Number of ‘artisanal landlords’ is up – and so are the profits

Shannon Dumont sits between two of the houses she owns in Windsor, Ontario.Emmanuel Sousa/Emanuel Sousa

If you ever get the feeling that there are more small landlords in Canada than ever, you’re right.

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

In a report posted online, Statistics Canada says it obtained data from tax returns that showed 1,356,650 households reported rental income. The report coined the term “artisanal owners” to describe these homes because the data excludes rental income reported by trusts or corporations, which account for the vast majority of the multi-million dollar multifamily rental sector.

In all, about 7.9 per cent of Canadian households reported a median rental income of $2,750 (compared to 2000 when 7.4 per cent reported a median rental income of $790).

Statcan data shows that owner life has also became more lucrative: In 2000, 65% of homeowners reported their rental income to be net positive (in other words, profitable), by 2020 with many more homeowners to compete against the 76.3% reporting profitable rental income. (The lowest point in that bracket came during the 2008 financial crisis, when just 63 percent reported a profit.)

There is also a significant wealth gap between those with rental income and those without: Artisan owners had a median annual income of $113,030, nearly double that of the 15,751,670 families without rental income ($63,040).

Shannon Dumont has been adding to her property 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 two of the three apartments.

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

Ms. Dumont had friends with income properties, but the main reason for the change was simply to crunch the numbers on rising rents compared to her mortgage costs. But things accelerated in the middle of the last decade.

“I swear to God someone had a class on how to buy real estate and all of a sudden every young person I could think of started buying property in the city,” he said. “This was a large family region, we only had one property management company in town; now there are four or five”.

The evidence seems to confirm that “young people” became more involved in real estate and rentals in recent decades. Households with residents ages 30 to 34 went from 4.1% of owners to 5.2% between 2000 and 2020, according to Statscan; those between 35 and 39 years old went from 5.3% to 7.2%, those between 40 and 44 years old went from 6.1% to 8.2% and those between 45 and 49 went from 7.3 to 9.2 %.

“For 30- to 50-year-olds in that age group, they have disposable income or have made a significant mortgage payment on their private residence,” said Sundeep Bahl, a salesperson for Re/Max Plus City Team Inc. in Toronto, who has amassed a clientele of condominium investors who buy pre-construction and then look to him to service and lease those units for income when they’re finished. As property values ​​skyrocketed and debt became cheaper, many of his clients added one or more properties by leveraging their equity in existing homes.

“A lot of people say, ‘My God, my house was worth $1 million, now it’s worth $1.8 million!’ You can withdraw $200,000 [in a home equity line of credit] to buy an investment property,” Mr. Bahl said.

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

“I don’t see anybody making those moves in this market, but there have been a lot of those investors in the past,” he said.

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One of Mr. Bahl’s clients willing to leverage his home equity in 2018 to buy his second rental condo says he’s not looking any further at the moment.

“We bought an investment condo before we bought it for ourselves,” said Guri Pannu, 44, who was still renting a downtown apartment when he put down a deposit on a preconstruction project in 2011. Meanwhile, he and his wife they bought their own house. And earlier this year, Pannu closed that second condo, but despite strong rents from tenants, he’s pausing to invest in more.

“A project I was looking at, in a good area where I knew it would have strong future rents, we couldn’t make it feasible unless we could put 50 percent of the [purchase price]. Without that, we’re looking at significant negative cash flow. He didn’t look very attractive,” he said.

Many rental investors are increasingly looking further afield from Canada’s larger cities for more lucrative opportunities. Vancouver and Victoria are in a class of their own as Canadian cities with the highest percentage of owner-occupied households (11.2 and 10.4 percent, respectively). But they are also the most lucrative markets, with a median rental income of $5,250 and $5,490. Toronto ranks third with 9.8 percent of households charging rent, with a median income of $2,870.

However, according to Statscan, 16 of the top 30 cities with more than 5 percent of households reporting rental income were smaller centers in Ontario, including Windsor, Waterloo, Sudbury and Thunder Bay.

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