How to Rent Out Your Condo When Everyone Else in Your Building Is Trying to Find a Tenant Too
When a new condo building is completed, it’s not uncommon for there to be dozens, or even hundreds of rental listings available at the same time making it challenging on the investor trying to find a tenant. In this episode you will learn specific tips and strategies to get your condo rented out quickly when you are up against a lot of competition.
Andrew la Fleur: On today’s episode we’re going to answer the question, how to rent out your condo when everyone else in your building is also looking for a tenant too. Stay tuned.
Speaker 2: Welcome to the True Condos Podcast with Andrew La Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur: Hey, there. Welcome back to the show. Thanks for listening in. Once again your host here Andrew La Fleur. If you ever want to reach me, you can call me on my cell phone for 416-371-2333, you can email me firstname.lastname@example.org.
So, today I want to answer the question that is often coming up and it seems to be coming up a lot more this year in 2019, and that is, how do you rent out your condo in a building where everybody else is trying to do the same thing. So, when a building is brand new, it’s a very common occurrence for there to be a lot of listings for rent at the same time in those first few months in that first year. As the building is being finished and occupied, a lot of the investors who brought pre construction will put their units up for rent and the market can often be, well, it can look like the market is getting flooded with supply of units for rent, and some of my clients will reach out to me and be obviously concerned and say, “What’s going on? How am I going to rent out my unit when there’s 50, 100 in some cases, 200 units available all in the same building, all at the same time for rent?”
Seems on the surface like it may be an impossible task, and obviously, it’s a very different scenario when you’re renting out your unit in a building that has 200 units for rent versus when you’re renting out a unit in an existing building that is an established building, maybe it’s five year old building or something and you’re just re-upping, your tenant moves out and you re-upping and you put it on the market and there’s say, five or six units available for lease in the building, very different scenario than if you’re up against 200 other units in the building at the same time. So what do you do? What strategies do we employ.
Obviously, just again, this is a service that we provide to our investor clients. We do this every single month, every single week, we are renting out units for our investor clients. So if you’re new to investing or if you’ve recently purchased a condo through us here at True Condos, or if you’re thinking about doing it and one of the questions you have is, how do we deal with the actual renting out of the unit, just to remind, this is a service that we provide. We do this all the time for our investors, most of our clients do take advantage of this service. If you’d like more information about it and how it works and everything, of course, you can always send me an email email@example.com, if you need help renting out your unit, we’re here to help even if you didn’t buy your condo with us we can certainly help you on the rental side if that’s something that you need.
Some of our clients prefer to actually do it themselves and more hands on and want to rent out these units themselves and take control of the process themselves and we can offer guidance and support for that if you’re looking to do that as well. But quite frankly, it’s a lot of work and if you’re not experienced in doing it, I wouldn’t recommend going that route. We only charge one month’s rent as our service fee for getting the tenant and doing all the work and heavy lifting and leveraging our years of expertise and the fact that we’ve done this hundreds of times. So, if you’re, like a lot of investors, you’ve maybe done it once or twice or never, really makes a lot more sense to just hire professional and pay a small fee and you don’t have to worry about the process, and you don’t have to waste your time running around trying to show the unit to people and the people don’t show up half the time and so on and so forth. We are experienced we provide that service as a value add for our investor clients.
Anyways, that was a bit of a side note, getting back on track here. So, there’s a couple of buildings specifically that I’ll be referencing today. One is 87 Peter Street and Menkes Build Project in the heart of the Entertainment District. That building is brand new right now. It is just registered and closed. It was sold about four or five years ago and it’s an investor heavy building with a lot of, every units that came up for rent in this building. So, that’s one example we’re going to look at.
The other example we’re going to look at and reference will be Grid Condos, Jarvis and Dundas, again, very investor heavy building, Eastside there near Ryerson and was also sold four or five years ago and is also just recently registered and closed a lot of rental units in that building. So, let’s talk about it. Well, how do you rent out your condo when everyone else in the building is also looking for a tenant too in this scenario?
