond.
New stress test rules will continue to slow the market
Canada’s new federal mortgage lending rules require a “stress test” as of January 1st, meaning that first-time real estate buyers will be required to pass rigorous borrowing tests to determine whether they can handle mortgage rate increases of up to two percent. While the new rules have been passed with the intention of promoting responsible mortgage lending, about one in ten new real estate investors will fail to pass the stress test, and many will lose up to 21 percent of their purchasing power – getting much less now than they would have in the previous year. With the presence of tighter mortgage lending rules, fewer incentives may exist for first time home buyers to explore the real estate market, possibly forcing many to put off their investments for quite some time.
The Canadian Real Estate Association (CREA) have predicted that Ontario homes will remain below the levels seen earlier in 2017, and that real estate prices are projected to fall by 2.2 percent in the coming year. Despite the presence of tighter government regulations that give fewer incentives for first time and foreign buyers to explore the market, demand in the Toronto area still remains high. The Toronto Real Estate Board will release their Year in Review report at the end of January, where the Board’s official sales and prices outlook will be featured.
For information on how Highgate Properties can make your Toronto real estate investing easy with experienced property management services provided by seasoned Realtors, visit our website or contact us today!
A number of factors, including the enforcement of strict rent control regulations leading to fewer developments being created, have resulted in Toronto seeing rental vacancy rates being the lowest they have been in 16 years. These record vacancy rates can be looked at as a major opportunity for Toronto real estate investors for a variety of reasons.
Toronto vacancy rate at 16-year low
Rent control regulations, building height restrictions, and an unwillingness for many Toronto-based renters to give up their current units has resulted in Toronto’s lowest vacancy rates in 16 years. The current rental vacancy rate is somewhere around the one percent mark, with the city seeing a consistently growing population and healthy housing market. Developers have suggested a number of solutions to the shortage, but have mostly been ignored by Toronto city planners and local politicians.
Ontario has continued to roll out strict rent control regulations for new rental building, leading contractors and developers to set their sights on condos rather than apartments. The development of rental units does not present the immediate return on investment offered by condos, so many developers and landlords have decided to change course due to a lack of certainty.
Big opportunity for investors
The low vacancy rates present a tremendous opportunity for Toronto real estate investors and landlords. Due to the unwillingness of many renters to give up their current units and a high demand for quality rental real estate, the rates of rental units will not be dropping anytime soon. Not only does this mean that landlords can set proper rates for their monthly rents, but that most renters will be looking for long-term rental opportunities.
Toronto landlords will be able to generate consistent revenue for their properties, attract renters who are going to respect their property as they seek to rent for long-term periods, and prosper as a result of this period of high demand and low vacancy. One of the very best ways to ensure consistent and reliable rental income is by attracting tenants with plans of renting for the long-term who are not turned off by the presence of higher rental costs.
The best time to get started with property management and realty services
Property management companies like Highgate have the knowledge and experience needed to help you find attractive properties and tenants that will provide you with security and a consistent income and open the door to future real estate investment opportunities. Property management companies specializing in Toronto real estate can also help you to set proper rental rates that will generate an appropriate amount of income that will see your investments pay for themselves, and will manage the day-to-day activities of your properties to free you up for higher priority business activities.
The low vacancy rates provides Toronto landlords and real estate investors with a unique opportunity that will see rental rates remaining stable and tenants seeking long-term housing in a high demand market. Get the most out of your investments by seeking out property management services through companies like Highgate Properties, who will help you get the most out of your investment. For more information on how Highgate can help make your property investing and management more successful, visit our website or contact us today.
First-time homeowners looking to invest in Canadian real estate in the coming year will face new mortgage rules as of January 2018. The new mortgage rules marks the seventh time that Canadian mortgage rules have been tightened since July 2008, and will see inexperienced borrowers face financial “stress tests” in order to qualify for uninsured mortgages.
What are the rules of the new stress test?
The upcoming implementation of new mortgage rules will see changes across the board, affecting Canadians around the country. One of the most major rule changes will see uninsured borrowers being required to pass this new stress test – a rule which only applied to insured mortgage borrowers in the past. The stress test guidelines set by the Office of the Superintendent of Financial Institutions (OSFI) will simulate a borrower’s current financial situation plus rates two percent higher in order to ensure that uninsured borrowers will be able to withstand the effects of higher interest rates.
The stress test guidelines will require that the qualifying rate for uninsured mortgage borrowers be greater than the Bank of Canada’s five-year benchmark rate or the stated mortgage rate plus two percent. Other rules include requiring lenders to increase their loan-to-value ratio and adhere to new ratio limits in order to be more flexible to risks and evolution in the housing market, and further restrictions on institutions creating arrangements designed to circumvent loan-to-value limits.
What does this mean for first-time buyers?
The new guidelines established by the OSFI will mean that more than 100,000 Canadians will fail the new stress test, with up to half of them being blocked from buying their own home, and the other half settling on a property of lesser value. A recent market analysis held by the Bank of Canada showed that up to 10 percent of Canadians who secured uninsured mortgages in the last year would fail the new stress test guidelines.
Starting in the new year, first-time buyers may have to settle on less expensive homes than what they can currently buy today. The new rules may also mean putting off investments for some time and saving up for larger down payments in order to surpass the 20 percent stress test guidelines. Thanks to potential pre-qualifications that may be necessary for first-time property investors, some may have put their dreams of buying a home on pause until they can pass the stress test or afford a larger down payment, or settle on a property that doesn’t properly suit their needs.
