Chris Davies

Ok, the title is a shameless plug for a great band. The Apartment Vacancy and Rental Cost Survey put out by the Alberta government’s Municipal Affairs department is only slightly less awesome. What is it? Here’s a quote from their introduction.

Since 1973, (with the exception of 2004), the Province of Alberta has conducted an annual Apartment Vacancy and Rental Cost Survey (AVS) of multi-family dwellings in Alberta’s rural communities. The survey identifies building type and age, unit type, number of units, rental rates, and the number of vacancies of private market rental units in rural communities. The eligibility criteria used in selecting communities for the survey are those with:

• A population between 1,000 and 9,999;
• Thirty or more rental units; and
• The community is not included in the Canada Mortgage and Housing Corporation’s (CMHC) bi-annual Rental Market Survey.

Each year the number of communities surveyed by the AVS may differ due to changes in population or the number of rental units in the community. In 2013, the Town of Millet was added to the survey as they qualified with a population over 1,000 people and over 30 eligible rental units.

That’s great news if you’re like me and have listings or buyers working in Swan Hills, Tofield, Vegreville, Edson, St. Paul and Wainwright. CMHC’s numbers are helpful, but they don’t cover the small towns. In a small town the name of the game is risk reduction and having real data is key to ensuring you’re making logical, informed and impartial decisions.

Interesting Charts!

There’s some pretty wild extremes in small towns, and that can mean big things for your income or pure disaster! And here’s just one data series from the report (picked Athabasca because it’s the first alphabetically) together with a sparklines chart.

Here’s links to a handful of interesting extracts directly from the Government’s website. I have the full report so if you’re looking for info, give me a call.

•  Number of Rental Units Identified and Survey Response Rates
•  Weighted Average Rent and Rental Range by Type of Unit
•  Number of Vacancies and Vacancy Rates by Type of Unit
•  Weighted Rents by Bedroom Type and Overall Vacancy Rates by Community
•  Report Highlights

I’m finding this $15 book of numbers hugely useful and I’m sure if you have or are considering buying properties in rural Alberta it’ll help you too.

Like most landlords, I have a love/hate relationship with smokers. They’re usually great tenants, pay on time and tend not to move as often as their fresh-air cousins. The hate (really, more of a dislike) comes when they move and it’s time to re-rent or sell. Flooring, paint, washing, ozone, and lots of fresh air. I’ve even had clients scrub walls with the commercial cleaner TSP (which I used to use when I worked in biology labs) to try and remove enough tar so that primer could adhere to the wall.

In the September 2013 issue of Canadian Apartment Magazine Chris Seepe does a quick summary of a couple issues facing the owner or manager with smokers in their buildings or who wants to go smoke-free. One part stood out to Edmonton’s market, currently seeing huge number of multi-family (condo) projects on the go, with the first new dedicated rental buildings in decades appearing on the outskirts of town. A survey undertaken by the Ontario Tobacco-Free Network showed that (in Ontario) 2 out of 3 people would choose to live in a smoke free building if the choice was available.

It’s tough to monitize a statistic like ‘2 out of 3 would choose’, so let’s consider the costs of turnover and the costs of lower rent. In the article Mr. Seepe suggests that it costs $650 every time you’ve got to clean up a one bedroom smoker unit – $450 on paint, $100 on carpet cleaning and at least $100 to clean all other surfaces, including windows, mirrors, balcony doors, closet doors, kitchen cabinets and appliances. If that tenant goes after a year, you’ve effectively dropped your rent by $54.17 per month.

I think it’ll be $1500 on paint and carpet, plus cleaning.

Speaking from three generations of apartment building ownership, if you were going to re-rent without doing a lot of work, you’d be looking at a $25-$100/month discount. That’s also assuming you could re-rent it to a light smoker. However, we’re in a very anti-smoking society and the majority of light smokers I know are quick to say they’d like to quit – making them unlikely candidates to move into a heavy-smoker unit. You should just keep the old tenant and leave things along. Smoking isn’t even close to being one of my 10 terrifying tenant issues.

New buildings, those recently renovated and buildings where you’re looking to turn around the tenant profile will see an even more profound discount or premium. Just like strong cooking smells, second hand smoke in the halls will scare off many students or people new to town who are looking to rent while they get established. As a REALTOR, I’ve seen many buyers choose significantly more expensive properties because they can’t find anything in their price range that isn’t coated in smoke. They’ll move from wanting cheap detached to brand new condos just to get away from the smoke.

I think there’s a niche for C-class buildings that will stay that way and be accepting of smoking. They won’t be a star in the current market but when things slow down they’ll be steady.

Are there any owners or brokers out there with experiences going pro-smoking to anti-smoking? Anyone got numbers of their own?

