How Condo Investing Solves the 3 Biggest Problems that Landlords Face
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Andrew recently got back from a landlords conference where he was a speaker. He was shocked at the problems that landlords are facing in their duplexes, triplexes, and apartment buildings across Ontario. More and more Andrew is convinced that pre-construction condo investing offers huge advantages over traditional real estate investing. Listen to hear how condo investing solves the 3 biggest problems that landlords can face.
Andrew la Fleur: On this episode, I’m going to talk to you about how condo investing solves the three biggest problems that most landlords face. Stay tuned.
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Andrew la Fleur: Hi. Welcome back to the show. Thanks again for listening in, tuning in, and subscribing to the show. If you haven’t already, make sure you do subscribe. If you’re on iTunes or wherever you get your podcasts, make sure you hit the subscribe button so you never miss an episode. And if you are not already, please, please, please make sure you are getting my weekly email updates on all things condo market in Toronto and beyond. Just go to the truecondos.com and sign up anywhere, and you will become a subscriber. You will get those weekly email updates and I promise you, you will get a lot of value from that if you’re interested in condo investing.
Andrew la Fleur: So as I said on this episode, I want to talk about the three biggest problems that landlords face and how condo investing can help to solve them. A reason for this podcast, inspiration for this podcast was I had a chance to be at a mini conference over the weekend for landlords. This was put on by the Ontario Landlords Watch Group. They are a group of landlords. There’s a group on Facebook. You can join if you’re an investor, if you’re a landlord, you can be part of it as well. I’ve been part of this group for about a year, got a lot of value from it. It’s just a great resource.
Andrew la Fleur: If you are an investor, a landlord, it’s a good group to be a part of. I’ll include a link to that Facebook group in the show notes for this episode, which you can find for this episode in any episode, truecondos.com/podcast or potentially if you’re using an Apple device right now and listening to this, you can pull up the link right on your phone or device and go to check it out from there. So anyways, that’s a plug for them if you wanted to be part of that group.
Andrew la Fleur: So there was a mini conference put on by this group for landlords, investors, and I had the chance to be at the event yesterday and a chance to actually participate as one of the speakers on a panel discussion as well, sort of coming at it as the condo representative. Most people in the room are investors, not in condos, but in apartment buildings and single family homes across Ontario, mostly southern Ontario.
Andrew la Fleur: So it’s always interesting being in a group like that where most people are traditional sort of real estate investors in houses and apartments. The type of issues and problems and challenges that they face as landlords are enough to just make you want to run the other way, to be honest. Dealing with the stuff that you have to deal with as a landlord in most types of properties is pretty scary stuff, but the beauty of condo investing, as I’ve always said, is it’s very different from investing in traditional properties in Ontario, especially when you’re buying condos in downtown Toronto. It’s just a totally different type of experience as an investor, as the landlord.
Andrew la Fleur: So there’s three big problems that I sort of observed at this conference, but not just at the conference but elsewhere, and three sort of key issues that, if you’re a landlord, these are the three things that you’re most afraid of the most, that keep you up at night, that cause you to stop and think, cause you to lose sleep or whatever it may be. Those three things that I see are, number one is your tenant not paying you rent, just they stop paying you rent. That’s probably the biggest fear, is you’re giving someone your property that you have to pay for, and the bank doesn’t let you stop paying. You have to, of course, keep paying all your bills and the tenant, what if the tenant stops paying you rent? That’s number one.
Andrew la Fleur: Number two is your tenants trash the property. Your tenants damage the property, they don’t take care of the property, and they cause damages to the property or to what’s inside, the appliances and everything inside the property. And number three is issues, the problem, the challenge around property maintenance and upkeep. So just having to get that phone call, my roof is leaking. Mr. Landlord, hey, my roof is leaking or whatever it might be, my basement’s leaking, or whatever it is. There’s a million things that’s under the category of property maintenance and upkeep.
Andrew la Fleur: So those are the three big problems, I think. There’s many other things, of course, that can come up when you’re owning real estate as an investment when you are a landlord. There’s other things that, of course, you can face, but these are, I think, the three biggest things, the biggest worries that most people have in that maybe if you’re not an investor yet, these are the things that may be holding you back. You’re worried about these things happening.
Andrew la Fleur: So I want to talk about how, as I said, condo investing can actually solve these three problems. So number one, not paying rent. So this was a big theme at the conference. In any type of conference like this, it’s how do you deal with tenants who are not paying rent? How do you get them kicked out to get a new tenant in there that is going to pay you rent, that is going to pay up? And talking about small claims court, and dealing with the landlord tenant bureau, and then just the board, and the arduous process and how it’s so weighted in favor of the tenant in terms of if your tenant stops paying rent to be able to actually get them out of there.