Well, number one is, don’t panic. It’s the number one piece of advice I give to everybody. There’s a tendency for, especially first time investors, to freak out a little bit, to panic, they might go on the internet or MLS or some of the websites and see a massive number of listings available for rent in their building that they’re trying to rent. Maybe they have a one bedroom unit and they see there’s 25 other one bedroom units, and people start freaking out, how am I ever going to rent out my unit? It’s a terrible scenario, they’re going to be paying occupancy fees or paying my mortgage if the building is already registered for months and months and months and no one’s going to be renting my unit. Oh, no.
First of all, yeah, don’t panic. This is a normal occurrence that happens in many, many buildings. Not every building, depends on the building, depends on where it is, who’s buying in the building, how many units are in the building, it depends how the building is occupied, whether everybody’s occupying it all very in a short period of time, all at once, as is the case with Grid Condos for example, everybody got occupancy in a very narrow short period of time and the building closed in a very quick short period of time. Versus some other buildings. Some other builders it might take six months, nine months, 12 months of occupancy where you don’t notice it as much in a building like that because everybody’s getting their units very slowly over a longer period of time and so they’re going on the market and being rented out, going on the market being rented out over a long period of time. So it’s not as acute of an issue that you’re going to notice.
But regardless, number one, don’t panic. Relax. Understand, this is a normal thing, everybody goes through it. Real Estate, again, is a long term investing game. You’re not worried about what’s happening this week, this month, this year, your understanding that you’re in this for the long haul. It may take longer to find your first tenant than it will to find your second, third, fourth, 10 and so on in the years to come. That’s normal. So, don’t panic. It’s okay. We’ve seen this before, we’re used to this.
Number two is, goes without saying, if you’re in a situation like this competing against a lot of other units, don’t be that guy who tries to get the highest price. Don’t be that woman who thinks that their unit is something special and better and different than all the other units. Be the lowest price. That’s my simplest clearest advice that I can give you is always be the lowest priced unit of a given type. So, if all the studios are 1,900 a month, make sure that you’re 1,850 or 1,800. If all the one bedrooms are 2,200, 2,300 a month, make sure you’re 2,100. If all the two bedrooms, and so on and so on. Just be the cheapest unit. The cheapest units are going to generally almost all the time be the ones that rent out first. They’re the ones that the tenants are shopping on price. They are looking at all the units and they’re going to start, “Oh, this one is,” They don’t care what unit they get.
In most cases, 20th floor, 22nd floor, 25th floor, doesn’t really make a big difference to them but if they can save a little bit of money, tenants are shopping on price, remember. They’re not really shopping on features, they’re not really shopping on square footage, they’re not really shopping on view exposure, they’re primarily shopping on price and that’s what’s going to get you the most attention. So, always make sure that you are the lowest priced unit. Don’t be too proud to lower your price a little bit below everybody else in order to obviously get your unit the most attention and get your unit rented out before everyone else.
If you’re real estate professional or somebody from our team, if you’re using us, if we’re recommending a certain price based on how everything else is price, don’t be that landlord, who says, “Well, my unit has blue carpets and everyone else has red carpets,” or whatever. And so you don’t try to get more than everybody else. When you’re first renting out your unit, you should be going less than everyone else. Pretty simple, but it is something that you need to be reminded of.
Number three is, remember, there’s no more rent control. Thank you Doug Ford and the provincial conservatives who put that, conservative government who put that policy back in place for new buildings. So, no more rent control on, if you’re listening to this podcast in 2019 or beyond, which obviously you are because that’s when I’m recording this unless you have some kind of a time machine, but … So, if you’re listening to this, that means, and if you’re getting a new condo, a new building, that means it’s not subject to rent control. Any new buildings that are finished after sometime in the fall of 2018, I want to say November of 2018 and onward, if it’s a new building, then it’s not subject to rent control.
So, what that means is you can rent your unit out a little bit cheaper than the market value today because you know that after 12 months you can increase the rent to market value. At least you have the opportunity, you have the legal ability, the legal right to increase your rents to the market value after a year. So, if the market value of your one bedroom is 2,300, and a year from now, let’s say it’s going to be 2,400 but you rented out for say, 2100 just to get it rented out, a year from now you can issue notice to your tenant telling them that you’re increasing the rent to whatever amount you wish. There is no rent control so you could say, rent is now going to be 2,300 or 2,400, if you think that’s what you’ll get for it. And obviously the tenant has the right to either accept that and pay that rent or to vacate and move out, in which case you’ll be finding another tenant and again, but you’ll presumably be able to, if they do move out, get a new tenant at the market rate rent.
