Fake News? Trudeau Promises a Change to the Stress Test

Published on 16th January 2020

At the end of 2019, Canadian Prime Minister Justin Trudeau asked Finance Minister Bill Morneau to consider reviewing the mortgage stress test. The public words were “Review and consider recommendations from financial agencies related to making the borrower stress test more dynamic”. I had a few questions on these comments that I know I’ll never get the answer to, such as: What does “more dynamic” really mean? According to the dictionary, dynamic as an adjective can be used in 2 ways:

  1. (of a process or system) characterized by constant change, activity, or progress.
  2. (of a person) positive in attitude and full of energy and new ideas.

I’m assuming dynamic refers to the first point above. So does that mean we are going to change the stress test constantly?

Another question I had was: Which financial agencies is Bill Moreanu taking recommendations from? The banks? The government? Bank of Canada? CMHC? Office of the Superintendent of Financial Institutions (OSFI)? The source of the recommendation matters because each of those financial bodies has their own agenda, goals and underlying objectives.

One thing is for certain – the news of reviewing the stress test has gotten many people in the lending world very excited. It’s almost as if everybody is expecting the stress test to be removed or made “less stressful”. However, all of this sounds like political jargon to me.

The Political Possibilities – Regardless, this affects the “dynamics” of the market and it has a lot of people talking about what changes could be made. There are so many levels that I could take a deep dive into on this matter. I could probably write 2,000+ words on this topic but I’ll keep it short and sweet with 2 key topics of discussion at hand.

  1. Changing the Stress Test Percentage – The stress test is based on an interest rate of 5.19% right now, which is the Bank of Canada’s 5-year benchmark. The major discussion point right now is to potentially reduce this rate by 1%. If this happens, then the availability of credit increases by approximately 10% (i.e., you could borrow 10% more).
  • Why this may not happen: The Schedule A banks (i.e., TD, CIBC, etc.) are highly motivated to keep this benchmark high for their own profit margins. A higher stress test interest rate means that more people are locked into existing mortgages with higher rates because they can’t re-qualify under the stress test to a different lender. Ultimately, this means that when mortgages are up for renewal, the homeowner must take whatever rate their existing banks give them otherwise they become homeless (i.e., they can’t re-qualify under the stress test with a different lender).
  1. Increasing the Amortization Period Back to 30 Years – As of right now, only buyers with 20% down are able to qualify for a 30-year amortization period. This is important because a 30-year amortization means that you are paying less each month over a longer period, which ultimately allows you to borrow more money. You’re tested on how much of your income goes into repaying your loans. If your monthly loan payment is less, then you could borrow more. Note that if amortization is increased to 30 years, that’s approximately an increase of 10% in available credit.
  • Why this may not happen: This makes no sense. If they allow buyers with less than 20% down payment to get a 30-year amortization, it defeats the very purpose of the stress test. The stress test was designed to prevent home buyers from overextending themselves when purchasing a home but if buyers are able to borrow more with less down payment, then it goes against that design. That just seems hypocritical. Starting from the early 2000’s, the mandate has always been to reduce the amortization period. We went from 40 years to 25 years and now we’re trying to increase it back to 30 years. Either make up your mind or stop intervening with the free market!

Mixed Messaging – It seems like they are making the rules too “dynamic” by constantly changing it. All of these “potential revisions” look like they are targeting the first-time home buyer segment of the population – the Millennials, who are having a difficult time getting into the market in Toronto and Vancouver. I don’t hear affordability issues coming from other Canadian cities. Is it a coincidence that Toronto and Vancouver is where the majority of Trudeau’s votes came from? Maybe… but I won’t go there.

There have already been other incentives for first-time homebuyers that were implemented, such as the new CMHC “interest-free loan” to buy a home and increasing the first-time home buyer RRSP withdrawal limit. These incentives go against the purpose of the stress test. As you know, the government wants to make sure Canadians, especially first-time home buyers, are financially responsible by having the stress test to reduce the amount money they can borrow to buy a house. However, at the same time, the government is giving them an interest-free loan and are allowing them to borrow from their retirement funds to buy a house. By now, are you as confused as I am with all of these government policies and incentives floating around?!

The Wrap – Like I said earlier, I could probably write more than thousand more words on this topic but I won’t digress. Even if I did write more on this topic, I don’t have the answers. All I see are problems with these band-aid solutions, and no “real” plan to move forward (cue: the ongoing Gardiner Expressway mess). My only suggestion to Mr. Trudeau is to really look at the supply issue that we have on hand. Perhaps make it easier for Builders to develop? Enforce less Builder delays? Lower taxes? Either way, I won’t look at this “dynamic review” of the stress test as a saving grace to the rising affordability crisis that we have in Toronto.

Until Next Time, Happy Real Estate-ing,

Is Toronto Real Estate Market Recession-Proof?

Published on 9th January 2020

Recession-proof? Is there such a thing? If there is, does the Toronto Real Estate Market fit into this category?

I’ve always wanted to write this Insight Article but previously, I thought it would be too bold of me, and that I may be permanently labelled as a super-bullish person after giving my opinion on the matter. However, as I had time to reflect while I was abroad, I told myself, “sure, why not? I should just give my 2 cents!”

I don’t believe in absolute certainty as anything can happen, but Toronto’s real estate market has a lot of upside going for it that makes it as close to recession-proof as possible (relative to other markets). If you missed last weeks’ Insight Article where I compared the cost of living to other major Asian cities I recently visited, you can read it here: CLICK HERE.

Recession-Proof Factors – With the comparisons out of the way and equipped with a newfound appreciation for the Toronto real estate market, I’m even more bullish than ever now. Allow me to explain. I’ve always monitored 3 factors when it comes to the stability of the Toronto real estate market – these factors are:

  1. Availability of credit (i.e., mortgage)
  2. Job creation

I’ve touched on 3) Job creation with Toronto turning into Maple Valley (a.k.a., Canada’s Silicon Valley), so I wanted to elaborate on the other 2 factors today.

