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Discussion Starter · #1 ·
Hi,
Does anyone have a suggestion or figured out a way to deal with this problem? Let's say you want to buy a duplex and the present owner hasn't put up the rent in many years or rent could be really low and includes utilities and is just too low total. knowing I am not allowed to raise the rent significantly to have cash flow, I can't buy this property.

Let's say the rent is $400 per unit. I plan on fixing things up, especially the outside to give it a facelift. From 2011 to 2020 the average rent increase was 1.7%. This year, it's 1.2%. At 1.2% that's an increase of $4.80 per unit. The next year it's an increase of $4.86 and so on... I'm stumped. And how does an owner get out of this situation to sell? I'm more interested in finding a solution to be able to buy this hypothetical house without inheriting this absurd low rent that will never increase fast enough to be worth the investment.

Has anyone every dealt with this?

Thank you,

Yves
 

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Years ago I turned down a building in the same basic situation. One tenant was paying $225 a month for a 3 bedroom apartment including heat and hydro. At the time similar units rented for $800. She had been there 42 years.
It is legal to evict if you are going to do major renovations but you have to evict all the tenants and give them first right of refusal when the building is ready. I know a guy in a similar situation who paid his tenants $5000 each to move. If the tenants are very old you could wait for them to die or move to a senior home.
You can evict a tenant if you need the unit for yourself or a close relative but you have to move in for a year.
So, buy the property for a deep discount price or specify that it must be vacant when you take possession.
 

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Discussion Starter · #3 ·
Hi Rusty,
Yes, I read about the evict for major renovations but the law stipulates that it needs to be for a valid reason like it had to be done. Not just because you want the value to go up or because you want better rent. Also, the law says that if the last tenant wants to come back they must have the same rent contract as before they left so that would be even worse. Can you imagine someone doing a complete rehab with new appliances and the landlord didn't realize he had to rent to the same person with no compensation except for a $5 rent increase 😬.

I've heard of the cash for keys option but I'd be curious to know if a tenant can report this as bribery and then end up with a criminal record... I'd like to verify that because $4000 or $5000 is well worth it in some case.
 

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Join an Ontario landlord forum.
I'd pass, it's nearly impossible to evict tenants in Ontario, plus all the politicians are promising to "clamp down on greedy landlords". To be fair, as a former student renter, I am very aware of how bad the landlords get screwed.
That's why much of the housing is/was technically illegal, so that if you complained, you lost your housing.

You've identified a red flag with this property, either have them gone before you buy, or move on.
 

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It is an interesting situation and the "fairness" is determined by how much the landlord paid for the property.

Our landlord built the property we are in 1967 and likely paid less than $5,000 a unit to build them. They still own them and the rents for a 3 bedroom vary according to the length of tenancy from $500 to $1500 for the same unit. It all depends on when the tenant moved in. Some tenants moved in 35 years ago and some moved in last week.

Basically, when a long term tenant moves out who was paying $500 a month, they renovate the place and the next tenant pays the higher rent of $1500.

Everyone in our complex pays different amounts of rent. The landlord owns about 1200 rental units.

So.....the return on investment is great for the landlord who only paid $5,000 for the units over 50 years ago, but not so good for anyone buying the units today.

The units have appreciated in value from $5,000 each to $300,000 each so the landlord would still make a pretty good profit on them.
 

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Just to add, I have a clear bias against residential rentals as an investment, the politics is just too bad IMO.
I do know many people who did ok, but they key is get the absolute best tenants you can.
 

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I agree with that.

In our area many of the long term tenants have added considerable value to the properties with their own money. A lot of people have beautiful courtyards and gardens or have completely renovated the inside of their units. The lower rents and security of not having to move every year prompts them to make their own units better, since they plan on staying.

Of course it would be difficult not to make a profit when you built rental units 50 years ago. The family can thank great grandpa for that.
 

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In the OP's case, I would investigate how old the tenants are and estimate how much longer they will be living there. Sooner or later.......everybody moves out.

When they move out.......renovate a little and raise the rent to just below market value to attract good tenants. Then maintain the units and grounds properly.

Short term landlords won't survive in today's market. It is the people who plan out the next 50 years who will benefit the most.
 

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...

I've heard of the cash for keys option but I'd be curious to know if a tenant can report this as bribery and then end up with a criminal record... I'd like to verify that because $4000 or $5000 is well worth it in some case.
Look up a definition of "bribery". Offering a tnt a buyout is not bribery. Nothing corrupt about it. It's not an offer to a public official to act in a certain way. There is nothing illegal or immoral involved. It's a straightforward business proposition and the tnt is not obliged to accept.
 

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Discussion Starter · #11 ·
Join an Ontario landlord forum.
I'd pass, it's nearly impossible to evict tenants in Ontario, plus all the politicians are promising to "clamp down on greedy landlords". To be fair, as a former student renter, I am very aware of how bad the landlords get screwed.
That's why much of the housing is/was technically illegal, so that if you complained, you lost your housing.

You've identified a red flag with this property, either have them gone before you buy, or move on.
Join an Ontario landlord forum.
I'd pass, it's nearly impossible to evict tenants in Ontario, plus all the politicians are promising to "clamp down on greedy landlords". To be fair, as a former student renter, I am very aware of how bad the landlords get screwed.
That's why much of the housing is/was technically illegal, so that if you complained, you lost your housing.

You've identified a red flag with this property, either have them gone before you buy, or move on.
Do you know of such Ontario landlord forum MrMatt?

I'd be curious to know as a seller's point of view how a landlord can legally get a tenant to leave in order to sell, other than cash for key deal if that's an acceptable option.
 

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Do you know of such Ontario landlord forum MrMatt?

I'd be curious to know as a seller's point of view how a landlord can legally get a tenant to leave in order to sell, other than cash for key deal if that's an acceptable option.
I know they are out there, I'd just get googling.

For myself I choose not to bother with such a difficult investment.
 

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On the flip side, imagine how much more expensive residential middle-class housing (nice condos, townhouses, small detached) would be if it were super easy for upper-middle class retail investors to buy and rent real estate? Housing would be priced 20% higher for sure.

Plus how many low income seniors and hard-on-their luck lower income working class people would be out on their butts if it weren't for such rules?

This is one of those areas of stupid government rules where at least it doesn't screw over the little guy, like every other law. It just screws over the slightly less little guy (retail investors). We can be thankful for a law that doesn't purport to help the working class, but actually screws over absolutely everyone except the big corporations, for a change.
 

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I agree with that.

In our area many of the long term tenants have added considerable value to the properties with their own money. A lot of people have beautiful courtyards and gardens or have completely renovated the inside of their units. The lower rents and security of not having to move every year prompts them to make their own units better, since they plan on staying.

Of course it would be difficult not to make a profit when you built rental units 50 years ago. The family can thank great grandpa for that.
You have an interesting perspective on investing. If your grandfather bought a stock in 1967 at $2 a share with a 10 cent dividend, and since then it split several times and was now the equivalent of $1000 a share with a $75 dividend, would you feel obliged to give all the profit to charity?
What about taxes, insurance, repairs and other expenses? Don't you think those cost more than they did in 1967? If they kept the property long enough to pay off the mortgage don't you think they deserve some return on their investment? Or would you make every property owner in Ontario an unpaid servant of the tenants?
 
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