The rental market has been hit hard by the pandemic. With Ontario experiencing a downward trend in the number of reported cases and several vaccines rolling out across the world, more investors are becoming hopeful of the rental market and general economy recovering. If you’re in any major city in Canada, rental investors of all sizes have experienced the need to quickly adapt to the current market conditions. Here are some rental market lessons taught by the pandemic that you should consider as a landlord.
Run the numbers
The pandemic has taught us the importance of contingency planning and watching financials closely – or get used to being stressed out every time the bills are due. As a landlord, you should have a clear understanding of your own break-even rent price, factoring the following:
- Mortgage payments
- Property taxes
- Repairs and renovations
- Landlord’s insurance
- Building maintenance fees
- Vacancy costs and move-in incentives
- Professional fees, such as for tenant placement and property management
As we pass the one-year anniversary of the pandemic outbreak, we continue to notice more and more tenants requesting early lease termination, assignment or subletting, as well as vacant units sitting on the market for longer. Keep yourself familiarized with your unit’s market price and annual rental increase potential.
In 2020, most Ontario landlords of rent-controlled units could increase rents by just 2.2 per cent and this year the rent freeze is in effect. Because of this, you should ask yourself if you want to heavily discount the rent to fill your vacancy ASAP, or keep it on the market for longer, possibly with move-in incentives, to get a higher base rent.
Keep track of all your costs and always have a backup plan!
Flexibility is key
It is important, now more than ever, to be flexible in the rental application review process. Many parts of the economy, including the rental market, have changed drastically due to the pandemic, and so have people’s financial situations. As a landlord, try to consider broader credit score ranges and income types in your tenant applicants, as well as easing up on some of the rules you have previously set – for example, pet restrictions.
Of course, that doesn’t mean that you should dismiss any due diligence – you should always conduct independent background and credit checks, including reference checks. Remember, a great tenant will not only pay rent on time, but they will also maintain the property and most importantly, give you a peace of mind. Don’t make a hasty decision, especially when many landlords are struggling to deal with their local tribunals.
Better customer service at every step
When you’re managing a rental property, you’re running a business. You should see tenants as your clients. Treat your tenants, both prospective and current, like you would treat an important client throughout the process:
- Whenever possible, offer your prospective tenants options for viewing availability, since many work from home now and don’t follow the typical 9-5 schedule. Along with in-person viewings, you could offer virtual viewings via Zoom, Google Meet, WhatsApp and other conferencing platforms.
- Ask the prospective tenants for their feedback during the viewings. See if you could make any accommodations before your tenants move in, such as applying a fresh coat of paint, paying for move-in expenses, or getting the unit professionally cleaned.
- Surprise your tenants with a welcome gift, whether it’s a bottle of wine, baked goods or day-to-day products like soaps and detergents, complemented with a hand-written card. Such small gestures go a long way.
- Check in with your tenants from time to time to see if they have any questions or issues about your property.
A little kindness and respect will go a long way when you’re looking for a tenant. Keep that in mind and you’ll save yourself a lot of time, energy and money.
With current social distancing and safety measures, many people are wary of open houses. Think about how to safely host viewings, such as having people at a reduced capacity (for example, a two-person maximum), requiring everyone to wear masks indoors at all times and providing hand sanitizers before they enter the unit. If your current tenants do not feel comfortable (and understandably so) with in-person viewings, take advantage of conferencing tools to host virtual viewings. We’ve seen quite a few tenants willing to do the viewings on their landlords’ behalf as well, to minimize entry into their unit, so talk to your tenants!
Work with your tenants
In the current market, finding and holding on to a good tenant has become a challenging quest of its own. If you are lucky enough to have great tenants, you should try to do everything you reasonably can to keep them. You may consider postponing any rent increases or offering payment plans (discounts or deferrals for example). Even the slightest accommodation for your tenants could go a long way in keeping them happy and maintaining a positive relationship with them.
As a landlord, you must prepare for scenarios where a tenant either doesn’t pay rent, requests for a rent payment arrangement or decides to break the lease early. Throughout the pandemic, we’ve noticed more cases of tenants looking to get out of their leases early. With classes now being offered virtually, many students don’t need to live close to their schools anymore. Many tenants are also finding cheaper rental options and some decided to purchase. Others are moving into the suburbs, as lifestyle in the downtown core is no longer the same and they no longer need to be closer to their offices. Unfortunately, there were even some cases of tenants taking advantage of the current eviction ban and case backlogs at the Landlord and Tenant Board. To mitigate this, and as intuitive as it may sound, treat your tenants to the best of your ability.
Keeping a good tenant happy is more important than ever. Little acts that show you care about them and the property will help you in maintaining the business relationship.
We understand that the pandemic hasn’t been easy for everyone, especially for landlords across Canada. Although no one has a crystal ball for foreseeing just when things might go back to the pre-pandemic normal, it’s important that you always do your homework and stay optimistic.
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