Andrew la Fleur: It’s not like you can do it overnight. It takes quite a bit of time and you have to go through the system. And it’s a major pain to deal with. Obviously, it’s very stressful if you’re sitting there as a landlord with this property, paying your mortgage and all your bills, and the tenant is just sitting in there, the deadbeat tenant’s just sitting in there not paying you for that service you’re giving them. It’s a terrible situation, obviously.
Andrew la Fleur: Now, how do condos address this? Well, when you’re dealing with condos, especially downtown Toronto, compared to most property types across southern Ontario and across Ontario, you’re dealing with, in most cases, a much higher quality tenant. Just look at the average rents. A lot of these properties like small towns and small cities across Ontario are dealing with people who are paying rents, $800 a month, $1,000 a month, $1,200 bucks a month.
Andrew la Fleur: Well, when you’re dealing with condos and the average rent of a downtown condo is $2,500 a month, that eliminates a lot of people right off the bat who could just never afford to rent that property from you. So the type of person that is able to qualify and is able to rent a property for $2,500 bucks a month, they have to be earning a certain salary. To get that certain salary, they have to have certain jobs, certain qualifications to reach that point. If they’ve reached that point in their life where they’re able to afford a $2,500 a month on average. Again, it doesn’t guarantee anything. You can still get deadbeat tenants in the high end range of things, but it greatly increases the likelihood that that is going to be a quality tenant who will pay you your rent every month.
Andrew la Fleur: There is a correlation, in other words, between the higher the rent that you’re charging and the level of delinquency or the lack of delinquency that occurs. So again, condo investing versus investing in other properties across Ontario, much higher average rents gives you much higher quality tenants. That’s the first thing. So when you get a higher quality tenant, they’re much more likely to be that, be high quality, meaning they’re going to pay the rent and pay it on time.
Andrew la Fleur: Number two problem that landlords are facing and a lot of people were talking about at this conference and something that I have never faced, and again, I’ve never faced any of these issues to any major degree with any of my condo properties, and same with my clients as well. So number two, is damaging the property, so trashing your place. That’s obviously not something that anybody would want to happen, but again, that is also tied into the first point, which is you’re getting much higher quality tenants.
Andrew la Fleur: When somebody’s paying average $2,500 bucks a month, when they’re making an average $80,000 a year, they’re working a lot. They are not sitting around smoking weed all day and playing video games. The type of tenant that is able to pay you is the professional tenant that we’re all seeking as landlords, somebody who’s working a lot. And if you’re working a lot, you just don’t have time to get yourself in trouble and throw wild parties and trash the home that you live in. You’re most likely concerned with things like bettering your life, progressing up the corporate ladder, and just focusing on whether it’s work or study or whatever it is that you’re doing.
Andrew la Fleur: And again, it’s not a guarantee of anything, but it just increases the likelihood when you’re renting to a young professional who is starting their career, they’re looking to move up in the world. They’re looking to better themselves, get that promotion at work, find that partner, get married, have a kid, whatever it might be. If they have that first kid, they’ll be in good financial position to move from that rental and buy their first place. Those are the kinds of things that people are thinking about. These are not deadbeat tenants sitting around trashing the properties.
Andrew la Fleur: There’s just so many horror stories at this conference of people just destroying properties. And again, are these people paying $2,500, $3,000 a month? No. The consistent thread with all these horror stories of these tenants, not every time, but most of the time, is they’re all paying a very low rent. And if they’re paying a low rent, they have very low income. They have low income, they’re not likely to be goal oriented people looking to move up in the world and looking to make themselves and people around them better. So that is the second issue. ‘
Andrew la Fleur: So first one, not paying rent. Second one, property damage, trashing the place. Again, the quality of tenants you’re going to deal with mitigate a lot of those issues when you’re talking about investing in condos versus investing in most other types of real estate. And number three is property issues, maintenance, and upkeep. Again, you’re buying a condo. What is there to maintain? What is there to upkeep? What repairs do you have to do? Most of the time, nothing. That’s again, the beauty of investing in condos versus buying houses and apartments and things like that.
Andrew la Fleur: Unless you’re going out and buying brand new homes, brand new apartment buildings, it doesn’t exist. You’re buying anything in the city of Toronto, in southern Ontario, it’s all old. It’s old stuff. It’s 30, 40, 50. In Toronto, it’s 100, 120 years old. These are old properties. There’s always work and stuff that has to be done. I always go back to this, but most of my investment properties are condos. I have one property that is not a condo, it’s a house. It’s a house in Toronto on the Dan Forth, it’s 90 years old. The thing is, I’m going to hold onto it. I think it’s a great long-term asset to have, so I’m not going to sell it, but it’s the biggest pain in my butt.