Or you might decide you know what, tenant has been great, I don’t want to increase the rent that high, maybe you just increase the rents by, you say, “You know what, hey, tenant, market value here is 2,400 now, you’re only paying 2100, you’ve been a great tenant to me, so, let’s meet somewhere in the middle kind of thing where both sides are happy” and you can work that out. That’s the third point.
Number four obviously, be patient. Just be patient. It takes time, these things sometimes take time. It’s funny, you might have 10 one bedroom units in the building and you’re one of them. Everybody’s the same price, you might be the one that gets rented out first. Or you might be the one that gets rented out last. To some extent, it’s luck of the draw. It’s just whatever the … the tenant is going to go into building, if you’re advertised properly, if your photos are proper, if your listing … assuming everything is properly done and you don’t have any issues there, the tenant is going to compare that there is one bedrooms and they’re just going to pick one that they’re going to go with. Assuming everybody is the exact same price. If that’s the scenario. So, it’s a game of just being patient and understanding that you’re on the game show, the dating game show, like, Pick me Pick me. It’s like you might get picked or you might not. To some extent it is out of your control and you just got to be patient.
Number five is a good tip, spreading a wide net. And again this is something where if you have a professional like us doing it for you, knows what they’re doing, these little things can really make a big difference. You got to know where tenants are searching, and it’s changing all the time. When I started 10, 15 years ago, Craigslist. Craigslist was the place where everybody searched online primarily for rental condos. Now, today, not so much, Craigslist has really faded out of popularity and other sites have become more popular. Very popular one at the moment seems to be PadMapper. PadMapper seems to be a very popular site. So make sure that you are on as many … The point is, make sure you’re on as many rental sites as possible.
Facebook is a growing platform as well. Facebook marketplace is a growing platform so, make sure you’re on MLS if you’re able to be on MLS, the developer’s allowing that. Make sure you’re on MLS primarily number one, boom. Kijiji is a big one. PadMapper might be the biggest one right now. Craigslist might as well sure still put it out there. Rentals.ca and so on and so on and so on. There’s so many of these sites. Again, make sure you’re spreading a wide net that you’re in the Facebook, make sure you’re everywhere.
Number six, be pet friendly. So a lot of landlords will say, no pets, and that will turn off a lot of tenants. Just put it in your ad, pet friendly, pets welcome. Just again, spread a wide net. Somebody might have a goldfish, whatever. I don’t know. It could be anything. You might say, “No, I don’t want any pets.” But if somebody comes to you with a goldfish, you’re probably going to be like, sure, whatever. The point is, cast a broad net. Don’t narrow yourself at all. Keep a wide open perspective. Be open to students, be open to professionals, be open to anybody in the initial stages to just broaden your potential pool.
I mean, maybe you get a very low quality tenant application from somebody with a horrible credit score and they’ve got six dogs and they are smoking like a chimney, and then you get another offer from your sort of typical downtown professional single female, no kids kind of thing. I mean, no pets kind of thing, working downtown. So, just having those two offers and now you’re in a bidding war scenario. But if you limited yourself and you only had the one offer and you lose that bidding war scenario which obviously is hurting you. So, cast a wide net, be pet friendly, be everyone friendly, obviously don’t discriminate, of course, obviously the law it doesn’t allow you to anyways, but just be open minded and broad in your willingness to accept applicants.
And remember, of course, you can always say no. You can always deny an application. You don’t have to provide a reason why you can just simply if you don’t like somebody application, if they don’t have a good credit score or if you think they have a large dog that you don’t want for some reason, or if they’re saying they don’t have pets, but you you suspect they might have bets, they’re not being truthful with you or something, you just simply deny the application and that’s it. But it’s good to just cast that broad net.
