Landlord's Goldmine

The following is for information only and should not be taken as law.
Please refer to the appropriate jurisdiction in your area.

“This place is just a goldmine for the landlord”.

“This place has paid for itself many times over”.

As a landlord's agent in the Vancouver area, I hear these phrases over and over again. With housing prices as high as they are, if the complex wasn't paying, do you think the landlord would hold on to it as rental? Real estate is an investment and as with any investment, be it stocks, bonds or savings account, it needs to show a profit, or you convert to another investment.

Most landlords are not greedy. If it was just for the money, they would convert to condo and sell. Many jurisdictions prohibit converting rentals to condo and thus make the sale of rental property undervalued.

Allow me to state the case:

Take a 100 unit rental complex with an average rental of $1200 per unit month. That brings in gross $120,000 per month or $1,440,000 per year.

The average municipal tax, including land, business, water, sewage, etc of about 35% takes $504.000 of that.

An average operating and maintenance cost of about 25% takes another $360,000 per year

This leaves approximately $560,000 for administration and investor profit per year.

Let's Switch to Condo and Sell

100 units at a sale value average of $350,000, gross total sale value $35,000,000.

Conversion and sales costs of 20% or $7,000,000 leaves sale profit at $28,000,000

Straight bank interest at 5% (we can do better) of $28,000,000 gives $1,400,000 per annum

Hey! That's more than double what we made when renting, and less headaches. LET'S SELL.

The economic advantages to selling over renting are even greater in Toronto, Calgary and Vancouver where real estate prices are so much higher.

We Need More Rental Housing

Municipal taxes and government regulations prohibit investment in new rental housing. Unless rental housing is tied to (forced by local government) commercial building and improvement permits, investors have little interest in building units for rent, especially lower rent housing.

The Residential Tenancy Act of BC and it's equivalent in other Provinces, has a tendency of being overly favorable to the tenant. Mostly caused by gross under-funding of the administration of the act. Investors don't want to link their investments to the headaches that come with Landlord – Tenant Relations.