I’m well known around my office for knowing quite a bit about landlording and the laws that govern tenancies in Alberta, or at least knowing where to go to find answers. It’s not surprising that I get a lot more questions when it’s spring and leases are up for students or people want to sell. I’ve had the same basic question twice this week so I thought it’s blog post time. (Thanks to Bill, Doug, Oliver and Christian for the push to actually get typing.)

The essential question is two-fold. First, can I get rid of the tenant so I have a vacant property to market and sell? Second, if I’m selling with a tenant in place, how do I get in and how can I get vacant possession for the buyers? There’s a lot of Realtors out there who don’t understand the law in enough detail to help you decide if you can/should accept an offer that required vacant possession. Imagine you accept an offer that asks for 30 day possession and your tenant refuses. Your sale could collapse and you may end up with a lawsuit on your hands. These tips may help and I’m always happy to help you sell your rental property.

Access to Your Rental Property

An agent called my yesterday who has a property where the tenant is refusing to let the Realtors in for a quick look around. Here’s the first big rule which helps owners and Realtors: Tenants can’t refuse access. The only exception is on a day of Religious worship if the tenants have informed the owner in writing in advance. I’ll quote from Service Alberta’s website:

After giving the 24-hour notice, a landlord can enter between 8 a.m. and 8 p.m., but is not allowed to enter on a holiday or on the tenant’s day of religious worship. The landlord can enter on a Sunday if the tenant’s day of religious worship is not a Sunday and the tenant has provided the landlord with a written notice of that day.

My advice to the owner or agent. Post a notice, leave voice mails, text messages, or whatever, and then just go. I’m presuming you have keys, but just go. If nothing else the tenant who refuses access usually has committed a substantial breach such as having 5 roommates, having trashed the place or is otherwise contravening the lease.

Notice to Vacate (Fixed-term leases vs month to month)

If your tenant is on a fixed term lease you’ve got a double edged sword. First, you can’t break a fixed term lease, no matter what the purchase agreement or the lease says. You’ve got to wait until the lease expires however you’re not obligated to renew the lease or go to month to month. Your only other legal option here is eviction for substantial breach. There’s one more option I’ll talk about at the end.

If your tenant is on a month to month lease, you’ve got more options. I’m going to quote Service Alberta again (emphasis mine).

The only reasons landlords can terminate periodic tenancies are:

• the landlord or a relative of the landlord intends to occupy the premises,
• the landlord has entered into an agreement to sell the premises and all the conditions of the sale have been satisfied or waived, or the agreement is to sell one detached or semi-detached dwelling unit and/or condominium unit, and the purchaser requests in writing that the landlord give the tenant a notice to terminate the tenancy,
• the landlord intends to demolish the building in which the premises are located or make major renovations requiring the premises to be unoccupied,
• the premises will be used for a non-residential purpose,
• the landlord is an educational institution and the tenant is or will no longer be a student,
• the premises rented are subsidized public housing and the tenant is no longer eligible for such housing, has not reported income respecting eligibility or the public funding for the program is cancelled,
• the tenant is employed by the landlord and the employment is terminated,
• the premises are being converted to condominium use, or
• if a tenant has committed a substantial breach of the tenancy agreement.

Now please note that you still have to give 90 days notice when the purchaser has requested vacant possession. That’s 90 days from the end of the month they’re supposed to vacate, so it can be closer to 120 days in practice.

Family/Substantial Renovations

The smart reader who actually went down the list of reasons to terminate above will be asking if we can use family or renos as a reason. Yes, but you actually have to take the action required. The notice periods aren’t fun either. For condo conversion or substantial renos, you need a full year notice. For family or owner occupation you can get away with “just” 90 days. **Note that if you’re buying it for a rental you can’t use these reasons to terminate the old tenants’ lease and put your own tenant in. I’m not saying it doesn’t happen but if a well informed tenant wants to they can force you to rent to them.

The long story short is that fixed term leases seem more rigid but they’re actually easier if you have a difficult tenant because you can just not renew the lease and the tenant has no recourse.

Pictures

It’s tough to do pictures and respect the tenant’s privacy. First, the entire process we undergo requires we be professional and above board. Tenants need to understand we’re respecting the law and trying to make the process as painless as possible for all parties. This is not the time to take out your frustration on your tenants.

Three tips for pictures:

1. Get their permission in writing. Realtors have a form we can use (see AREA’s webforms), but just a simple written agreement will do in most cases.
2. Do your best to protect their privacy and let them know that you’re doing it. Give them lots of advance notice of the date you or your photographer is shooting. Encourage them to do a quick clean for things like personal photos, utility bills, underwear or expensive possessions that can be easily moved.
3. Be realistic with your photos. If you do a super-clean and make the property look too good, you’ll attract unqualified buyers who will just walk away when they see the mess that is reality for your tenant.