Another strategy which you might consider employing but it’s not as relevant now that rent control is gone is the free month, one free month rent strategy. So, this was more helpful and is more helpful with older buildings where they are subject to rent control. If you need to go below market value rent, you’re better off to offer a free month’s rent in order to keep the rental rate higher so that when you increase each year you’re increasing from that higher starting point as opposed to just lowering the rent. So, instead of offering, if the market rate is 2,000 a month, don’t offer 1,800 a month because then you’re stuck at 1,800 a month potentially forever. But keep it at 2,000 a month but tell the person, “Look, if you pay your rent in full and on time for the first 11 months, the 12th month will be free.” Something like that.
So you get $2,000 free rent 12th month, you don’t pay me anything if you pay the full year on time and in full, we’ll give you that. And effectively that’s lowering your rent for the first year by 200 bucks a month which is, you’re really paying 1,800 bucks a month for the first year. So, you could try something like that. But again in a no rent control scenario with new buildings, you’re better just to lower that rent right off the bat, not mess around with incentives like that and know that you can just increase your rents after that first year. But that’s a little trick, a little strategy that I’ve found is sometimes useful.
So, those are some things to do. Some more don’t. So things not to do. Don’t take a crappy applicant. So don’t rent your unit to to a crappy tenant just to rent it out. Look for that high quality tenant. Be patient and wait for that high quality tenant. Trust your gut as well. If you have a bad gut feeling about a tenant, it’s probably in most cases right assuming that you’ve done this before. Again, that’s where we come in. If we can help you sort of fill the tenants and the applicants to get a sense of if they’re likely going to be good tenants or not, don’t settle for a crappy tenant just to get the thing rented out. Be patient, make sure you get a good tenant. You don’t have to get perfection and amazing, everything, but make sure that they’ve got income, make sure they’ve got employment, make sure they’ve got references, make sure they have decent credit and so on. Don’t take somebody sketchy just to get it rented.
Especially for new buildings. Like don’t freak out, don’t panic, again, if it takes more than 60 days. I mean, most places are renting out overall like in way less than 30 days in Toronto, especially in existing buildings. Again, older buildings if there’s only three, four, five, six, 10 units for lease in a building, those type of buildings, they’re renting out in seven days, 10 days very quickly. In a new building if you’ve got 100 units, 150, 200 units in a building, it’s going to take some time most likely. Again, you might be the lucky one that gets rented out first, but most likely somebody is going to take 30, 60, it might take 90 days. Like, this could happen, it’s nothing to freak out about. Hopefully and in most cases it will be less than that, but don’t freak out, don’t panic if it is taking a couple of months to rent out.
It doesn’t necessarily, a question I often get is, why is it taking so long? Is there something wrong with my unit? Is there’s something wrong with my listing? Am I putting the wrong pictures up or? Am I not on the web sites like you know … No, it’s just, it takes time. If you’re dealing with a massive amount of inventory and a new building, it just takes time.
The other thing don’t do, don’t lock yourself into a bad lease agreement. So, make sure you protect yourself. Make sure you don’t have any weirdness in your lease. Your lease, having it worded properly incorrectly to protect yourself is so, so important. Don’t accept any weird clauses or short cut yourself or short change yourself on the language in the contract just to get the thing rented out. Again, like don’t pick a bad tenant, don’t take a bad contract either. Also very important. Make sure you’re protected that way. Again, make sure you have a professional helping you who’s somebody who’s been through hundreds of leases and been through hundreds of scenarios, has much more experience than if you’ve only been through it once or twice or three times yourself. So, take advantage of that and it’s a service that we provide.
And of course, don’t skimp out on background checks. Always do the background checks. Check the credit. Verify the income. Call the employers. Google the person. Check out their social media profiles. Do your homework. Do your sleuthing. Whenever possible, try to meet, I always say, try to meet the person face to face before you hand over the keys. You can tell a lot about a person in the first 30 seconds that you meet them. Just meet them face to face. Talk to them. Ask them some couple of questions. See if there are normal, responding proper human being or if there’s some kind of sketchy person. Don’t hand over those keys. Always make sure you have an out before you finalize things with your tenant. And make sure you do those background checks. Of course, many people are lazy and they just, Oh, they see the application comes in and they see the offer to lease full price. “Okay, no problem. Let’s get this thing done.” Don’t forget about those background checks, do them. Again, if you need help with that we can help you.
