How NOT to increase your rent by $1000 per month

Today is Monday, February 27th, and this is what’s happening in the condo market this week. The first article that I want to talk about is from the CBC. It’s been getting a lot of play, a lot of clicks and eyeballs. There’s a video along with it as well. Basically, one of the CBC journalists is saying how they were kicked out of their apartment when their landlord said that their rent was going to be increasing by $1,000 a month. They were paying currently $1,600 a month, and now the landlord has said the rent’s going up to $2,600 a month. She says she was essentially forced to move out and now she is essentially homeless. She is a couch surfer, as the article sort of says and as the video says. Now, I posted a bit of a rant on Facebook about this. I believe it to be really dishonest journalism and sensationalist for the purpose of getting clicks. The public is really being mislead. If you’re a seasoned condo investor, you know that there are no rent controls in condos.

If you’re not a seasoned condo investor, maybe that’s new to you, causing you to raise your eyebrow a little bit. It’s true. There is no rent controls basically in any condo, condominium that is built in Ontario basically in the last 25 years. That means you can increase the rent to whatever amount you want once per year with your current existing tenant. Of course, when the tenant moves out, you can always increase the rent to whatever you want in any rental property, but with the same tenant, without kicking them out, you can raise the rent to whatever amount you want. You’re not limited by the annual guideline by the Ontario Tenant Board, which is usually around one or two percent. That’s the first thing that everyone needs to know and understand, that there is no, there are no rent controls on condos, but the other thing that people need to understand is that there are no one bedroom condos that are renting for $2,600 a month.

With the exception maybe of Ritz Carlton, Shangri La, or something like that, Four Seasons. The average one bedroom condo, as you may or may not know, is about $1,700 a month for downtown. Brand new buildings in centrally located spots maybe they’re getting $1,800 a month, but that’s about it. This landlord coming out and wanting to get $2,600 a month from the tenant for the one bedroom, what’s really going on? It’s probably, 95% likely, that the landlord just wanted to get rid of that particular tenant, the journalist from CBC, for some reason. The way that they went about doing that, because there’s really no easy way to get rid of a tenant if you want to do that for some reason as a landlord, the way that they decided to do that was to give them a notice of rental increase of $1,000 more per month. The tenant had the choice to either accept it or to leave. They chose to leave, obviously.

I’m not here to say whether you should or shouldn’t do that kind of a rental increase to kick your tenant out, I’m just here to state the facts. The facts are that there are not rent controls on condos in Toronto and that one bedroom condos are not renting for $2,600 a month. Why this particular landlord wanted to get rid of this tenant, I have no idea. Were the reasons valid or not? I have no idea. Was there a better way to go about doing it? I have no idea. Basically, the journalist has taken this and made a very interesting story about it and now they’re turning it into a very bigger discussion about housing in Toronto and the rising costs of living in Toronto and how many people are being priced out of the city. Not great if you are experiencing that, but if you are a condo investor, and if you’re watching this video, basically it’s more good news that yes, the rental market is very high and rental prices are increasing a lot, and it is a great time to be a property owner and a landlord in Toronto from that perspective.

We’ll continue to watch this trend and see if rents continue to climb like this, but it probably won’t. Right now they’re increasing at about 10% a year, which is very much not normal. Don’t expect this to continue forever. Normal rental increases are around three, four percent, something like that is what we’re used to. I won’t get into this anymore. I’m getting a little bit bored of this story myself. Again, you can check out the Facebook story there, my rant on that as well. Next one, before we sign off today, is, as we’re running short on time, is the Toronto housing market may need a Vancouver style cooling says RBC. This is from the Globe and Mail. Basically, the RBC CEO is saying they’re concerned about major price increases, 20% plus price increases. His quote it, “That’s not normal.” Well, CEO of RBC, I would 100% agree with you. It is not normal. If you are an investor and you’re thinking that this is normal, definitely give your head a shake and understated that things will slow down, whether it’s six months from now, a year from now, two years from …

At some point, things are going to slow down, things will come back to normal. When you’re talking about price increases over any long term period of time, 10, 15, 20 years, if you look at any amount of history, you’re looking at an average of about five, six percent a year for price increases. If you’re seeing numbers that are 10, 15, 20, 30 percent, not normal. Don’t get used to it. I’ve been telling people this for a while now. Enjoy it while it lasts, but understand that things will come back down to earth. If you are a long term investor and if you have a long term perspective on your investments, you understand that over a five, 10, 20 year period, that appreciation rates are going to be around that five to six percent mark and that’s great. That gives us a very healthy return over the long term, regardless of whether we’re buying in when the market’s going at 30% or when the market is going at zero percent. Over a long period of time, we’re going to get about five, six percent and we’re going to very, very well with that for buying the right properties in the right locations. Okay, gone on long enough for today. Hope you enjoyed this video and until next time, have a great week.