Toronto Income Property Newsletter: July 2011
Happy Canada Day everybody. July 1st marks our full jump into summer and the start of the second half of the year. We certainly saw a very strong market for income properties over the past six months. If you haven’t purchased your property yet this year, it will be trickier over the next couple of months. The inventory for quality duplexes and triplexes continues to be scarce. I expect a good fall market though with plenty of new product, provided that rates stay relatively low.
Rental Increase Guideline to Quadruple?
The maximum allowable increase that you are permitted to charge your tenants for this year is 0.7%. That’s seven bucks if you are letting your suite for $1000 a month. This number fluctuates from year to year and can obviously make a big difference to institutional landlords with thousands of units.
I read an article this morning that the Ontario Federation of Rental Housing providers are expecting this to increase to 3.1% in 2012. They cite HST as an increased cost as well as increasing inflation. Landlords also claim that their costs have risen as high as 7% and they can only charge a small fraction back to the tenants.
Whilst an official announcement hasn’t been made yet, I can’t see the increase jumping that high. I usually deal with landlords that have only a few suites, and I usually advice them to skip the rental increase altogether as a nice gesture to good tenants. If the increase goes up to 3%, and you own a few suites that could be upwards of an extra $100 a month. Let’s see what happens.
I believe in the old saying: “There are no such things as bad tenants – only bad landlords.” If you treat your tenants really well, it will pay back in less hassle throughout your journey as a landlord. I know hundreds of landlords in town from my years of selling plexes and can happily state that most of them have had very little problems with their tenants. I think that is because most of my clients understand how to treat their tenants properly.
Rental Transactions up 18 Per Cent
The recently released TREB Rental Market Report stated that there were 5079 lease transactions for condos and townhomes for the January to April 2011 period. This result was up 18% from 4319 lease transactions reported during the same time period in 2010. The number of rental units listed on Toronto MLS rose 10% to 9374 units. The increase in listings reflects the high level of condominium completions over the past year. Many investors chose to lease their units upon completion.
Bear in mind that these numbers do not reflect the rental figures for duplexes, triplexes or multiplexes in the GTA. More importantly they don’t cover the many more transactions that take place on Craigslists, Kijiji and viewit.ca. This does provide some valuable insight into rental trends however. The report stated that a one bedroom apartment rented for an average of $1485 per month. While this may be true for condos, the average price would be more like $1000 – $1200 in most self-contained units in houses. The rental market remains strong across the board so investing in good income-generating properties continues to make a lot of fiscal sense.