I always recommend though, you as the landlord, at that point, you should really take charge of that and satisfy yourself that you’ve got a good feeling about moving forward with that tenant because there’s nothing worse than having a bad tenant when things go wrong they can go very wrong and it can really be a thorn in your side for a long time if you’re settling for a bad tenant just to get the place rented out. So, those are some tips. Going back to the specific examples of the buildings I mentioned, 87 Peter and Grid, there’s been some chatter online. I’ve seen some people posting some stuff about these buildings and stuff. People freaking out that this dramatic oversupply and this kind of nonsense. Like, this happens all the time. We’ve seen this time and time and time again.
As long as condos have been in Toronto, there have been new buildings that have been completed with tons of rental listings available. This is nothing new. It might be new to you. It might be new to some people who haven’t seen this before, or who weren’t paying attention or whatever, but this is a common occurrence. The bottom line though is that the rental market in Toronto, of course, we know the vacancy rate is next to zero. The rental market is very, very strong. Particularly in downtown Toronto. So, here’s some statistics that will help you understand how strong the rental market is.
So, 87 Peter Street, one single tower, looking at the latest statistics from MLS only. These are MLS statistics. There may be other leases things done, not through MLS of course, and other sources, but primarily MLS is going to be it. So, looking at 87 Peter Street, there have been 59 leased units in the last 30 days. 59 units in the building have leased out in the last 30 days last month. Works out to about two leases every single day on average. So, again, if you were dealing with a high case scenario in a building say with 200 units for lease, if they’re averaging around something like this two a day, if there were 200 units which I don’t think there was ever that many in 87 Peter, but looking at 100 days, just over three months to lease out all of those units roughly speaking, if you’re leasing two a day.
So, currently available at 87 Peter Street, there are currently 26 units available for lease. 26 units available for lease if they’re currently averaging about two a day. That’s only two weeks, less than two weeks of inventory in that building. So, in less than two weeks time, we can expect that 87 Peter Street will probably be a fully leased out building assuming no new units come onto the market, which they may. Not bad when you see the numbers like that. Less than three months to lease out 200 units, that’s very, very good. When a pension fund or a big builder builds a rental building, they expect it will take six to 12 months is what they usually will put in, like their performers to rent out a building fully. Six to 12 months.
So, if you’re seeing 200 units rented out in 100 days, three months, that’s very, very quick. Very fast absorption rates. Indicates again, very strong rental market in Toronto especially downtown. Let’s switch over and look at the East side now. Grid Condos, at Jarvis and Dundas, what’s happening there in the last 30 days on MLS? In the last 30 days on MLS we have seen 67 units leased out, reported leases. Even more than 87 Peter. 67 units have leased out in the last 30 days. Keep in mind of course with these stats, this is the worst time of the year to actually be a landlord looking to rent out your units. January, February, March, worst time of the year for renting out units. People don’t want to move in the winter. It’s a terrible time to be renting your units. But when you get your keys, that’s when you got to do it. That’s just the reality. Or that’s when your tenant says I’m moving out and you got to find another one, that’s when you got to do it.
So, you can’t always time these things and be … The best time of the year obviously is the summer, July, August, September. Coinciding with the school year and the students of course too. So, 67 leases at Grid in the last 30 days or currently 62 units available for lease. That sounds like a ton of units available. More than twice as many units available than 87 Peter Street are available at Grid. Sounds like a ton. But when you see how many of them are renting and how fast they’re going, that’s actually less than one month’s worth of inventory. 62 units represents less than one month’s worth of inventory for rental units in that building. And again, that’s at the worst time of the year to be talking about this.
So, again, within a month’s time, we can expect that the entire building will probably be leased out assuming that no more units come on to the market, which of course they probably will, but that’s what we’re looking at there. Yeah.
So, hopefully this episode was useful to you. If it was go ahead and share it with somebody who you also think could benefit from it. Maybe somebody you know who’s renting out their unit or their units aren’t renting out. Or maybe somebody has a unit coming up for occupancy soon and they’re wondering about renting it out and how that’s going to go, share this episode with them. Hope you got some value from this little bit longer than a typical episode, but yeah, covered a lot of ground here. Hopefully that was useful to you. Until next time, hope you have a great week. Happy investing. Talk to you soon.
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