An argument against the stress test
The new guidelines set by the OSFI have been criticized for being too harsh towards first-time investors. Using numbers two percentage points higher than what they currently are is too rigid, and is extremely limiting to first-time buyers. Since interest rates are not being raised immediately and employee wages across the country generally rise over time rather than languish (November 2016 to November 2017 saw wages grow an average of 2.8% across all sectors), borrowers will typically be able to afford higher interest rates in the long-term. Forcing unrealistic stress tests on inexperienced and uninsured borrowers means many Canadians will lose out on the chance to invest in the real estate market, blocking thousands across the country from buying homes. The OSFI will begin enforcing these stricter stress test guidelines Canada-wide on January 1, 2018.
The strict guidelines present an exciting opportunity for experienced Canadian real estate investors. With less entry into the market by first-time homeowners, more experienced investors will have access to better investment prospects and less market competition. If you’re an experienced Toronto real estate investor looking to capitalize on the new mortgage borrower guidelines, Highgate Properties can help you through experienced brokerage and property management services. For more information, visit our website or contact us today.
The city of Toronto is considering implementing rules for short-term rentals offered by platforms like Airbnb. The proposed regulations have been anticipated by city officials for some time, focusing on creating a registry of landlords and potentially only allowing short-term rentals of rooms in principal residences. While the implementation of new regulations and the growing popularity of short-term rentals may seem daunting to investors with full-time rental properties, there are a few reasons why you shouldn’t be worried.
Less reliable than long-term
Short-term letting has become increasingly popular in the city, especially with tourists and visitors looking to escape expensive hotels. While this may seem like a more profitable option at first glance, there are quite a few drawbacks when compared to long-term, “regular” rentals. Renters have a higher chance of falling through due to the non-committal nature of short-term renting and there is a lack of consequences for dropping a rental at the last minute.
Renters spending a short amount of time most likely won’t treat your home with the necessary amount of care, increasing the likelihood of renters damaging your property and leaving you to cover the damages yourself. While short-term rental platforms like Airbnb are great when arranging for tenants to stay at your home while you are away or in your in-law suite, they are far less reliable than renting to long-term tenants.
More work for landlords
Property management becomes a major factor when dealing with short-term rentals, turning what seems like a simple task into a lot of work for landlords. Short-term rentals can very quickly turn a landlord into a hotelier who is in charge of cleaning and doing maintenance before new visitors arrive, arranging for key delivery and answering visitor queries among other tasks. This extra work can be extremely time-consuming for landlords, taking up valuable time that should be spent on more important things.
Another issue arises with the behaviour of short-term renters, which is much more difficult for landlords to enforce than long-term arrangements. Ensuring that visitors are not breaking laws on your property becomes far more complicated, leading to potential legal trouble and issues with neighbours. Some condominium properties have already begun to enforce anti-Airbnb rules for this very reason. Enforcing noise and traffic/parking rules can also become far more difficult for landlords, risking the alienation of neighbours. While it’s easy to give guests a list of rules to follow in your home, it becomes much more difficult for you to enforce them because of the short-term nature of their stay and your absence from the situation.
Less protection for landlords
Hosting frequent short-term rentals leaves landlords with no more protection than that offered by Airbnb or similar platforms. They do not have access to the protections overseen by the Landlord and Tenant Board, leaving room for short-term tenants to abuse or take advantage of them. While the Landlord and Tenant Board often skews towards protecting tenants in many situations, it is still there to protect property owners and landlords when negative situations arise. Without the protections offered by the Board, resolving disputes with visitors can quickly become messy and time-consuming for landlords.
So why do people list properties on Airbnb?
The overwhelming reason to list a rental property on Airbnb is financial, and it is especially tempting if your property is in the downtown core as these properties rent short-term at a premium similar to hotel rooms. If you do choose to do this, be aware that new regulations may be coming which prevent it, and budget for extra time and money to cover damages. You have to decide if you want to run a hotel or be a landlord. If you are thinking long-term with your property investment, being a landlord is the better choice.
As Toronto lawmakers move closer to implementing rules and regulations for short-term rental platforms such as Airbnb, rental property owners can sleep soundly knowing that they have nothing to fret over. Short-term rentals bring with them a host of extra responsibilities and time-consuming tasks for landlords, and don’t have the comfort of legal protections and overseeing bodies – making them less worthy of your time than traditional long-term rentals.
If you’re a rental property owner in Toronto looking for information on how you can make managing your rental property a seamless experience with Highgate Properties, visit our website or contact us today!
Finding the perfect tenant can be difficult for any landlord, no matter how long you’ve been in the game. Tenants can be unpredictable and can’t always be accurately judged based on the information they give you – unfortunately, almost every Toronto property owner has heard horror stories about bad tenants or dealt with them personally.
The CBC recently published an article about this exact scenario – a Hamilton landlord had to fight tooth and nail in order to evict a criminal after months of unpaid rent. Many bad tenant experiences like the one highlighted in the CBC article could have been easily avoided by running professional and personal background checks on prospective clients, with a focus on criminal history, credit history, and previous experience as a tenant.
Great news for Toronto real estate investors – the Toronto housing market continues to thrive in its current “hot” state. With a vacancy rate hovering around just one percent over the last year and increasing rental prices, Toronto landlords have the luxury of being able to prosper in the hot market and to shop around for ideal tenants while also retaining them for longer periods of time.