Canada vs. The World – Population growth is also something that I’ve written about many times in the past. However, allow me to elaborate further. Canada gets a ridiculous amount of immigration in proportion to how many citizens we have. Furthermore, our new immigration selection process is much more rigid, wherein Canada allows immigration based on economic output – in other words, if you can pay more taxes in your profession or if you are bringing in lots of money to Canada.

Many people compare our immigration system to our neighbours down south, the United States, and simply dismiss how much immigration we have relatively speaking. However, you must compare apples to apples.

Size Matters – As per the chart above, the US has the most number of immigrants. However, if you look on the right-hand side of the chart that is highlighted in purple, one should realize that immigration ought to take into account the actual size of the country. Canada is at 21%, which is 5% higher than the US which is at 15.1%.

Another way to look at this metric is the number of immigrants in which a country gets per capita. You can see in the table below that for every 1,000 inhabitants, the forecast was for Canada to receive 6.6 new immigrants, compared to the US’s 2.9 new immigrants. Therefore, Canada’s immigration rate is more than double that of the US!

Also to further this point, most immigrants who come to Canada land in Ontario, and when they land in Ontario, where do you think they are most likely going to settle? If you guessed the Greater Toronto Area, you got it!

Show Me the Money – The second reason for Toronto being fairly recession-proof is the availability of credit. We all know that the stress test has made the ability to get a mortgage more difficult. Although that can be seen as a negative point, in some ways, it is a positive as well because we’re over-qualifying applicants in case of a recession. However, what I actually wanted to explain here is the delinquency rate or default rate.

Dangers of Default – In Canada, as per the graph below, we’re at a very low 0.24% default rate on mortgages, which means that there is only 1 mortgage default for every 4,166 mortgages. That’s a staggeringly low default rate!

Now, when you look at Ontario specifically, we’re actually 0.09% or other words, 1 mortgage default for every 11,111,111 mortgages. That’s even lower than the rate in all of Canada, that’s one in 11 thousand! It looks like Ontarionians want to keep their houses!

When compared with our US counterparts, their default rates are 27.22 times higher than Ontario (10.20 times higher than Canada) as their current default rate is sitting at 2.45% as per the chart below.

The reason why I bring this up, and why it’s important, is because if a recession were to be on the horizon and if the availability of credit is reduced, the default numbers show us that there is more emphasis in Ontario for citizens to keep their houses and mortgages during the rough times. The mortgages in Ontario and Canada are less likely to end in default. The mortgage defaults are what caused the US recession in 2008 (when the mortgages were not backed by any substantial collateral).

I also purposely mapped out the default rate during the 2008 recession for both countries. Canada wasn’t affected too much by the recession as the Toronto market was still fairly strong during that time. The default rate in Canada was only 0.33% at the time, and now we’re sitting at 0.24%, so the default rate wasn’t that much higher during the 2008 recession. In comparison, the US default rate was 7.96% during the 2008 recession – that’s in 1 in 12.5 mortgages that defaulted in the US during the time of the recession, compared to only 1 in 3030 in Canada. That’s some perspective for you!

Equity vs. Debt – Another important fact is that the average equity in a Canadian house is 74%, according to Purview. This means that the average Canadian already owns 74% of their house, while only 26% is mortgaged. There are 2 ways in which you can look at this metric, and both are good. 74% means that most Canadians bought their house a while ago and they own 74% of its current market value; in other words, their mortgage payments are low and as such, they are not as likely to default on their mortgage payments. Alternatively, it could also be interpreted as 74% of the mortgage loan has already been paid off. In either case, a metric of 74% points to stability and a lower likelihood of mortgage default. Given all of these compelling factors that push the Toronto real estate market forward, this is why I am so bullish on the market.

The Wrap – The world is chaotic right now; it’s like a storm. Toronto is right in the middle of that storm; the eye of the storm where it is the calmest. Everything around Toronto is chaos but when we look at Toronto, the real estate is nice, calm and steady. Does that make us recession-proof? There is a good chance, but only time will tell.

As long as you buy correctly and your properties cash flow positive, I don’t see why you would not benefit financially from the rising tide that is the Toronto real estate market. If this is something that you want to benefit from in 2020, please reach out to me at Zhen@PrimePropertiesTO.com.

Until Next Time, Happy Real Estate-ing

How We take the Toronto Real Estate Market for Granted

Published on 3rd January 2020

I was originally born in Guangzhou, China but immigrated here when I was only 5 years old. As a result, my memory and recollection for anything related to China was essentially non-existent. My memories of China only started jogging when I went back to China for the first time in my early 20’s. I’ve been so ingrained in my Canadian upbringing, that when I recently went back to visit my family in China, they told me that I had an accent when speaking Cantonese (my native tongue). Strange phenomenon!

Discoveries Abroad – Over the last 10 years, China has changed SO rapidly, especially my birth city, Guangzhou. I recall my initial thoughts during my first visit back about 10 years ago – I had discovered a newfound appreciation for how great the air in Canada is and how clean Toronto is relative to Guangzhou. This time around, during our honeymoon stopover to visit family abroad, I found Guangzhou to be incredibly clean and well-kept. It is now so clean that I would even argue it’s cleaner than certain parts of Toronto! There are also no more illegal street vendors and all of the ground-level retail stores have been re-developed into fancier, newer retail storefronts. The city is incredibly high-tech and everything runs from mobile phones. Citizens no longer need to carry anything else besides their phone because literally everything resides in their phones – money, ID, everything you could possibly imagine and more. You can pay for everything using WeChat Pay or AliPay. From transit to night market vendors to even beggars on the street, they all have a QR code for acceptance of electronic payment. The city has developed incredibly fast from what I once remembered it as.

