More than 80 per cent of Toronto's condo investors are not collecting enough in rent to pay their mortgages.SHANNON STAPLETON/Reuters
Renting a home, especially in a big city like Toronto or Vancouver, is expensive. Historically tight housing supply and the popularity of living in such cities means landlords can typically charge whatever they want.
However, there are certain times where the dynamic gets reversed and power swings back towards renters. This is one of those times.
A trade war with our biggest partner is depressing our economy and driving up unemployment. Immigration levels have been slashed by Mark Carney in an effort to bring stability to a housing market that had been rising uncontrollably under the Trudeau government. And landlords who purchased condo units during the pandemic are seeing their mortgages renewed at much higher rates.
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All these forces have combined to create an environment where it’s never been tougher to be a landlord.
Advantage: Renters.
So if you’re gainfully employed and looking for a new rental, congratulations! For the first time in years, the pendulum of the rental market has swung in your favour. Make the most of it.
Check rent control laws
Many renters value things like the granite countertops and trendy looking furniture when searching for a rental, but the real value many overlook is in something you can’t see: whether the unit is subject to rent control.
Rent controlled units are limited in how much rent can change in any given year, and that amount is decided by the regulatory body of that city or province. This makes units that are rent controlled desirable, since you’re essentially locking in a low rent for the long term.
Rent control laws are set by the provincial government, and can vary from no rent control (Alberta) to universal rent control (British Columbia). In Ontario, only units that were first occupied before November 15, 2018 are rent controlled.
Check your local rent control laws here.
Know your worth
A tenant with a steady paycheck that pays the rent on time and doesn’t mess up the place is worth their weight in gold to a landlord, so make yourself look as shiny as possible.
Have your paystubs (or Notice of Assessment if you’re self-employed) printed out and ready to go.
If you’ve had a previous landlord that you have a good relationship with, get a reference letter from them. A letter is more useful than just a phone number since the new landlord can read it and immediately see how responsible you are. Make sure that letter emphasizes how well you’ve maintained the previous rental.
Be patient
The days where you have to grab a unit before someone else snatches it up are over. In a renter’s market, time is on your side.
If you have multiple units where you could see yourself moving into, make your prospective landlord sweat a little. Be polite, but non-committal. Check in with them in a few weeks and see if they’re willing to negotiate even more.
Because interest rates have risen drastically since the pandemic, a stunning 80 per cent of condo investors in the Toronto area are finding themselves in negative cash flow, which means the money they collect in rent isn’t enough to pay their mortgages.
Toronto condo renters play their strong hand
If a landlord is sitting on a vacant unit, they’re desperate. Use that desperation to your advantage.
Negotiate
Many landlords are trying to entice tenants by offering incentives such as a few months of free rent. Don’t take these offers.
Here’s why.
Landlords are desperate right now, and they can’t afford to keep their unit vacant for long. However, they know that if the unit is subject to rent control, if they lower their rent, they won’t be able to raise is back up to where it was if the rental market turns back in their favour in the future.
By keeping their base rent high and offering a few months for free, they are hoping that a tenant will be enticed to take their unit at a discounted rent for the first year, and hoping to jack up their rent to nosebleed levels afterwards. In other words, these landlords want to have the best of both worlds.
Ignore these offers and demand they lower their base rent. If they don’t like it, ask again in a few weeks. Bleeding cash while sitting on an empty unit tends to bring landlords back to the negotiating table.
Being a renter in a major city like Toronto or Vancouver is not for the faint of heart, and for many years renters have been getting shafted by a combination of a tight rental supply and greedy landlords who use every dirty trick in the book to evict their tenants and jack up rents. Today, renters are in the rare position of being the ones with the negotiating power. Take advantage.
Kristy Shen and Bryce Leung retired in their 30s and are authors of the bestselling book Quit Like a Millionaire.
