There are times when the Real Estate Market presents itself with a hilarious series of events that make the long hours of the profession really worth it at the end of the day.
Recently, there has been a slew of heated articles about the rental market being crazy for tenants right now. These articles have been about things like multiple offers (yes, it’s been happening for a while) to rapid price increases (yes, it has also been happening for a while) to tenants being priced out of the Downtown Toronto market (yes, this has been happening too but more on that next week).
Trending Now – I’m no professional copywriter by any means nor did I study journalism, but the basis for these heated articles seem to be one of the four below:
1) Quote from a tenant in a bad situation;
2) Outline of how dire their situation is;
3) How it’s unfair Torontonians can’t rightfully live in their own city;
4) Blame something or somebody.
The most recent one is by FAR the best, not because it’s actually positive unlike most articles, but because it’s creative and funny!
Recently, a prospective tenant, Huy Do, couldn’t find an apartment to rent and/or was being rejected by so many landlords (reasons that are obvious, but I won’t list here) that he ended up writing a parody song to Chainsmokers’ Closer. To his valiant efforts, he managed to secure a condo to rent. I do have to credit his songwriting capabilities as it’s quite good. I’ll put a link to his song at the end of this insight article to add some humour to your day.
So that poses some hilarious questions…
Would you write a song, sing it and post it online just to find a place to live?
Have we gotten to a point where that’s what it takes now to put a roof over our head?
I honestly (and hopefully) don’t think so, but the ingenuity is quite amazing.
So you must be wondering, how bad is the rental market right now?
I’ll answer it here in two short sentences below, but also provide you with a real-life case study as well.
- If you’re an investor the current rental market is completely in your favour, especially if you have a pre-construction condo coming soon.
- If you’re a tenant looking for a condo to rent, you’re going up against a lack of supply, a huge demand, and a huge price spike. Good luck.
Now let’s take a closer look at the case study. I’ve been representing the Entertainment District for a while now since it has been one of the best areas to invest in over the last 2 years and it continues to demonstrate that. So I took the 1-bedroom rental stats from the area in the first 3 weeks of February 2018 to give you an idea of how the rental market shaped up.
One thing to keep in mind is that February is a VERY slow month for rentals, with most rentals turning over during the spring and summer months.
Below are the parameters of the Entertainment District.
Here are the details for the 38 properties that were leased in February 2018.
Now, here are some shocking statistics from the above details:
- 30 of the 38 properties, or 79%, went for 100% of the asking price or more. One can assume that most of those had multiple offers.
- Average Lease Price was $2,160.63 (That’s nuts, but I expect it will increase some more in Spring 2018)
- 12 of the 38 properties, or 32%, were leased within a week.
- Green Highlight represents over asking and yellow represent less than 100%
So it’s safe to say that the rental market is pretty crazy right now. If you prefer to NOT have to write a song, sing and post it, then here are some alternative strategies that you may like better. These are some strategies that I’ve seen prospective tenants use to secure a rental.
1) Increase deposit (up to 6 months instead of just first and last)
2) Overbid (as seen from the stats above)
3) Accept earlier possession dates
Tenant Profile – Here is something even crazier for you to ponder. I’m going to work back the numbers for you so that you understand who these prospective tenants are.
- If the average rent is $2,160.63, that means the rent you pay each year is approximately $26,000.
- Now let’s assume that half of this individual’s income goes towards their rent, while the other half goes towards other living expenses and savings. This would mean that this individual would need approximately $52,000 after-tax income ($26,000 x 2).
- What does that translate to in gross income? $70,000.
This means that if you own a condo in Downtown Toronto right now, then you are picking between tenants who make $70,000 or more. That’s insane! That’s MUCH higher than the average income, not to mention most of them have nearly perfect credit scores.
The Wrap – To the ladies and gents who are prospective tenants reading this Insight Article – that is your competition, my friends. If you have the funds saved up, perhaps it’s time for Plan B and consider buying your own condo before that gets out of reach too. If you’re a condo investor, CONGRATS to you for making the decision to invest – time to reap the rewards!
Link to Huy Do’s Parody Song: https://soundcloud.com/thelittlestband/closer-to-a-one-bedroom
Until Next Time, Happy Real Estate-ing,