If you’re a landlord in Ontario, you’re probably feeling the woes of the Rental Fairness Act that recently went into place. While the act favours renters, you’re probably asking, “What does that mean for me as a landlord?” With an extremely competitive rental market and a vacancy rate of less than 1%, you’re likely wondering what’s the best approach to successfully price your rental property now that the rent control act is in affect?
OUT WITH THE OLD
Historically, when renting your property, underpricing would be the best way to attract renters and avoid having any vacancy period. The strategy would be to increase the rent to a price that was more in line with the market when the lease was up for renewal. But that was before Wynne’s newly dubbed changes. With this new act in affect, you’ll need to consider a completely different strategy.
IN WITH THE NEW
With the inability to raise a tenant’s rent to fair market value after the first year of their lease is up, you’ll need to adopt a more bullish strategy with your pricing. Rental rates have and will likely continue to rise. Especially considering Toronto’s growing population base and the fact that we can expect another two million immigrants by 2023 .
Rather than underpricing for immediate occupancy, you need to price high, setting a benchmark for what could potentially be long-term tenants. It’s important to price in a way that if your tenant decides to rent with you for several years, you’re not locked in to a price that’s too low and that is subject to very minimal increases. As it stands under the new act, a landlord is only able to increase a tenant’s rent based on inflation and at a rate that is capped at 2.5%. With this in mind, budget for a month of vacancy to secure the better rate; establishing a good rent-roll initially will carry you forward on the property.
CONSIDER HIRING A REALTOR
Given the state of the market, now more than ever, using a realtor to lease your property will help you to secure a higher price. Individuals who rent their properties themselves often get less money, either because they don’t have the reach to find the right tenant, or because the tenants searching without a realtor tend to be a bit more price conscious.
A realtor can help adequately evaluate the competition and the nature of the market, securing you a higher rental price. Keep in mind, renters are always looking for a deal, if you don’t have an agent who can substantiate the rental price, you risk being stuck with a lease that can’t carry you along with the increasing prices.
OFFER A SIGNING BONUS
Consider opting for a higher initial rental price while offering your tenant a signing bonus. A slightly higher rate than the average going market price will allow you to raise the rent annually based on that higher rental price — while offering the signing bonus makes it affordable for the tenant today. As an example, if the going rental rate is $1950 a month, lease your property for $2000 with a signing bonus of $600. That $600 is equivalent to the $50 difference in monthly rent which means your tenants are actually paying the standard $1950 but you’re able to increase the rent next year based on the full $2000 lease price. Tenants will want the cash in hand and it will provide them with money up front to help offset some of the costs involved in moving.
Don’t worry too much. Rent control doesn’t affect your ability to increase your rental price by any amount in between tenants. Should you find yourself preparing a new lease agreement under this new act and want to discuss your options, feel free to reach out. If you have questions on how to strategically price your rental unit or would like help leasing your property we’re always here to help, just give us a shout.