Change is What You Make of It – So the point that I’m trying to get across with all of this is that things can change, and sometimes very fast. You may not even notice the change. Over the last 10 years, Toronto has changed – the price of real estate in Toronto has changed and I’ve changed. The trip back to China this time around was the first time that I’ve returned to China since owning real estate property in Toronto. As such, with real estate always being on my mind (I can’t help it!), it has spurred me into doing some further research on how Toronto’s market has stacked up against the other major cities that I’ve visited. Let me tell you this – as a real estate investor, Realtor, and a Torontonian, we 100% take for granted how great Toronto truly is!

Make Toronto Great Again – To fully appreciate how great Toronto is, let me list some of Toronto’s statistics for comparison purposes.

Toronto, Canada
Population: 5.9 million (GTA)
Price of real estate relative to average income: 14x

Guangzhou, China
Population: 13million
Price of real estate relative to average income: 33x

The greater area of Guangzhou has approximately 35% of the population in all of Canada. In Guangzhou, you can take the subway from one end to the other in less than 2 hours. That should give you an idea of how dense Guangzhou is and why the price of real estate is so high relative to income. The cost of living in Guangzhou is not very high. When you compare the cost of groceries to Canada, it’s actually quite low. However, like with most Asian cities, the population is so high that it drives up real estate prices. More people equals higher demand. Speaking with all of my cousins in China, all but one don’t own any real estate and have completely given up their dreams of owning any real estate as it is just not realistic at this point. The city is growing and the price of real estate has actually dropped in the last 2 years – despite all this, housing is still unaffordable.

Hong Kong, Hong Kong
Population: 7.3 million
Price of real estate relative to average income: 48x

Hong Kong is known for having the most expensive real estate in the world and at 48 times the average income, owning real estate in Hong Kong is unattainable to say the least. My uncle owns a 620 SQFT 2-bedroom unit purchased in 2003, in what I would say is the “Yonge & Eglinton” equivalent of Toronto. The current market price for such a unit is about $1.35M CAD right now – that’s $2,183 per square foot for a 17-year old unit! Good luck buying anything when you also need a 35% down payment in Hong Kong (i.e., $472,000). The price of my uncle’s apartment has nearly quadrupled since his purchase in 2003. As a reference point, Toronto prices have only increased by about 2.5 times since 2003. Relatively speaking, Toronto still seems somewhat sustainable compared to Hong Kong. Many who Hong Kongers who want to live in Toronto and Vancouver can easily trade in one of their properties in Hong Kong for 2 or 3 Canadian properties. That’s some perspective! It’s no wonder why a lot of them have come to Canada in search of buying real estate here.

Ho Chi Minh City, Vietnam
Population: 9.3 million
Price of real estate relative to average income: 28x.

Ho Chi Minh City was definitely the least expensive city we visited on our Honeymoon adventure. The cost of a cup of coffee was approximately $0.30 CAD. However, I can’t say the same for real estate. Like many developing countries, there are pockets and nodes that are much more developed than others. We stayed in an Airbnb in the central part of Ho Chi Minh City, the “Yonge & Dundas” equivalent if you will. The 3-bedroom condo that we stayed at was approximately 1,000 square feet with 2 washrooms. Build quality was about the same as what we would get in Toronto. The cost to purchase this unit was approximately $1.1M CAD, which puts the area at approximately $1,100 per square foot. This is practically identical in pricing to downtown Toronto. The only catch for locals is that their average income is only a fraction of ours. As a result, affordability is at an all time low in Ho Chi Minh City. Oh, and here’s the kicker – Vietnam just opened up its economy to foreign investment recently, so expect real estate prices to increase even further.

Bangkok, Thailand
Population: 8.3 million
Price of real estate relative to average income: 27x.

The stats are very similar to Ho Chi Minh City. However, Bangkok is more developed. It has a fairly extensive subway system unlike Ho Chi Minh City, which has no subway. The word on the street is that lot of Chinese money is being invested into Bangkok. Surely enough, our Airbnb hosts in Bangkok were from China. We stayed in a very new 1-bedroom condo that was approximately 350 square feet. Surprisingly, the finishes were better than what we are accustomed to in Toronto. The size, although it sounds very small, was quite livable. For reference, builders in Toronto are selling 1-bedroom units that are approximately 450 square feet in the downtown core right now. Similar to Ho Chi Minh, affordability in Bangkok is at an all-time low.

The Grass is Greener Here – As you can see from the examples above, the cost of real estate in all of these major cities are approximately the same price or higher than that of Toronto regardless of whether you compare that as a ratio of average price-to-income or just apples-to-apples comparison in Canadian Dollars. The lifestyle and quality of life in Toronto, in my opinion, is much better than any of the major cities mentioned above. Furthermore, the currency and the value of the currency that we earn is much higher in Toronto as well. Effectively, this makes the ability for us to own real estate much easier.

The Wrap – Without a doubt, every time I come back home to Toronto, I have a newfound appreciation for how awesome our city is. This time around, in addition to all of the usual appreciation for comfort and lifestyle, I also have a newfound appreciation for how great our real estate market is and how affordable our city still is relative to other cities around the world (despite all of the constant chatter about how unaffordable Toronto is). Yes, Toronto is indeed becoming more unaffordable, but relative to many other cities in the world, we are by no means in a crisis yet.

Until we see the forest for the trees, Toronto is changing so fast that I think most Torontonians have taken for granted how amazing and affordable this city still is. We’re growing, we’re developing, and we’re getting bigger as more and more people around the world want to immigrate to and live in Toronto. You’ve heard it from me once and you’ll hear it from me again – Toronto is a world-class city that is only going to get more expensive as time goes on. Simply put, don’t take what we have for granted!

Landlord Lesson #7 -Understanding Rent Control

Published on 26th December 2019

Rent Control – love it or hate it, as an investor, you must understand rent control because how much rent you can charge for your investment property becomes your lifeline for how much cash flow you can produce and how much profits you’ll make. Depending on who you speak to regarding rent control, it can either be a blessing or a disaster. My honest opinion on rent control is that it has temporarily frozen the rental market and spiked the prices up ~20% since its inception. It was so bad that it had to be lifted. However, we are still feeling the ripple effects of some of the properties that haven’t had their rent control lifted yet.