Showings

I have three great tips for managing showings and one thing that drives me nuts.

First, refer to my first point above – tenants cannot refuse showings except for holidays, showings after 8pm or on days of religious worship. It might suck, and they might decide to sit at home and be nasty, but they can’t stop you from coming in.

Second, I often get owners to buy a stack of $5 gift cards to Tim Hortons or Starbucks. Every time I show, I leave a gift card and a thank you note. You’d be shocked at how quickly tenants get onside when you give them treats. I guess they’re much like toddlers.

Third, give advance notice for showing windows. Imagine that instead of giving 24 hour notice and setting up a showing every time you get a request, you give  the tenants a letter on Monday morning with notice for Tuesday, Thursday and Saturday afternoon between 2-6pm. That fulfils your legal requirement for notice, and then you follow up with a phone call or text for actually scheduled showings. I prefer to work out a good time with tenants ahead of time and keep everyone happy. Paper letters like this help keep tenants happy and cooperative because then they really see that you’re working hard to fulfil the legal obligations you’re all working under.

However, Realtors, please don’t have buyers agents contact the tenant directly. I might be polite but there’s a lot of morons out there who will harass your tenant with 1 hour notice attempted showings.

Sneaky Tricks

Ok, so you might have the perfect buyer who is paying $10,000 over market but needs possession in 45 days. Here’s a couple ideas to help.

First, help them find a new place. Call, email and post messages for other investors who might have a space. Maybe you even want to buy another property knowing you’ve got a great tenant.

Second, offer them cash. I’m usually a fan of paying their first month’s rent and security deposit. If you’re getting a premium or solving a problem a couple grand is less of a problem than a frustrated sale.

Owners, you need to read and understand the Residential Tenancies Act and the Ministerial Regulation. There’s other strategies we’ve learned over the years, but that’ll have to wait for another blog post. Give me a shout if you have any questions or if there’s any way I can help.

It’s been a while since I did some musical sharing. Given my post about mental health the other day I thought I’d combine the two. There’s a lot of good Hendrix covers out there and I’ve been loving the Songza World of Jimi Hendrix playlist. Jeff Beck is legendary and Seal has a great voice for Hendrix. Enjoy!

Marketing is a funny thing. There’s a bygone era that the 1950’s Mad Men typified which made mass marketing an art form. It worked great back then. Today it not the same. We’re immersed in messages from every angle. Brands are on everything and I dare say that you can find 10 logos or advertising messages without leaving your chair.

Here’s the point. In a world full of ads, when you only get seconds of someone’s attention, you need to be persistent.

Pretend you’ve been given a $100 credit to be used for a small ad in a series of professional magazines for $10/month per group. You can chose from Accountants, Dentists, Construction Mangers, Carpet Cleaners and Fish Tank Salespeople.

Do you put an ad in each groups’ magazine for two months, or do you advertise for ten months for just one group?

The latter option. Don’t blunt your message. Trying to be everything to everyone is the best way to be meaningless. Pick a group, target them effectively, speaking their language and addressing their concerns. Research has shown it’ll take 6-8 impressions before they remember you even a little bit.

This extends to personal marketing too – past clients, friends and business associates still need to be reminded you exist. It’s better to spend money with people you already know before you start spending a lot on trying to convince people you don’t even know yet.

Amongst real estate investors (and most group of people) there’s a lot of confusion about how organized real estate works. Commissions are pretty straight forward, though they very by location and property type (i.e. commercial properties have a different commission because they require different efforts).

Referral fees are pretty simple and describing them makes me feel like a pimp. I’m going to explain how they work for me, which is generally how they work across North America.

I pay for business

When a great REALTOR® in Toronto has a client moving to Edmonton or looking for an investment property here, they introduce their client to me. I help them find a property they love, they buy it and I send them a cheque for at least 25% of my commission. Actually my brokerage sends the money to their brokerage so it’s all above board.

Ok, maybe I am a pimp

I love when people come to me asking for referrals. Yes, I do get paid eventually, but I enjoy the process of helping find the right agent for someone. Sometimes I already know someone (Calgary, Red Deer, Grande Prairie, Fort Mac, Vancouver, Toronto, Hamilton are all covered already) but sometimes I don’t. Then I get to earn my referral fee, if I ever get one, by doing the leg work to help them find the right agent.

When an old work friend called to say him and his wife were moving to a small town north of Barrie I was glad they asked. I had a great time calling around and getting to know some agents near them. I ended up suggesting a couple but found one that I thought would really click with my friend’s sense of humour. When I dropped him an email after their first trip up there to look around they’d already bought a house and had a great time. Home Run!

It’s the cheesiest line in real estate, but referrals are awesome. It’s also a part of the real estate economy that you should be aware of before you start calling around. Asking a great Realtor can help simplify your search and help you both out.