March 20, 2023

The number of “manual workers” increases – and so do the profits

Shannon Dumont stands between the two homes she owns in Windsor, Ont.Emanuel Sousa/Emanuel Sousa

If you feel like there are more small “mom and pop” landlords in Canada than ever, you’re right.

New data released by Statistics Canada suggests that while the share of Canadians reporting rental income has grown modestly since 2000, the net number of small landlords has increased by about 32 per cent since 2008 thanks to population growth.

In a report posted online, Statistics Canada says it obtained data from tax returns that showed 1,356,650 households reported receiving rental income. The report coined the term “artisan landlords” to describe these households because the data does not include rental income reported by foundations or companies that make up the bulk of the multibillion-dollar multifamily rental industry.

In total, about 7.9 percent of Canadian households reported a median rental income of $2,750 (up from 2000, when 7.4 percent reported a median rental income of $790).

Statcan data shows that life as a landlord has also become more profitable: In 2000, 65 percent of landlord households reported a net positive (ie profitable) rental income, by 2020 significantly more landlords competing with 76.3 percent reporting profitable rentals. income. (The lowest point in this range came during the 2008 financial crisis, when only 63 percent reported a profit.)

There is also a significant wealth gap between those with rental income and those with no income: The median annual income of fake landlords was $113,030, nearly double that of the 15,751,670 families with no rental income ($63,040).

Shannon Dumont has been adding to her real estate portfolio since 2008, when she convinced her husband to downsize from a large house in the LaSalle suburb of Windsor to a downtown duplex and rent out two of its three apartments.

“We bought our first duplex for $135,000. Now it’s worth $500,000,” said Ms. Dumont, 52. “Once we did that and became mortgage-free, we bought the house next door.” The extra income from three rental properties allowed him to work part-time, and the couple recently bought their retirement home.

Ms. Dumont had friends with income properties, but the main reason for the switch was just to offset rising rents against her mortgage expenses. But things picked up in the middle of the last decade.

“I swear to God someone had a course on buying real estate, and suddenly every young man I could think of started buying real estate in the city,” he said. “This was a big mom and pop area, we only had one hosting company in town; now there are four or five.”

The evidence seems to confirm that “young guys” have become more interested in real estate and rentals in recent decades. Households with 30- to 34-year-olds rose from 4.1 percent of landlords to 5.2 percent between 2000 and 2020, according to Statscan; The 35-39 age group rose from 5.3 percent to 7.2 percent, the 40-44 age group from 6.1 percent to 8.2 percent, and the 45-49 age group from 7.3 percent to 9.2 percent.

“People in this age group, in their 30s to 50s, either have disposable income or have made significant payments on their mortgage,” said Sundeep Bahl, a salesperson at Re/Max Plus City Team Inc. in Toronto, who. has built a client base of condo investors who buy pre-construction and then look to him to service and rent the apartments for income when they are completed. As property values ​​rose and debt became cheaper, many of his clients added one or more properties, leveraging their equity in existing homes.

“A lot of people say, ‘Oh my God, my house was a million dollars, now it’s $1.8 million!’ You can withdraw $200,000 [in a home equity line of credit] buy an investment property,” Bahl said.

But the Bank of Canada raising rates quickly in 2022 to combat inflation has meant borrowing from Peter to invest in Paul has slowed.

“I don’t see anyone making those moves in this market, but there used to be a lot of these investors,” he said.

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One of Mr. Bahl’s clients, who wanted to use their home equity in 2018 to buy his second rental, says he’s not looking for more right now.

“We bought an investment apartment before we bought one for ourselves,” said Guri Pannu, 44, who was still renting a downtown apartment while making a contribution to the pre-construction project in 2011. In the meantime, he and his wife bought their own home. , and earlier this year Mr. Pannu closed another apartment, but despite the high rental income of the tenants, he is stopping to invest more.

“One project I was looking at — in a good area where I knew it would have high rents down the road — we couldn’t make it happen unless we could put 50 percent [purchase price]. Without it, we’re looking at significant negative cash flow. It didn’t look very appealing,” he said.

Many rental investors are increasingly looking for more lucrative opportunities further away from Canada’s largest cities. Vancouver and Victoria are in a class of their own as Canadian cities with the highest number of landlord households (11.2 and 10.4 percent, respectively). But it’s also the most lucrative market, with median rental incomes of $5,250 and $5,490. Toronto ranks third with 9.8% of households collecting rent and a median income of $2,870.

However, 16 of the 30 largest cities where more than 5 per cent of households reported rental income were smaller centers in Ontario, including Windsor, Waterloo, Sudbury and Thunder Bay, according to Statscan.

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