How It All Started – The full story of rent control in Ontario dates back to 1991. There are 3 pivotal dates that come up often in the context of rent control, and they are:

  • November 1, 1991 (referred to as 1991 in this Insight Article);
  • April 20, 2017 (referred to as as 2017); and
  • November 15, 2018 (referred to as 2018).

Prior to 1991, rent control was applicable across the board in Ontario. It wasn’t that much of an issue as Toronto was really not deemed as a world-class city (just yet anyways). What we didn’t know was that it was eventually going to become a world-class city over the next few decades. We had very little skyscrapers and condos in the late 1980’s. Shortly post-1991, rent control was lifted on all apartments that were constructed after the 1991 date. At that point though, there was really no construction of condos in the downtown core because buying a detached house was still $500,000. So the removal of rent control in 1991 didn’t really affect the market too much.

In the early 2000’s, the condo market started blossoming and condos were being built – CityPlace was developing, Bay Street Condos were being built, Yonge Street commercial space was being rezoned. This was just the beginning of the condo boom.

When the supply became very problematic and prices were increasing at 10% per month, the Liberal government introduced the Fair Housing Initiative in 2017 to re-introduce rent control on all properties. BAM! Just like that rental rates became stagnate and rental inventory just fell off a cliff. Anyone who had a vacant rental property immediately increased their rental rates. This was ironic because I truly believe the intentions of rent control were to help tenants, but ultimately, it ended up doing the opposite. There is speculation that this was all caused by a CBC report about one landlord doubling the rent on their tenants.

The Fair Housing Initiative also put a major damper on the demand for freehold properties, and so, the second condo boom started. No inventory, prices increased and no rental supply… this was a recipe for disaster. Then came the Conservatives after being elected – they vanquished rent control again but with a caveat: Rent control still applies to all buildings completed before 2018. This left us exactly where we are now – all properties finished prior to 2018 are subject to rent control and all properties finished after 2018 are not subject to rent control.

Investor Impacts – So why and how does all of this matter to you an investor? Basically, if you own a property that is completed after 2018, you can freely increase rent over the allowable limit of 1.8% on all renewals. Just don’t be ridiculous.

If you own a property that was completed prior to 2018, then you can only increase the rent by a maximum amount of 1.8% (2019 rate) on renewals. It’s actually quite low given what the inflation rate is. However, if your tenant decides to leave, you can increase the rent above the rent control limit.

So this leaves us with a lot of tenants who have existing under-market rental rates from leases prior to 2018. These people will never move (if they don’t have to move for other reasons) because their rent cannot be increased past the maximum allowable limit of 1.8%.

Common Situations – Here are some common situations that come up with the rent control legislation:

  • You are only allowed to increase the rent after your 1-year term by 1.8%.
  • If you do not sign a new lease, the tenant goes to a month-to-month tenancy and you cannot evict them.
  • During the month-to-month tenancy, you can still increase rental rates by 1.8% if you provide them with an N1 form.
READ: Why You Should Always Increase Your Rent
  • New legal basement suites completed after 2018 are not subject to rent control

I have some clients with existing properties who are waiting until the day their tenants move out, so that they can increase their rent. Some tenants with leases circa 2011 are still paying about $1,500 per month for a nice large 1-bedroom unit in downtown Toronto. Imagine that! How amazing is it for these people who have low grandfathered rental rates when the average 1-bedroom units are going for $2,300 per month on the market. Investors – if you are in this situation, the honest truth is that there isn’t much you can do, unfortunately.

The Wrap – I’ve had people inquire about their options to buy their first home knowing that that they are living in a rent-controlled property with rental rates increasing very minimally each year. If that is the situation you’re in, then you should 100% buy an investment property and continue living in your rent-controlled property. This is a form of what others refer to as “house-hacking”. By undertaking this approach, you can essentially create enough cash flow from your new investment property to cover your below-market rent. If you are interested in doing something with this approach, make sure you reach out to me at Zhen@PrimePropertiesTO.com. We’ll set you up nicely for some house-hacking!

Until Next Time, Happy Real Estate-ing,


Landlord Lesson #6 -Understanding the Landlord Tenant Board

Published on 19th December 2019

All investors need to arm themselves with the know-how and knowledge of what the Landlord Tenant Board does and how it impacts your investments, especially if you are self-managing your property. With the rise of professional tenants and disastrous issues that have happened in the past few years, plus the new regulation of rent control (more on this next week), tenants have become way more savvy and knowledgeable about their rights under the Landlord Tenant Board. Ultimately, this makes tenants more difficult to deal with.

The Rise of Professional Tenants – The Landlord & Tenant Board can be seen as the judge who ultimately makes the call on how to settle a dispute between a landlord and a tenant. Of course, getting to the point where a judge is put into place can be a very long and drawn-out process. This gave birth to what we call “professional tenants”. These are tenants who know the Landlord & Tenant Board inside-out and can manipulate the system to live rent-free for extended periods of time. Don’t worry though, it’s not as bad as you think. That said, do continue reading the rest of this Insight Article to understand how you can protect yourself from these professional tenants.

Knowledge is Power – First off, everything at the Landlord & Tenant Board is super backed up and getting a hearing takes forever. Secondly, in order to get to the hearing, you must file the appropriate forms.

Obviously, you never want to be in the situation where you need to use the Landlord & Tenant Board, but in the case that you ever need to, you should equip yourself with the relevant knowledge well in advance. As a side note, if you ever get to the Landlord & Tenant Board, it doesn’t matter what your lease says because if it cannot be upheld in the Landlord & Tenant Board, then the actual signed lease itself means nothing. All rights of tenants and landlords as per the Landlord & Tenant Board will superceed the language used in any lease. An example of this is prohibiting pets in a rental unit. As per the Landlord & Tenant Board, you cannot forbid a pet from being in your unit, so it actually doesn’t matter if it’s in the lease or not.

