This may come as no surprise especially with the limitations on real estate showings during this global pandemic. Fewer investment properties are renting right now. And they’re taking a longer time to rent.
I work with investment clients and several of them have investment properties are for renewal in the coming months. I was curious to see how COVID-19 affected rentals.
My colleagues were sharing stories about how their rental listings have been on the market for weeks with minimal (and sometimes zero) activity.
I wanted to dig deeper and see what was going on.
Most of the investors I work with own condos in Toronto’s “E09” district — around Scarborough Town Centre. I myself own an investment condo there so it made sense to look here.
During the period of April 1 to 20, 2020, 10 condos in the Scarborough Town Centre area were leased. Compared to the same period in 2019, a total of 29 condos leased.
That’s a drop of 65.5%!
But how many condos were actually listed for lease when comparing the same period?
In 2019 — 41 condos were listed for rent.
In 2020 — 27 condos were listed for rent.
The inventory of condos for rent in the Scarborough city centre area dropped 34.1%.
Condos in Scarborough’s city centre typically lease faster, and for much lower rents than downtown Toronto. It wouldn’t be fair to compare the two areas (downtown Toronto versus Scarborough city centre), but to gauge if this drop in number of rentals is in line with what’s going on in the market, let’s compare the two areas anyway.
Downtown Toronto condos fall into the Toronto Regional Real Estate Board’s Toronto C01 and Toronto C08 districts.
Let us compare 2019 and 2020 figures for the April 1 to April 20 leasing period to find out if the 65.5% drop in Scarborough’s city centre can be seen elsewhere.
In Toronto C01, 617 condos were leased during this time period in 2019. In 2020, only 234 were leased — a 62% drop.
In Toronto C08, 302 condos leased in 2019. In 2020, only 124 were leased — a 58.9% drop.
Now let’s look at how many condos were actually listed for lease in these two downtown areas comparing 2019 and 2020.
In 2019, Toronto C01 had 776 condos listed for rent and Toronto C08 had 358 listed for rent.
In 2020, Toronto C01 had 1,006 for rent and Toronto C08 had 392 listed for rent
That’s an increase of 29.6% and 9.4% respectively.
Unlike Scarborough’s city centre, Toronto’s downtown condo districts saw an increase in listings for rent in 2020 despite a decrease in numbers of units actually rented.
This means supply is outpacing demand, which could affect monthly rental rates if the trend persists.
Why are fewer condos being leased during this pandemic?
What does this mean to condo investors who currently own a unit and whose rent is up for renewal?
What would happen if you listed your investment condo for rent today?
Does it still make sense to buy an investment condo?
Let’s answer these questions one by one.
Why Fewer Condos Are Renting
The condo rental market has been ‘hot’ over the past several years. The global pandemic has taken a bit of steam out of the rental market.
There are several reasons why fewer investment condos are renting right now.
Many condos throughout the GTA have placed restrictions on showings. On the province’s own website, tenants and their agents must provide 24 hours notice to show a rental property (which is normal anyway). Showings must be between 8am to 8pm. And physical distancing must be practiced.
A lot of condos have restricted access to residents and current tenants, making it difficult for rental properties to be shown. This means landlords renting out their units have to rely on virtual showings and tenants making offers without seeing the rental property.
Going out and seeing rental properties also proves challenging because of physical distancing and simply the fear of going out and getting exposed to COVID-19.
Is Your Tenant Up For Renewal?
If you’re good at managing your rental condo, you would have given them a notice of rent increase three months prior to their renewal. If not, that’s okay — having a tenant paying rent right now is good for you and your investment.
Speak with your tenant and see if they’re planning to stay.
Work with your tenant if they’re having difficulty as a result of a recent job loss, financial challenges or lifestyle changes.
If they intend to move, make sure you prepare well in advance so you can properly market your rental condo and find the next suitable tenant.
In challenging times, and in good times, it always makes sense to have open communication with your tenant.
Listing Your Condo For Rent Today
You need to adjust your pricing strategy depending on how many rental listings in your market. You or your Realtor should have a look at what other rental units in your building are listed for. Compare it to the rental units in nearby buildings as well.
How many of them are currently on the market?
How many days have they been listed?
For units that were recently leased, how long did it take?
There are still cases where multiple offers for rental units happen. Currently, and generally speaking, condo rentals are taking longer to rent.
Some condo units for rent are seeing minimal to no showings partly due to the increase in listing inventory and partly due to showing restrictions.
Make sure you work out a proper strategy with your Realtor so you can market your rental condo listing and quickly find the right tenant.
Should You Still Invest in a Rental Condo?
Investors seek opportunities. While sales are down in this market, prices remain somewhat stable. If you’re looking to invest based on cash flow, the numbers you’d see today are not that much different if you compared them to a month or two ago.
Motivated sellers who need to unload their condo unit might be willing to negotiate a price that works with your investment goals, but you need to look for those situations.
Due to the limitations in selling right now, there are opportunities but it all depends on what your investment goals are, what area you’re looking in, and how well you’ve got your financing in order.
Figure out your goals, have a look at some listings, then crunch your numbers to see if this is the market that’s right for you to invest in.
Photo by Nadine Shaabana on Unsplash