A condo landlord’s headaches

Being a landlord of a condo unit, either townhouse or an apartment, is not all peaches and cream. There is a lot to worry about.

Cash flow verse appreciation
Depending on how much you put down on your rental condo unit(s), the rent you collect may not pay all of your monthly expenses. In effect, you may be subsidizing your tenant to the tune of $100 to $200 a month.

Many condo landlords are content to do so as they expect the raising prices of condo units to generate a healthy return.

The problem arises when condo unit prices peak and there are no price increases. Worst will occur if prices start to decline.

Condo fees
A landlord's profits or losses are based on municipal tax rates, mortgage costs, unit maintenance costs and the monthly common element expenses.

Monthly common element maintenance expenses that rise faster than the rate of inflation is a big concern to condo landlords.

Special assessments
These always come as an unwelcome surprise and can create unacceptable negative monthly cash flows.

Rent controls
Introduced in 2017, this is another setback for landlords. The rent increases that you can charge an existing tenant is set by the Ontario government and no, or at least little, allowance is made for the landlord's increased expenses aside for improvements made to the unit.

Landlords will now hope that existing tenants will not stay for the long term as when a rental unit becomes vacant, the landlord can charge whatever rent a new tenant is willing to pay.

Turnover
If tenants move out every year or so, the landlord gains the ability to lease the unit to a new tenant at the current market rates.

However, most likely the unit will be empty for a minimum of one to three months while the unit is painted and minor repairs made. Then there are the costs involved in finding a suitable tenant.

This lack of income and extra costs must be included in the landlord's profit and loss calculations.

Short-term rentals
Depending on the condominium's declaration, many landlords had the option of furnishing their unit(s) and licencing them short-term like hotel suites.

Short-term rentals, rented out directly by the landlord, or through Airbnb or other online services, can offer returns far better than they can get from leasing long-term.

However, the City of Toronto, starting in June 2018, is banning short-term rentals in any housing unit that is not the host's primary residence.

However since the by-law inspectors may not have the manpower, or will, to enforce the by-law, condo short-term rentals may be with us for a while.

Tenants from hell
This is a landlord's nightmare. A badly damaged unit, a tenant that fails to pay his rent, a tenant that games the Landlord-Tenant tribunal in order to live rent-free for months can result in big loses.

Best bet to limit your exposure to bad tenants is to hire a professional rental manager to manage your unit for you.

Disputes with the board
Now this is a problem that blind-sides most landlords.

If your tenant has loud parties, parks his car in front of the lobby or feuds with his neighbours, it is you who will get the warning letters from the board and then the expensive legal letters from the corporation's lawyer.

I saw one landlord hit with over $50,000 in legal costs, both the condo corporation's and his own, when the condo took him to Superior Court because his goofy tenant's dog wouldn't stop barking.

Want to sell?
The unit has to be empty if you want to sell it for market price. Having a tenant living in the unit will make it difficult to sell, especially if the tenant is a slob or if the tenant makes it difficult to book showings.

Having dirty underwear on the floor and unwashed dishes in the kitchen should either turn the potential purchasers off or drive down the asking price.


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