The FAQ – The 2 most common questions that I get are, “How do I increase rent?” and “How do I evict a tenant?” I’ll break down these 2 common questions below in further detail.

#1 – How do I increase rent?

You simply need to fill out the N1 form (Notice of Rent Increase), which you can find in the link below.

N1 Form:

Make sure you adhere to the maximum allowable rent increase as per rent control. In 2019, the maximum allowable increase is 1.8%. We’ll soon find out 2020’s allowable increase. I highly doubt it’ll be much more than that of 2019. If you are not sure whether your investment property is under rent control, all you need to know is if your unit was completed before or after November 15th, 2018. Other than a minor exception for major renovations, if your investment property was completed before November 15th, 2018, then your property is subject to the rent control rules. If the property was completed after November 15th, 2018, then your unit is not under rent control and you can increase your rent past the maximum allowable amount on lease renewals.

#2 – How do I evict a tenant?

The most common reason for evicting a tenant is a result of late rental payments, so I’ll use that as an example. If you wish to evict a tenant for late rental payments, then you must file an N4 form (Notice to End a Tenancy Early for Non-payment of Rent). This form can be found in the link below.

N4 Form: 

The N4 is the notice that must be served to your tenant in person or by mail before eviction. The N4 is the legal notice from the Landlord & Tenant Board telling your tenant that they must pay rent. You can only take the next steps of submitting a L1 form (Application to Evict a Tenant for Non-Payment of Rent and to Collect Rent the Tenant Owes) only after 14 days from when the N4 was served if handed to the tenant in person, or 19 days if mailed. From there, you will be in the queue to go to the Landlord & Tenant Board and get a date. If the judgement is ordered for an eviction, a Sheriff will then be hired to evict the tenant and give you vacant possession. This entire process can easily take anywhere between 4-6 weeks.

So if you don’t treat your investment properties like a business and file the N4 immediately, even if your tenant is 1 day late, it could spell trouble for you because it’ll only delay the 4-6 weeks that it normally takes to evict a tenant. Imagine giving the N4 notice 2 weeks late. This means it’ll take 8 weeks or even 2 months for you to evict your tenant, and during that period, the tenant doesn’t have to pay any rent.

The “professional tenants” who understand this can manipulate the system and I’ve heard horror stories about tenants taking as long as 6 to 12 months to be evicted, meanwhile the landlord is out of pocket for all of those months. At the end of the day, again, this is why you should always treat your investment properties as a business!

The Wrap – Do not worry if you’re reading this and the entire process scares you. Our team has contacts with paralegals that have dealt with this situation before. This is simply another perk for working with our team. If you’re ready for your next investment property, then make sure you reach out to me, Zhen at Zhen@PrimePropertiesTO.com to get started and more importantly, to protect your investment!

If you have any further questions regarding the Landlord & Tenant Board, you can read up on their frequently asked questions page here: http://www.sjto.gov.on.ca/ltb/faqs/#faq5

Until Next Time Happy Real Estate-ing,


Landlord Lesson #5 -How to Handle Tenant Issues

Published on 12th December 2019

Are you worried about dealing with headache-inducing tenants? Well, lucky for you this week’s Insight Article may help with just that! I’ll explain how to lay down the groundwork in order to avoid these sticky situations before they even happen.

There are many, many, many, many, many (multiplied by infinity) horror stories that have happened in the past that I won’t be writing in detail about because every single situation is going to be fairly different. It’s almost impossible to predict and foresee what will and what could go wrong. When you’re dealing with housing issues, neither the tenant nor the landlord enjoys the process and it always ends up getting emotional to a certain degree. However, always keep in mind that these headache-inducing situations happen only far and few in between, and even though it’s a pain to deal with, these issues are totally worth it at the end of the day because the reward is very substantial (in other words, your tenant is paying down your property!). If you’re going to make $50,000 dollars in 1 year from your investment property, then you have to ask yourself, “Is dealing with a tenant issue that may take 5 hours of your time worth it?” Essentially, you’re asking yourself if your time is worth $10,000 per hour. I would say yes.

So here are a few insights and steps to having a winning tenant-landlord relationship:

#1 – Have the right mindset.

First and foremost, being able to handle a tenant well starts with having the right mindset. Treat your property like a 1-bedroom hotel. This is because your tenant becomes your client. You want your clients to enjoy their stay and to continue paying rent so that you can cover your mortgage payments. If the tenant calls for some repairs, then respond within 24 hours and fix it (as long as the repairs are within reason of course). The worst thing for you to do is to be an absentee landlord. Being an absentee landlord will cause to your tenant to be more reckless in your unit.

#2 – Setting the precedent with late payments.

The second thing to keep in mind is setting the precedent at the start of the lease. At the start of the lease, I always inform my tenants that if they are going to be late paying for rent (whether there is an excusable reason or not), I will always serve the N4 immediately. The N4 is the notice of late payment. The reason why you want to do this upfront (i.e., on the very first day of being late for the rental payment) is that the N4 must be served 14 days before the next steps can be taken for eviction. The longer you hold out on serving that N4, the more problems you may have in the future, especially if the tenant has more issues than just not being able to make their rental payments. Furthermore, the upfront N4 sets the precedent that you will not tolerate any late payments. Remember, every late or missed payment is a mortgage payment coming out of your own personal pocket!

#3 – Do regular inspections and check up on your property.

The third thing is to always do an inspection every 6 months. You are legally allowed to do an inspection as long as you give 24-hour notice. I usually do this during the summer months and a few weeks before Christmas. Letting the tenant know that you will inspect the unit every 6 months will make them take care of the property better. Furthermore, it lets you check in on them every 6 months to make sure no major damages have been made. Remember, you’ve made a major financial investment in this property, so showing up once every 6 months for inspection should be the easy part.

#4 – Be NICE!

