| Real Estate

Today is April fools, and while normally I’d feel inclined to be silly and have a laugh at the expense of friends & family, today is not that day. Instead, I’d like to share some advice based on conversations we’ve been having w/ our Landlords (and even Tenants) who are trying their best to navigate these difficult times.

It’s April 1st – rent is due for many across Ontario!  

 

And just a second ago, Dr. Eileen de Villa, Toronto’s Medical Officer, announced that COVID-19 measures could be in place for 12 more weeks!!
First reaction, FUUUUUUUUDGE!
Next reaction, fine, sh$t happens, let’s deal with it.
So … let’s deal with the hot topic of the day … LANDLORDS vs TENANTS:
  • As some may know … there’s been a large push/movement by groups Tenants to skip rent (April 1st onwards)
  • Tenants behind such movements are pushing the idea that Landlords are inherently privileged and must be ok with giving Tenant breaks (i.e. no rent)
  • So What Options Do Landlord’s Have?
  • If you are in a position to help … help!
  • If you like/love your Tenant and truly feel for them … see if you can compromise!

Examples …

  • Use last month’s rent for current month (i.e. 1st/last deposit)
  • Show Tenant exact breakdown of expenses / have Tenant cover only costs (i.e. no profit)
  • Agree to terminate early – N11! (flexibility in difficult times is very valuable – for both sides!)
  • Provide your Tenant with a short-term loan – against your home perhaps?  Better than them skipping all together, no?
  • Tenant’s will claim you can defer your Mortgage – Mortgage deferral does not mean deferral – so you assume cost/risk … be transparent, explain that deferral is case-by-case … and if possible to defer, what the associated costs would be.  Ask the Tenant if they’re ok with assuming some of those costs/risks associated.

 

A MESSAGE TO TENANTS

 

It’s tough, we get it, believe us!  And I know, you might think “no you don’t” – you’re a Realtor, a Landlord and you’re just looking out for your own.

That’s not the case, we’d like to see a fair compromise that doesn’t adversely affect one side at the cost of the other.

Long before this life, my Family & I grew up in Gov’t/subsidized housing, moved around a lot, with little to no money, 2-3 jobs each, with tons of bills to pay.  I’ve never forgotten that life and it’s what drives me everyday.  So we understand and empathize with you, the Tenant, these are difficult times for sure.

But please recognize that Landlords are not all big conglomerates and they themselves may be facing serious financial distress.

Many Landlords across Toronto are essentially Mom-and-Pop shops and if you forgo rent entirely, you’re putting them out of business.  If they can’t pay their mortgage/bills, they (and other Landlords) may exit the rental market entirely.  This reduces the # of available rentals over time, thereby reducing supply available to YOU, the Tenant.  And in time, this drives prices up!

If you can’t afford to pay rent because you’ve lost your job, have a Family to feed/take care of etc. That’s 100% understandable.

What I would advise you to do is to be honest w/ your Landlord.  Explain your situation and be transparent.  Come up with a compromise – don’t just join a “movement” to forgo rent – that’s irresponsible and not fair to your Landlord (or to yourself – too much uncertainty and associated stress).

 

TO MOM-AND-POP LANDLORD & TENANTS EVERYWHERE

 

Don’t go at each other.  Become allies!  Go after the Banks!  The Lenders!!  They’re profiting off of the deferrals – and that’s where the disconnect is.  Deferring a mortgage payment IS NOT FREE.

A mortgage deferral simply defers the interest owing over the deferred period and adds that sum onto the principal of the mortgage.  That new sum is then compounded over the mortgage term – translation, Landlord pays back the interest owing (i.e. it’s not free money or forgiven) and then pays more interest than they would have had they not deferred.  Why?  Because of compounding – oh yes, good old grade 8 math (i.e. interest on interest – booooo!).

IN PLAIN ENGLISH:  Landlord has a 500K mortgage.  Landlord pays 2K per month.  1K is principal (i.e. paying down original loan) and 1K is interest (i.e. the fee owed to the Bank/Lender for the loan).  Bank defers Landlords’ mortgage for 6 months.  Wunderbar!  After 6 months, Landlord has a 506K mortgage – paying interest on the new and increased principal amount!

So if a Bank/Lender etc. is ok to differ BUT, NOT CHARGE INTEREST on the deferred mortgage amount – BAM, you’re golden!

This allows Landlords to comfortably defer & pass the deferral on to their Tenants without the need to share associated costs/risks – there’d be none!

 

I hope the above is helpful.

It’s easy to get at each other in stressful times.  Don’t be fools (pun intended), 2 heads are always better than 1.  Become allies 🙂

Bye bye and have lovely, sunny, Wednesday, April the 1st!!

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