There were always PROS & CONS to keeping and renting out your property. The biggest benefits are the continued appreciation of your property (when the market is growing) and the tenant paying down your mortgage. The downside has always been the additional workload of becoming the landlord, somewhat low (but real) risk that renters may not pay rent, and continued decline of the rental property condition from the moment you move out.
...AND THEN THIS HAPPENED:
in 2017 Government introduced new tenant laws that stripped landlords of many rights they enjoyed as property owners.
Most notable changes:
- Rent control - you can only increase rent according to inflation (not really a rent increase at all)
- Tenants can stay as long as they wish on a month-to-month basis (they have tenure enforced now by stricter laws)
- Don't like your tenant? prefer another or to keep it empty? Out of luck!
- If you wish to move in again - you have to pay the tenant for moving out (one month's rent)
- NDP in 2020 tried to double it and double how long you must live in the unit too.
- If you evict in order to move back in, you must stay at least for a year. NDP is trying to make it 2 years.
- You must truly live there. You are not allowed to keep it empty for a year. Court cases decided it.
- New fines of up to $25,000 for violating this or other regulations. NDP just tried to pass laws to double those fines but failed.
- Vacant Home Tax was implemented in Toronto and others are thinking of it as well should you decide to keep it vacant.
...AND THAN IN 2020 COVID CREATED A CRISIS
People that lost jobs are renters, first and formost. Since Covid started the general attitude on the social media, backed by similiar remarks by the government to this day is: Don't Pay Your Rent. Evictions have been stopped, resumed, stopped, now back on again, creating thousands of backlogged cases in front of the tenant board.
Tenant stopped paying rent? Landlords are waiting months, some 6-10 months, to get a hearing. Renters are not paying because it is acceptable to do so. Even if they get evicted (6 months later) they benefit from $10,000-$20,000 saved on rent. How will you collect from someone that simply does not have it? One famous tenant recently was arrested for doing this with various landlords for a decade.
The system in place is broken. It protects the tenants, strips away many protections from landlords. Now we have "us vs. them" attitide when it comes to renters and landlords that used to work well together.
When the tenant doesn't pay for 6 months, who pays? It's the landlord. Typical landlord cannot afford to pay 2 mortgages at the same time. Things are tough for both sides.
Rents have been declining each month for many months now in a row, some buildings offer free rent and free move in services, agents are asking what to do on legal forums daily, because their clients have not been paid for weeks, months and in some rare instances a year. (see a typical example below)
Thinking of renting? There have always been risks to renting out, but there has never been riskier time than now. Financial rewards are still out there for as long as the market does not correct itself and home prices drop. Having an investment property is a great idea, save and except the risk level we are seeing today. Anyone deciding to become a landlord should be aware of the erosion of ownership rights and problems landlords are experiencing now. The risks are elevated in 2020 and 2021.