The final thing that I’d like to add is that during my Christmas inspection visits, I usually bring a small gift. Either a bottle of wine or a Starbucks gift card as a token of my appreciation. As much as I like to run my properties like a business, I don’t like to come off cold to people who are helping me pay off the mortgage on my investment property. For that, I am grateful and appreciative of them.

The Wrap – So if you follow those 4 steps, you’ll likely avoid a lot of the tenant issues that other people may have. I find that being a good landlord is like walking a fine line between running the property like a business and being nice enough but not a pushover at the same time. I hope that helps to set some ground rules for your next tenant-landlord relationship. Trust me, it’ll be a lot easier to handle tenants following those steps above.

Until Next Time, Happy Real Estate-ing,

Landlord Lesson #4 – Top 5 To-Do’s When Choosing Your Next Tenant

Published on 5th December 2019

One of the scariest things about real estate investing is finding the tenant that will cover your carrying costs on your property. This is usually the last step of the entire investing process. There is always worry about finding a terrible tenant who will make your life a living hell. Do not worry, and do not fret as I’ll share my top 5 to-do’s when choosing your next tenant. Most Realtors normally opt to NOT openly share this type of information with you, but I find that if you’re armed with this kind of knowledge, then real estate investing is really not that scary after all.

If you want to take a full, in-depth dive into how to attract the best tenants, you can read that Insight Article here,

READ: How to Find the Perfect Tenant

The Insight Article above is a guide for attracting the best tenants, but this Insight Article today sheds light on what you should do when you’ve found some potential tenants and the best way to screen them. So here it is, the top 5 to-do’s when choosing your next tenant:

#1 – Always consult Google and social media.

We live in the digital age where almost anyone’s phone can be used to do a quick Google search to learn about something or someone, almost instantly. So make sure you always do a quick Google search on who your prospective tenants are. It literally takes 2 minutes. I always check their Facebook, Instagram, LinkedIn and Twitter pages. The types of social media posts or comments they make, or the type of professional background they have is often indicative of what type of person they are (you can often get a general gauge). If the prospective tenant owns a pet, it’ll likely be on Instagram. If they party a lot, there will be a lot of tagged photos of them on Facebook. Also, check their LinkedIn profile to see if their job references line up with what their tenant application shows. If there are any red flags, don’t trust them with your property. If there is nothing substantial found from these social media searches, then proceed to the next step.

#2 – Use Narborly.

This one is important if you are not hiring a Realtor. Narborly is a free tool for landlords to use artificial intelligence to screen tenants. Narborly will conduct a background check on your prospective tenants using their tools. When their check is complete, they will provide you with a full report and score. You just simply need to enter their name and the address of your property, and then your prospective tenants will fill out the application. In 2 to 3 business days, you will get a full report with a score out of 100. I usually look for a score of 75+ on the Narborly report.

#3 – Know how to read credit reports.

This one may be difficult because most people who have seen a credit report will generally have only seen their own. I’ve had the liberty of reviewing hundreds of credit reports and know how to read between the lines. So what I generally look for is how much money is owed by the prospective tenants and if they have made any late payments. Here are a few other things that you should look for in the credit report that will determine if your prospective tenants are financially responsible enough to be your tenant:

  • No late payments. Most reports have an area for 30/60/90-day late payment. If there are multiple 60 or 90-day late payments, then that is a red flag.
  • High credit utilization. Look for someone who doesn’t utilize the maximum amount of credit available via a credit card or a line of credit. If the credit utilization is close to being full, then it means that your prospective tenant is always in debt.
  • Look for outstanding student loans and car payments, and see how large of a payment is required each month. If these payments are large, then make sure their gross income is high enough to cover these other monthly obligations.
  • Look for mortgage debt. This one may sound weird but a lot of the times, life circumstances may cause the prospective tenant to require an additional place to live. Make sure the mortgage debt plus the rent is sustainable for their income.

#4 – Understand the gross-income-to-rent ratio

I generally try to make sure the gross income is 3 times that of the rent. This means the gross income shown must be greater than 3 times that of the rent that will be collected in 1 year. An example of this would be if your property is listed at $2,000 per month. This means that in 1 year, the prospective tenant will owe you $24,000 (12 x $2,000). The minimum income that I would look for is 3 times that amount, which would be $72,000 gross income per year. If they earn less than that, it could be a red flag.

#5 – Always call past references.

In the tenant application, there is an area for past landlords. If there are names and numbers available, then you should 100% call their past landlords. Here are a list of questions that you should ask the previous landlord.

  • What was the previous address of the prospective tenant? This allows you to verify that the reference is real.
  • Why did your prospective tenant move out? This helps to determine what the reason for the move was.
  • Did your prospective tenant miss any rental payments?
  • Did your prospective tenants have any bounced cheques?
  • Did your prospective tenants cause any damages?
  • Did you have any complaints about the property while they lived there?
  • Did the prospective tenants have any complaints?

The Wrap – So there you have it, those are the top 5 to-do’s when choosing your tenant. Keep in mind that no matter how well you can screen a prospective tenant, there can always be bad apples out there. The bad apples can cause you some major headaches, so that’s why it’s good to arm yourself with the knowledge of the landlord tenant board – I’ll be going over just that in the next 2 weeks so stay tuned!

Until Next Time, Happy Real Estate-ing,


Landlord Lesson #3 -Top 5 Things I Wish I Knew Before Being a Landlord

Published on 28th November 2019

As the idea of having passive income becomes more and more popular, I find that there has been an increasing number of people inquiring about real estate investing in the hopes of replacing their income. If you work towards this goal hard enough, it is possible and there have been many people who have accomplished this. However, let me warn you though that there is nothing fancy or great about being a landlord. I understand that there is pride of ownership for your own home and your investment properties, but I can tell you for a fact that I don’t know anybody who wakes up in the morning and says “I can’t wait to be a landlord today!” So here are the top 5 things I wish I knew before being a landlord.

