Being a landlord in Calgary right now isn’t easy. According to the Canadian Mortgage and Housing Association, vacancy rates in the city are on track to hit 7 per cent this month; up from 5.6 per cent in 2015 and 2.1 per cent on 2014.
It’s a renter’s market as well as a buyer’s market and tenants are demanding rent reductions and incentives such as utilities to be included into the bargain.
One of Canada’s biggest residential landlords, Boardwalk Real Estate Investment Trust, which owns more than 30,000 units in Canada, says it has dropped rent in Alberta by an average of 5 per cent. They’ve also invested $7-million in incentives for tenants.
But not every landlord can afford to take that sort of hit.
“It’s not just Boardwalk. Many other companies here are following their lead,” says Gerry Baxter, executive director of the Calgary Residential Rental Association.
“It’s those small ‘mom and pop’ landlords that are finding it most challenging. People have mortgages to pay and bills to cover.”
The Financial Industry Research Monitor states that one in 20 Canadians owns rental property.
Mr. Baxter’s association has 900 members, 65 per cent of whom are what he terms “small operators” with between one and 10 properties. Mr. Baxter says he hasn’t heard of anyone within his association who’s “closing doors yet” but he knows “many are struggling” and he has heard of some trying vacation-rental sites like Airbnb.
“This business is just like any other business,” he says, “you have to be able to pay bills and make a profit.”
Ex-landlord Neil Bailey agrees that renting property “has to make sound financial sense.” He says “in Calgary right now, it doesn’t.” Which is why he’s decided to get out of the game.
He’s just listed his second rental property for sale; a two-bedroom house in Bridgeland. He’s owned the property for 21 years and had rented it for the last three until his tenant moved out last month.
“When I started renting out property in Calgary, vacancy rates were at about 1 per cent. Now it’s over 5, which means you have to be far more competitive with rent to secure tenants.”
Mr. Bailey bought his Bridgeland home in 1995 for $93,000 and it’s currently on the market for $529,000. He estimates he’s spent around $100,000 on renovations and upgrades over the years.
“For the last three years, rent has covered the mortgage and given us about 20-per-cent cash, which is okay. But if I rent it out for less I have to question what the point is. I’ll maybe pay off another $40,000 on the principal mortgage but I get a diminishing return on my renovation. If I want to sell further down the line it’ll cost more to fix the property back up to a sell-able standard.”
Mr. Bailey’s tenant in his Bridgeland property, like many others in Calgary, found a better deal.
“A friend of his had a room to rent, which is a lot cheaper than a whole house, but I think he was shopping around anyway.”
Last year, Mr. Bailey also sold a condo in the Orange Lofts development in the East Village that he’d rented out for nine years.
“The same decision making process applied with the condo,” he says. “It was costing $1,300 a month in expenses and we were making $1,100 a month in rent, but it was an investment. The condo market in the East Village was about to become completely oversupplied so we decided to get out while demand was still high.
Murray Pike is another Calgary ex-landlord crowded out by the city’s oversupplied rental market. Last month he sold his rental condo in Stella Nova Towers in Beltline.
“I bought the condo three years ago as a rental investment and I’d planned to buy some more investment properties, but the market in Calgary is so bad right now, I just wanted to get out,” he says.
Mr Pike’s property was on the market for six months and he sold it at a loss.
“I’d had the same tenant since I bought the place and I hadn’t increased their rent, even though I could have. Then, when things changed in Calgary, they wanted their rent reduced and we were working on that but then they got a better offer and decided to move out. I’d be in capital negative if I rented the place out for what I could get fo