How to navigate a ‘unreal’ rental market, and find an affordable place to live
Interest rates continue to rise, which means the home buying market has slowed. People who would have bought are now staying in their rentals and that means lower vacancy rates. Landlords, faced with higher mortgage payments and inflation, raise rents when they can. This all means renters are coming under more pressure than ever, especially in Canadian cities.
Toronto real estate platform HouseSigma.com tracks rental properties listed through verified sources such as the Multiple Listing Service. Their data shows a 32 percent increase in the median rent for all apartment types in Metro Vancouver from January to August this year. The median rent for all condos listed in the Vancouver area is now $3,135. In the Toronto area, the average total rent increased 18 percent over the period, while the average condo rent in the Greater Toronto Area (GTA) is now $2,700.
“Really, you have to have enough money to rent it,” says Lynn Samuels, a longtime condo manager for a large complex in Thornhill, Ontario.
“If you could afford to rent $2,500 or $3,000, those prices go up to $4,000 or $4,500 for the same unit. A person making, say, $80,000 is going to have a hard time managing the rent. And that’s in Thornhill, not even Toronto.”
Consider this step
This is not the time to move because you don’t like the carpeting. Keep in mind that once you vacate your unit, the rent will increase immediately. Samuels knows of a tenant in her complex who gave up her outdated unit to move to a rural area with her daughter. But she missed her flat in Thornhill and returned eight months later. During that time, her rent went from $2,500 to about $3,600, Samuels says.
Tina Lee has just returned from the US where she has been living with her family for the past two years. The single professional has a seven-year-old daughter and is looking for a two-bedroom apartment in west Vancouver. Unfortunately, she finds that rents have gone from $2,700 to around $3,500 or $4,500.
“It’s unreal,” says Lee. “They can dismiss all these requests and it’s a miracle when they respond. And if they do, they say, “We’re fully booked.”
“If I manage to see a place, it’s next to a construction site or something, so there’s a reason they’re still available. I try to adjust my expectations.”
At this point she says she would settle for a bedroom and a den for her and her daughter.
“I’m just trying to find stability, a place to put down roots.”
Stand out from the competition
Donald Mackenzie, founder and president of Bodewell Real Estate Management in Vancouver, said demand has escalated since initial pandemic fears eased. Downtown real estate is in demand again. It gets around 100 applications for the typical $2,400 per month downtown one-bedroom, which is the most competitive price point right now. One-bedroom apartments costing more than $2,800 attract fewer applicants.
He gets so many applications that he doesn’t have enough staff to review them all.
“I encourage owners to look at the best credit scores, the best references from any previous landlord, and the best job stability because the quality tenant is the total package.”
Pay attention to each step in the process, he advises. Professional property management firms often have online forms that review applications. Be sure to fill them out carefully because that first point of contact is important, says Mackenzie. Once you’ve cleared that first hurdle and someone calls to make an appointment, he advises you to jump on it. It’s like an interview.
“Just show up on time, be honest and represent yourself properly,” says Mackenzie. “It’s like the job market. It’s a competitive field. And be aware that the person showing you the property is not a seller. We’re looking for the best tenant, not just the first person to walk through the door.”
He also likes to see someone who spends no more than a third of their monthly income on rent. For example, if the rent is $2,000, ideally the renter should be making over $6,000 per month.
For those who don’t have references, such as young adults just starting out, Mackenzie says parents sometimes guarantee the rent, and that’s another way to get approved. In this case, the parents sign a legal document.
Money makes the world go round
It’s more common in Toronto than Vancouver because rents in Vancouver are already very high, Mackenzie explains, but sometimes desperate renters will offer to pay a little more rent or pay several months’ rent up front to gain an advantage. They could try this approach if they don’t have previous landlord or work references. Of course, most people can’t afford to pay extra or pay rent for months in advance.
Michael Carney, director of business development at HouseSigma, used to be a property manager at GTA, and he’s seen people pay extra.
“The true reality is that people in highly competitive markets are able to bolster their offering with a larger down payment or rent prepayment or higher rent. And I know that’s not the answer a potential renter wants to hear. A landlord cannot require this, but the tenant may be able to offer it and that would strengthen the application.
“It’s unfortunate that the rental market is getting so hot,” he adds. “But it’s like last year’s heated resale market, you had to outbid your competitor.”
Connect with agents and managers
“You have to know good agents, that’s vital,” says Samuels. She has previously connected prospective tenants with agents looking to rent apartments for investors. A lot of people are pulling real estate from the market now that it’s slowing down and they’re renting out their houses.
Tenants could also go into buildings and speak to the managers. With condos, potential renters can ask the manager for agents who are familiar with the property, she advises.
New condominiums are also worth a look. Investors are buying lots of units in new condos and are looking for tenants, Mackenzie says. However, he warns that the new condos tend to be much more expensive, which is why they are slower to rent.
And even finding an agent could be a challenge, says Carney.
“The truth is that many agents who specialize in rentals are currently operating at full capacity because of the high demand.”
This article is informational only and should not be construed as advice. It is provided without any guarantee.