#1 – NEVER rent to your family and friends.

This one is a trap that so many people fall into. This may happen because you don’t want to go through the hassle of finding a tenant because it’s too much work, but you know a friend who needs a place to live. Since you know them from before and they’re not a stranger, you inherently trust them to take care of your property. Does that sound familiar? Well, it happens all too often. Don’t fall into this category! As harsh as it may seem, never rent to family or friends because getting them out is always going to be extremely hard. Increasing their rental rate will always be hard as well. They will likely pull the family or friend card on you to guilt-trip you into doing things that are in their best interest (but not necessarily yours). They may also not be taking care of your property in accordance with your expectations, and getting them to meet your expectations may be a touchy subject for you to bring up. Even if you outline all of the terms of engagement in advance, the situation may get sticky in the future. You can think of this as having the same feeling as if you were to lend money to a friend. It’s awkward to ask for that money back when you need it, or worse yet, it affects the relationship.

#2 – Treat your investment property as a business.

This will keep coming up in this series of Landlord Lessons. You must treat your investment property as a business. It produces income in the form of cash flow for you, so treat it like a business. A business needs attention to grow and blossom, and so does your real estate portfolio. If there is maintenance that requires your attention, then fix it. If you need to serve late payment notices (i.e., N4 from the Landlord Tenant Board), then serve them right away. This is especially true for tenants who give you excuses for late payments all the time. If the cost of carrying your property increases, which it does every year, then increase your rent.

READ: Landlord Lesson #2 – Why You Should Always Increase Your Rent

Don’t fall into the trap of being emotional or lazy. If you’re overly emotional or lazy at your 9-5 job, then chances are, you won’t be very successful. If you want to create wealth with real estate, then you must treat it as a business.

#3 – Late night calls actually happen very infrequently.

Everyone is worried about a late night call at 3 AM from tenants. This has a lot to do with the expectations that you place on being a landlord. Very rarely do you actually need to pick up a call at 3 AM unless it’s for a leak. If you own a condo, the tenants will very likely call the concierge at 3 AM. There is really nothing you can do about it even if you show up to the condo, I mean unless you’re a licensed plumber. Although you need to be accessible to your tenant, you don’t need to be accessible 24/7. Constantly catering to your tenant’s every need makes them rely on you for absolutely everything – that’s an expectation that you do NOT want to set from the get-go. My general rule of thumb is that if there’s a leak, then respond immediately, otherwise for most other things, a response within 24 hours is sufficient. If this is a huge obstacle for you to overcome, then just hire a property manager. Property management is worth every penny if you are nervous about being a landlord, or if you don’t like to deal with people in general.

#4 – Always have an emergency maintenance fund.

My general rule of thumb is to have 3 months of mortgage payment in the bank for emergency funds. If there are any late payments or repairs/replacements that need cash, then you have the funds for it. Try to keep all cash flow earned in the emergency fund until you can bank up 3 months of mortgage payments. If the property doesn’t cash flow well, then put 2 months of mortgage payments in the bank account upon closing, in essence treating it as part of the closing costs.

#5 – Do not be an absentee landlord.

This one is super important and I’ll go more in-depth about this later in the Landlord Lesson series. Being an absentee landlord usually leads to damages because the tenant doesn’t think you care about the property. By not addressing your tenant’s issues in a timely manner, this leads to bad communication and when something big does happen, all of the smaller things that you never tended to bubbles over. You don’t have to be hyper-responsive, just treat it like a business and provide timely responses. If your tenant is a client, you would respond to your client within a reasonable timeframe.

The Wrap – So those are the 5 top things that I wish I knew before becoming a landlord. If you are really concerned about buying your first investment property, I hope these insights have helped ease your concerns. Being a landlord may seem daunting because of the horror stories told by many, but those stories are honestly far and few in between. The rewards you that reap as a real estate investor far outweigh the fears and downsides of being a landlord. If you are on the fence and don’t know what to do, please don’t hesitate to reach out to me at Zhen@PrimePropertiesTO.com, and we’ll find the appropriate property for your next investment.

Until Next Time, Happy Real Estate-ing,


Landlord Lesson #2 -Why You Should Always Increase Your Rent

Published on 21st November 2019

Notice to Reader – I must warn you that this Insight Article may spark some controversy for anyone who is NOT a landlord. But alas, I have to share this insight with landlords. For tenants, it’s a terrible feeling when your landlord increases your rent (and I can empathize as a former tenant myself), but from the other side of the coin, increasing the rent is something that ALL LANDLORDS MUST DO.

Addressing the Elephant in the Room – Most people are afraid of being landlords and are anxious about the whole notion of dealing with tenants because they think it’s all about fixing toilets at 3:00 AM in the morning. Oftentimes, these large mental roadblocks stop them from actually being invested in building some serious side hustle money. This Insight Article is meant to equip you with some tips and tricks, so that you can become a more confident landlord and investor.

One of the biggest tips is to ALWAYS increase your rental rate (when you can). This is a MUST. I often get a lot of push-back from clients on why they don’t want to increase their rent when the renewal period comes along. Typically, the reason is that they have a good tenant in their property and they don’t want to lose them, or the cost of filling the unit is too much (learn more about how to fill a unit, step-by-step, in the link below). I wouldn’t want my tenant to be upset either (this is a valid reason), but allow me to explain why you should be charging ahead and leave the emotions behind.


It’s All Business – I’ve always told all of my clients that they should treat investment properties like a business. To some, this may sound really cold and harsh, but you have to remember, you’re the one carrying the cost of your investment property.

  • When taxes go up each year, you pay;
  • When condo fees go up each year, you pay;
  • When insurance goes up each year, you pay;
  • If interest rates increase, you pay.

That’s a lot of payments you’re responsible for. So if you don’t increase your rent, then who will be responsible for covering these rising costs? Without increasing your rental rates, all of these price increases will eat into your monthly cash flow, and maybe even put you in the negative.

