Downtown investors raise rents to pay the mortgage

by Jamie Henry17 Nov 2014
The majority of CREW readers -- investors themselves -- are suggesting the phenomenon of rents outstripping mortgages has more to do with market forces than landlord ambition.

The poll found that 38 per cent of respondents blamed landlord excesses for this phenomenon, while 25 per cent of respondents said that exorbitant multi-family prices were to blame, which led to renters carrying the costs for the landlord.

Another 38 per cent pointed to the scarcity of rental units as the top reason. The end result, for many investors, is obvious.

Nick Bachusky, a mortgage agent in Ottawa, says: “Many landlords of mine look to at least break even on mortgage payments, property taxes, utilities and maintenance – and then they look at the other market rents in the area and will adjust accordingly. If it is not favourable for them they will usually keep looking until it is favourable.”

In downtown Vancouver, for instance, investors are able to ask for a very high rent because the location is so favourable.

Kelly Hudson, a mortgage professional at Dominion Lending Centres, describes a familiar scenario. Her friends pay $2,300 a month to rent a two-bedroom apartment in Vancouver’s popular neighbourhood of Kitsilano.

“They will never be able to afford [to buy the property] unless they win the lottery,” she says. “But they are willing to pay a high rent for the location and, due to high demand for some locations, the landlords can command a high rent.”

The dollars and cents argument hold sway across the industry, although it's one many consumers fail to take into consideration, argue mortgage financing professionals.

“This, in part, is a very simple equation that has been around forever,” says Phil Butler, a mortgage broker at Centum. “Supply and demand; supply is short and demand is great, so people will pay higher rental rates."

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