Andrew la Fleur: It’s so much more work. Any issues I have with anything related to any of my properties, it’s always this one. My condos, I never have to think about, just cash the checks every month and pray that the tenants will move out so I can increase the rent, but my house on the other hand, again, it’s just the money pit. There’s always something that has to be done. Currently, I’m looking at $50,000 of new tiles that have to be replaced in this house, in the kitchen and entrance area. I’m looking at $5,000 to $10,000 on a new porch that has to go in because the thing is 90 years old, and it’s really starting to fall apart.
Andrew la Fleur: And it’s just at the point where it can’t be just touched up. It needs to be replaced. I had some water damage in the basement recently. I had to dump some money into that. The list goes on and on. It’s an endless list, and let’s face it, there’s always something else. You have to have a budget for maintenance and repairs when you own a property that is not a condo. When you own a condo, you can get away for years and years and years without putting a dime into it, and that is totally, completely normal. It’s not the exception to the rule, it is the rule. The exception to the rule is if you do actually have to put money into a condo and actually have to do some work.
Andrew la Fleur: So that’s how condos for me, I mean, again, it’s much more of a passive investment than an active investment. When I hear all these horror stories of dealing with all these tenants in these typical apartments and duplexes and triplexes and things like that, I’m just, all these problems are just foreign to me. I don’t have any of these issues in my condos, and I just think if more and more investors out there realized how great and how easy and the quality of tenants that you get when you’re buying condos, especially downtown Toronto, I think more and more investors would turn to this asset class as part of their portfolio, as potentially all of their portfolio moving forward.
Andrew la Fleur: Now, another big theme from the conference was just this kept getting said over and over again is almost like apologetics for landlords. It’s like there’s no such thing as passive income. There’s no such thing as passive income. We all have to work for it. We all have to deal with all these issues that we just talked about, and fix those broken porches and all the other stuff. You got to deal with all that stuff. There’s no such thing as passive income.
Andrew la Fleur: Well, I would say that’s definitely true. Passive income is a myth. There’s no passive income, true passive income where you just sit there and do nothing, but condos, investing in condos for me, especially pre-construction condo investing, it’s the closest thing you’re going to get to passive investing when we’re talking about direct ownership of real estate. So you can invest in real estate through indirect means, through [reets 00:16:01] and other things, mortgage investments, stuff like that. You can sort of be invested in real estate completely passively, but you’re not a direct owner of real estate.
Andrew la Fleur: If you want to be a direct owner, which I believe you always should be a direct owner of real estate and control your own investments completely yourself, if you want to be a direct owner of real estate, then condo investing, specifically pre-construction condo investing is the closest thing you’re going to get to passive investing. You can buy and own a condo for a decade and never have to lift a finger. Imagine trying to do that with any other property type. Own it for a decade and never have to lift a finger? And never have massive property management bills who are doing all that work for you and charging a massive fee? No.
Andrew la Fleur: Think about it. You buy pre-construction, it’s not built for four to five years. You literally just sign a contract and you’d sit back and do nothing. The property, if you bought smartly, appreciates massively by the time the thing is built. Then it’s built, you rent it out for, say, five to six years. That takes you to the decade mark. That’s a 10-year period that you’ve owned that asset. In those five to six years of renting it, you’ve probably gone through anywhere from two to four tenants in that five year period. What do you actually have to do in those five to six years? Like what could possibly go wrong?
Andrew la Fleur: If you screen your tenants properly, if you’re getting the good tenants in place, which we also help you do if you’re working with us, 95 percent of the time, there’s nothing you’re going to have to do. Worst case scenario for a lot of a condo investors, an appliance my break. Oh, big deal, whoop de do. You pick up your phone, you open up the Jiffy App, you get the appliance guy in there, he fixes it, you pay the bill, problem solved. If you can write a check, if you can just throw some money on the table and make a problem go away, you don’t have a problem, right? That’s how it works.
Andrew la Fleur: So that’s the beauty of condo investing. That’s the closest that we can get to passive income through condo investing, and that’s how condo investing addresses the three biggest problems that most landlords face, but condo investors, we usually and almost all the time, don’t face those same problems. So I hope you found this episode useful. Hope you got something out of it. If you did, go ahead and share this with somebody that you know. If you are thinking about getting into condo investing, maybe you were at this conference and you met me there, you heard about me there, and this is the first episode that you’re listening to, I hope you enjoyed it.
Andrew la Fleur: And of course, if you want to reach me, you can always do so, firstname.lastname@example.org. 416-371-2333 is my direct number, and I’d be happy to chat with you anytime about helping you get your condo investment portfolio performing and performing at the best that it can do. Okay. Until next time, happy investing.
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