News

To rent or not to rent? That is the question. I can see the fingers getting ready to type their rapid responses to this article already, but chill for now because the question is actually for home owners.  Many of the people who have properties on the market today have to consider all their options in this market. So the topic today is: Rent or Sell?

If you are one of the many people around Edmonton with a beautiful new spec home you built with the sole purpose of turning it over for quick cash I’ve got news for you: put a tenant in it and immediately deduct at least 10% off of the value. Think of it like driving a new car off the lot - part of the value in a new home is that it is new, and that newness is going to fade really quickly with tenants in it. I’m generalizing of course but the majority of tenants don’t treat their rented home like an owner does.  Yeah I know there are exceptions to the rule but just know that rules, even general ones may have some basis in truth.

Tenants in my experience, are especially hard on floors and landscaping.  They don’t like to take their shoes off and those big dogs sure chew into that pretty exotic hardwood.  I know the rental agreement will say “no pets” like many of mine have but the pets just have a way of showing up: "My dad’s, friend’s uncle is away and I’m looking after his Pit Bull while he’s away.”  Funny thing is the guy never seems to come back to claim the monster. Those pets, and that lack of watering and cutting the lawn will turn that nice new yard into a wasteland.

Example: you spill a glass of wine on the carpet. As the home owner you race to the kitchen and get carpet cleaner, or soda water or whatever you prefer to use to get a stain out. Now remember what it was like when you were a tenant…sure you’ll give it a half-hearted attempt to get the stain out eventually, but you’re not exactly running off your feet to prevent it from setting in. Oh, and don’t forget about the tenants’ friends…they care even less about your home.

Becoming a landlord, like everything else in life can go quite well if your intentions from the start are to become a landlord and you plan it out and treat it like a business. Some properties are meant to be rentals while others are not; some of them will be rentals for a very long time. Smart landlords can make good money. In any case I never recommend renting a brand new home, but it maybe better than sitting vacant for a year. Tough decision.

Vacancy Rates

Last week CMHC released their semi-anual Rental Report. Many people are aware that the vacancy rates in Alberta, and Edmonton specifically have been extremely low for the last couple of years, causing rental rates to increase rapidly. Well, we are now seeing vacany rates hit more normal levels; the apartment vacany rate in Edmonton rose from 1.1% in April 2007 to 3.4% in April 2008. Despite the increase in vacancies rental rates have increased during that time (the average 2-bedroom rate in Edmonton went from $877 to $1000). However, with the number of second-home owners who only want to own one home and are now considering renting out that home, I expect the vacancy rate to continue to increase, causing a decrease in rental rates in the near future.

Selling a Tenant Occupied Home

Lastly, if you are considering renting out that home and trying to sell it at the same time you can pretty much forget that idea all together. In a normal market selling a home with a tenant in it is possible albeit more difficult than selling a vacant or seller occupied home. However, you have to keep in mind that there are over 11,000 homes for sale in the greater Edmonton area now. If I want to show a home with a tenant in it, the owner has to give that tenant 24-hours written notice, which means I pretty much have to give the listing agent 48 hours notice that I want to show it (so they can call their seller and have the seller notify the tenant in writing). Plus, if we do write an offer on the home, the owner has to give 90 days notice to the tenant, which means my client has to wait at least 3 months to get into their new home (30-60 days is generally preferred).

The buyer I’m working with has probably given me a list of 40-50 homes to view, which I have to narrow down to a reasonable number…The first thing I’m going to do is discard all the tenant occupied homes - we’ll get to those ones only if we don’t find something we like in the 30 other homes on the list. Now I know what you’re thinking, someone might want to buy the home and keep the tenants…right now there are not a lot of people out there looking for rental properties, especially not big detached homes on the outskirts of the city, and especially not new homes and condos that the tenants are going to destroy