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Stopping a building from becoming stagnate

R

Runman

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Oct 22, 2009
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Sorry for the three repeating posts earlier. Anyways, I have another question regarding strategies for preventing properties from becoming stagnate. For instance, in places that have no rent control, one can buy a property. Fix it up. Increase the rent and thus the NOI. and refinance or sell. However, my question is with rent control areas like Ontario. How can you prevent a building from becoming stagnate when you can`t increase the rent to market?

Thanks

Josh
 
QUOTE (Runman @ Dec 30 2009, 09:14 PM) ..., my question is with rent control areas like Ontario. How can you prevent a building from becoming stagnate when you can`t increase the rent to market?
you adjust the purchase price downwards such that it makes it a worthwhile investment.

If you already own it you have 2 choices:
a) sell it .. and re-deploy capital elsewhere, or
b) keep expenses tight and wait for tenant to move .. then adjust rents to market .. possibly after some appropriate upgrades !
 
QUOTE (Runman @ Dec 30 2009, 10:14 PM) Sorry for the three repeating posts earlier. Anyways, I have another question regarding strategies for preventing properties from becoming stagnate. For instance, in places that have no rent control, one can buy a property. Fix it up. Increase the rent and thus the NOI. and refinance or sell. However, my question is with rent control areas like Ontario. How can you prevent a building from becoming stagnate when you can`t increase the rent to market?

Thanks

Josh


you did not mention number of units. if 1 or 2 then different market forces will affect value. if 4 or more - yes increasing the rent is key. you can use statistics to estimate turnover or ask Thomas to provide the distribution parameters. I think he will confirm 95% expected to leave within 5 yrs, x% in y yrs etc. this shows how long it is expected to take, EVEN IN O-N-T-A-R-I-O, to increase rents by x % or to market rents. cheers.
 
QUOTE (investmart @ Dec 30 2009, 10:21 PM) you did not mention number of units. if 1 or 2 then different market forces will affect value. if 4 or more - yes increasing the rent is key. you can use statistics to estimate turnover or ask Thomas to provide the distribution parameters. I think he will confirm 95% expected to leave within 5 yrs, x% in y yrs etc. this shows how long it is expected to take, EVEN IN O-N-T-A-R-I-O, to increase rents by x % or to market rents. cheers.
exactly .. a rule of thumb is 3 years .. so 33% turnover on average .. but that are folks who know that their $500 2BR with a view today would rent for $1000 and thus they NEVER MOVE until they die ! So you will end up with 1/3 to 50% of a building well below market forever .. similar in BC .. not quite as bad there as you can get rents up 4%/year at least ..

Welcome to the Socialist Republic of Ontario .. thus: don`t overpay !
 
Thanks for your input. It seems that buying at the right price is crucial in rent control areas. Good to know.

Thanks

Josh
 
QUOTE (Runman @ Dec 31 2009, 12:50 PM) Thanks for your input. It seems that buying at the right price is crucial in rent control areas. Good to know.
and also in non-rent controlled areas ..
 
To add
Or buy vacant on possession when possible... much easier with smaller plex`s ...
 
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