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Sunday, 18 August 2013 00:00

How short tenancies benefit landlords

Written by  Mark David
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A recent report from the ComFree network suggests tenants in many Canadian markets are getting the “five-year itch” -- readying to move much sooner than the once-standard seven years.

Far from being a harbinger of doom, the trend has the potential to elevate cash flow for landlords in four key ways, say experts.

Cindy Wennerstrom, president and CEO of Toronto-based Oro Properties, has been helping investors through the property purchasing process since 2009, and by her own admission, if this becomes a strong trend, landlords will be in a very good position. Here are Wennerstrom’s three ways that landlords stand to benefit from tenants who choose to move out after five years. CREW Online has added a fourth, to even it out.

1.      Keeps things spic and span
“Most landlords feel that having longer-term tenants is good for them,” Wennerstrom explains. “However, tenants that turn over every five years or less is, in my opinion, better for a landlord. It allows them to ensure their properties are kept up to date and in good shape.”

2.      Raises the roof on rent
“When a tenant remains in the home, all you can increase the rent to is the government standard,” Wennerstrom advises. “When a tenant moves out, you can lift the rent to whatever you like thereby instantly increasing your cash flow.”

3.      Beefs up property value
“It is so important to remember that cash flow is king in the investing world,” Wennerstrom says. “The higher your rent and ultimate cash flow, the higher your potential sales price if you ever desire to sell.”

4.      Shares and shares alike

More and more urban renters are renovating and upgrading units at their own expense and even before they move in, say other seasoned investors. It's a way of elevating their surroundings to their "designer" tastes. The new five-year itch means landlords benefit from that elbow grease sooner and when those renovations are newer and in better nick.

Looking ahead
“The five-year itch is quite possibly a new phenomenon now that housing affordability has allowed home ownership to begin sooner,” Wennerstrom says of the new trend. “Gone are the days of your children living with you until they marry. Now they live in the downtown core in a cushy condo which goes up in value year over year but has zero possibility to expand in size. They sell, and trade up to the next entry-level home... a townhouse or semi-detached home perhaps with an in-law suite for the nanny or some extra income to help cover their new mortgage.”

Last modified on Tuesday, 20 August 2013 12:40

4 comments

  • Patrick Kozierowski Monday, 19 August 2013 20:33 posted by Patrick Kozierowski

    I think its the wrong advice. Best example is student rentals. They tend to cash flow best and have the "short" turn over and in term have the highest cost of maintenance and repairs.

    Once people move in its not realistic to renovate a property.

  • Randy Fillat  San Diego Broker Tuesday, 16 October 2012 23:24 posted by Randy Fillat San Diego Broker

    Seriously......a tenant paying for renovations......NO WAY.
    Occasionally there could be a person paying for a little short term maintenance so as to keep their rent from rising on a 'trade-off' deal with a small time landlord. That won't happen with a larger institutional landlord.

  • Marilyn Rothman, Broker of Record Marilyn Rothman Real Estate Broker Ltd. Brokerage Tuesday, 16 October 2012 14:53 posted by Marilyn Rothman, Broker of Record Marilyn Rothman Real Estate Broker Ltd. Brokerage

    In a tight rental market a shorter term such as one year or in some cases even six montyhs may be considered under the right factors:and keeping a property rented does keep the cash flow and eliminate vacancy in different market periods.

    Keep in mind though that many condominium buildings have a minimum term in their condominium rules re renting and that should be researched by the landlord first before learning what the minimum term of the lease will be

    In my experience it is very rare that I have seen a tenant pay for renovations to a rental in a short term lease;

    I have seen this with more renters with the commitment of a long term lease doing some renovations. However again this depends on the rental price and terms agreed to by the landlord and the tenant. Most tenants are not interested in doing this; and look for a rental that they can move into

    Always subject to market conditions, keeping a property rented to a responsible tenant and keeping a low vacancy rate is the way to go for many landlords, . Tthe value of a responsible tenant who respects the rental is the primary goal for many landlords.

  • Sue Dice Friday, 12 October 2012 14:31 posted by Sue Dice

    fantastic information

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