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.
“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.”