When the minimum wage jumped by a few dollars in 2017, the cost of labour increased. Guess what happened as a result? Business owners went on to increase their prices so that they could still hit their profit targets. Unfortunate for buyers, but this is standard practice because you need to retain margins in order to continue the business.

The Message – If you’re afraid of negotiations or afraid to have that hard conversation with your tenant, then you can say something along the lines of this via whatever communication method you prefer – see below.

Dear Best Tenant in the World,

As you know, your lease will be coming up shortly. Thank you very much for taking care of my property so far. If you would like to continue staying at 123 Main Street, unfortunately, the new rent will be X. As you know, my monthly costs have increased due to taxes, insurance, and inflation. Let me know if you wish to stay at 123 Main Street. Please let me know your response in a week’s time.

If they agree to your proposed rent increase, don’t forget to use the Landlord and Tenant Board’s N1 form. Here’s the link to that form: N1 Form 

In the Numbers – If you’re an empirical, numbers person like me, perhaps a few numbers will help explain how much money you’re losing by not increasing your rent. This year, the maximum allowable rental rate increase is 1.8%, and although 1.8% doesn’t feel like it can add up to a lot, keep in mind that you can compound the rental increases each year.

Below is a chart for you to see how much money you could be losing by not increasing your rental rates:

This example uses a $2,000 rental property, which is basically a junior 1-bedroom unit in downtown Toronto. Over the first year, if you don’t increase the rent, then you lose almost $2,000 in the first year. However, over the course of 5 years when compounded, that’s over $20,000. That’s not a small amount by any means.

Secondly, if you have a vacancy, you should always increase your rent to at least the going market rent. In our current market, I always recommend listing the property above the market rent because I’ve been doing this for a while now and the rental demand is so strong that there is a high likelihood that someone is willing to pay above the market rent.

The Wrap – Ultimately, you should always increase your rent by the allowable amount. If you have a vacancy, you will want to increase it higher than the market.  More on that to come in the coming week but the underlying reason is the higher the initial base rent, the better off you will be in the future because you can only increase it by approximately 1.8% per year. Leaving it empty for one month and getting a much higher rental rate is going to pay off in the future. If you take the emotions out of real estate investing and treat it like a business, then you’re on your way to building your very own real estate empire!

Until Next Time, Happy Real Estate-ing,

Landlord Lesson #1 -How to Be a Landlord

Published on 14th November 2019

Over the next few weeks, I’ll be releasing a series of Insight Articles on how to be a great landlord. I’ll be talking about a lot of the essentials such as finding the right property and crunching the numbers, but I’ll also be shedding some light from the investor angle as well, that is, some tips and tricks for investor landlords.

The Fears – I know the fear of being a landlord is usually top of mind for most first-time investors. They’re afraid of:

  • Late-night calls;
  • Damages to the property;
  • Late payments;
  • Vacancies;

Simply put, there many fears when you’re thinking about being a landlord, so that’s why I wanted to take these next few weeks to shed some light on how to be a landlord, THE RIGHT WAY. Hopefully, after all of these tips and tricks, you will have the landlord confidence that you need to buy your next investment property. When that time comes, give us a call at 416-436-9436. The team at PPTO is here to support you through your landlord journey!

So without further adieu, I’ll start off this series with “Landlord Lesson # 1 – How to be a Landlord”.

Landlord, Defined – Technically speaking, once you own a property and you put a tenant in there, you become a landlord. The actual term is “lessor”. There is no license required to be a landlord (except for Waterloo) or any pre-requisite education. You just simply need to have a tenant in your property and you become a landlord. It’s as simple as that.

The Mind of a Landlord – What’s hard about being a landlord is the mindset that’s required. It’s like being a Realtor – easy to become one (that’s why there are so many out there), but it’s hard to be a good one. Being a landlord is easy, but I have yet to meet a person who has expressed to me how much they aspire to be a landlord (and all of the duties that come with it). People have told me that they can’t wait to own an investment property, but no one ever says, “I can’t wait to be a landlord!”

The difference between being a landlord and being an investor is that an investor owns an investment property to specifically leverage it for financial rewards – the why and the underlying motivator. On the other hand, a landlord deals with the operations and up-keep of the property – the how. Nobody wakes up in the morning passionate about being a landlord, and telling themselves, “I can’t wait to deal with all of these potential tenant issues.”

Timing is Everything – The other daunting thing about being a landlord is that the issues always seem to arise at a time when it causes the most problems and is the least convenient for you. You never get a 1-week notice for when the furnace breaks down, and you never get a 1-day notice for a 3AM late night call. It’s always a surprise – a bad surprise might I add.

The WHY for Landlords – So then why are there so many landlords? The act of being a landlord gives us financial wealth. It’s similar to having a job. You may like it, or you may not like it. But the real question that you should ask yourself is, “If your job doesn’t pay you for what you do, would you still do it?” This is the same for being a landlord. People choose to be a landlord because the financial rewards are that great.

If the rewards are that great, then what’s the golden nugget for how to be a great landlord? I’ll bring this up many times over the course of this Landlord Lesson series, but I would have to say that being a great landlord comes with having the right mindset. You need to have the mindset of operating your investment properties as a business. I’ll go into this in more detail over the course of the upcoming weeks, but that is truly what I think would make or break being a good landlord.

The Wrap – I always like to remind my clients that when the proverbial sh*t hits the fan, you may spend 5 hours dealing with this unwanted surprise and it’s always at the worst possible time. However, those 5 hours are probably all that you need to do for the year as a landlord to make $50,000 from your investment property. So if you find yourself in these unwanted landlord situations, ask yourself whether your time is worth $10,000 per hour. More often than not, the answer is usually yes.

If you’re ready for the rest of this Landlord Lesson series, then stay tuned for more. If you’re ready to invest in your next income property already, then make sure you contact Zhen at Zhen@PrimePropertiesTO.com to get started today.

Until Next Time, Happy Real Estate-ing,