|
Real return on real estate investment: How to increase rental value, avoid rent abatements
September 2010
|
|
Vince Brescia, President and CEO of the
Federation of Rental-Housing Providers of Ontario (FRPO) |
|
| *V-Report Sponsors |
 |
| *Not affiliated with V-Report Speakers |
| |
By Clare Tattersall
Apartment rental prices vary significantly not only from city to city but sometimes even within neighbourhoods. Why? Because there are a number of factors that determine how much a landlord can charge for rent including location, market value and the condition of the building, among others. What’s more, the higher the monthly rent, the greater the overall value of the property.
“Every owner wants to maximize their value,” says Vince Brescia, President and CEO of the Federation of Rental-Housing Providers of Ontario (FRPO).
And, according to Brescia, there are four ways to do so.
These involve “knowing the rules, keeping current customers, making your building attractive and being professional,” he says.
To help maximize the value of an apartment building, landlords can also apply to the Landlord and Tenant Board to raise tenant rents by more than the yearly guideline. Landlords must apply at least 90 days before the date they want the earliest increase to start. The Board can only allow an above-guideline increase for operating costs related to security services, eligible capital expenditures and unusually high increases in property taxes and utility costs.
“If you’ve had an extraordinary increase in your gas, hydro or water bill you can apply,” says Brescia. “But keep in mind those are going to be bundled together, so (the Board) is going to look at the increase in the overall cost of your utilities, not one alone.”
Capital expenses are major repairs, renovations, replacements or additions that will last at least five years and are not part of normal ongoing maintenance. Cosmetic improvements are not eligible for repair funding.
“When it comes to capital work, you have to have undertaken the capital work already,” explains Brescia. “You do the capital work in advance knowing you’re going to apply and then you make an application detailing what the work was and that translates into a rent increase for you.”
Tenants affected by a proposed above-guideline rent increase have the right to challenge a landlord’s application at a scheduled Landlord and Tenant Board hearing. Here, the Board will decide how much (if any) of a rent increase it will allow.
Tenants can also apply to the Board for an abatement of rent due to a reduction or discontinuance in a service or facility or if the landlord has experienced a decrease in municipal taxes and charges.
To avoid a rent reduction, Brescia says landlords should keep meticulous records.
“You should have a regular inspection process for all your units and you should document what you’re doing in those inspections, so you can keep track of the level of maintenance and repair of the building because you can face an application for rent abatement based on the condition (of the building),” he explains.
Brescia adds that a landlord who faces a rent reduction due to a decrease in property taxes can make a request for a variance, which essentially challenges a tenant’s application for an abatement of rent.
“This happened recently in the City of Toronto . . . (where) a number of landlords were successful in offsetting or negating a rent reduction,” he explains. “(The City) issued a new waste levy that went on the water bill rather than the property tax bill, (which) generated a property tax deduction for a lot of landlords when in reality property taxes didn’t change that much.”
|
| Additional V-Report Opinions: |
|