Real Estate

Assuming tenant lease

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  • Sep 8th, 2017 12:20 am
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[OP]
Newbie
Mar 29, 2017
57 posts
7 upvotes

Assuming tenant lease

I'm looking to buy an investment property. It is tenant-occupied until 2018. The rent is below market rent and I would like to increase it when the lease expires. Anything I should be aware of? Tips?
20 replies
Member
Jun 15, 2017
298 posts
129 upvotes
Damiar wrote:
Sep 5th, 2017 10:59 pm
I'm looking to buy an investment property. It is tenant-occupied until 2018. The rent is below market rent and I would like to increase it when the lease expires. Anything I should be aware of? Tips?
If you assume same lease, you cannot increase by more than inflation rate as per new rules
Deal Addict
Nov 22, 2004
1395 posts
376 upvotes
Best bet is to let the seller know how much you want to increase the rent by. The tenant will either accept or refuse. If he refuses, the current owner can give him notice to move out since the property will be sold to a new owner. At that point you will have to find a new tenant.

Edit: Ignore the above, misread the scenario; corrected by dirtmover and cartfan123 below.
Last edited by Clueless Fox on Sep 5th, 2017 11:03 pm, edited 3 times in total.
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Jun 15, 2017
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You can increase for a new tenant after current tenant vacate

Calculate one month rent as fee to realtor and idle time mortgage and check if its offset the rent price diff between market value and leased value
[OP]
Newbie
Mar 29, 2017
57 posts
7 upvotes
Thanks. How do I guarantee that the current tenant vacates at the end of their lease and do not switch to month-to-month? I don't mind the below market rent but only for the duration of the current lease. Longer than that then it starts to hurt my margin.
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Jun 15, 2017
298 posts
129 upvotes
Damiar wrote:
Sep 5th, 2017 11:08 pm
Thanks. How do I guarantee that the current tenant vacates at the end of their lease and do not switch to month-to-month? I don't mind the below market rent but only for the duration of the current lease. Longer than that then it starts to hurt my margin.
No guarantee
What kind of property is that?
Where?
[OP]
Newbie
Mar 29, 2017
57 posts
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Lavaris wrote:
Sep 5th, 2017 11:19 pm
No guarantee
What kind of property is that?
Where?
It's a 2 bed condo in Niagara,Toronto area
Member
Jun 15, 2017
298 posts
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Damiar wrote:
Sep 5th, 2017 11:58 pm
It's a 2 bed condo in Niagara,Toronto area
I think 2 BR has less attrition rate, so they may stay long time...especially with market rent value...motive to move..they have to change city or buy a house
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Sep 8, 2007
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Way Out of GTA
Clueless Fox wrote:
Sep 5th, 2017 11:03 pm
Best bet is to let the seller know how much you want to increase the rent by. The tenant will either accept or refuse. If he refuses, the current owner can give him notice to move out since the property will be sold to a new owner. At that point you will have to find a new tenant.
This is incorrect. The current owner cannot simply give notice that the property will be sold to a new owner so here's your 60 days. Notice to vacate can only be given upon sale if the new purchaser intends to occupy the premises themselves / family member. At that point the tenant must be notified in writing of this and with adherence to timelines. If the property is being marketed and may sell to an investor there is no allowance for any sort of vacancy notification, nor can rent be increased outside of guideline (hence it will remain below market as long as the tenant chooses to stay there), nor does the tenant have to sign a new lease. At lease expiry in 2018 it is again subject to capped increases and allowed to continue on a month to month basis.

Bottom line: if an investor in buying a property that is tenanted whether there's month to month or year lease in place, there is literally no mechanism to increase rent beyond the preset limit. You cannot flush a current tenant out or adjust the terms by simply having a new owner take over. An investor looking for market rents either needs to buy a place with a tenant that's at already market or buy a vacant property or one where the tenant has given notification that they are leaving.
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Nov 2, 2005
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Ottawa
Clueless Fox wrote:
Sep 5th, 2017 11:03 pm
Best bet is to let the seller know how much you want to increase the rent by. The tenant will either accept or refuse. If he refuses, the current owner can give him notice to move out since the property will be sold to a new owner. At that point you will have to find a new tenant.
Hmm, no he can't and given your occupation I'm surprised at your lack of knowledge of the relevant legislation. Selling a property does not allow the current owner to terminate a lease that otherwise runs until 2018. Any active lease will transfer to the new owner until it ends. Now, the tenant may agree to an increase but anything above guideline may well come back to bite you in the a$$ with interest. He may also voluntarily agree to early termination but would be crazy not to seek some financial incentive to do so.

OP,
1. At minimum you're sol until the current lease runs out in 2018 at which point you may take the property back for personal use upon compensating the current tenant with one months rent. After a period of time has elapsed you may seek rent the property out again without fear of penalty.
2. Never buy a tenanted property even if your ultimate intention is to rent it out.
3. If you wish to proceed and make an offer on this place make it conditional on the property being vacant, this way the current owner has to do whatever it takes to get his tenant to move out.
[OP]
Newbie
Mar 29, 2017
57 posts
7 upvotes
dirtmover wrote:
Sep 6th, 2017 8:15 am
Hmm, no he can't and given your occupation I'm surprised at your lack of knowledge of the relevant legislation. Selling a property does not allow the current owner to terminate a lease that otherwise runs until 2018. Any active lease will transfer to the new owner until it ends. Now, the tenant may agree to an increase but anything above guideline may well come back to bite you in the a$$ with interest. He may also voluntarily agree to early termination but would be crazy not to seek some financial incentive to do so.

OP,
1. At minimum you're sol until the current lease runs out in 2018 at which point you may take the property back for personal use upon compensating the current tenant with one months rent. After a period of time has elapsed you may seek rent the property out again without fear of penalty.
2. Never buy a tenanted property even if your ultimate intention is to rent it out.
3. If you wish to proceed and make an offer on this place make it conditional on the property being vacant, this way the current owner has to do whatever it takes to get his tenant to move out.
Thank you. This unit would have sold higher if not for the issues you mentioned.
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Dec 13, 2016
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how much below market rate?

This year you could only increase rent by not even 2%
Clueless Fox wrote:
Sep 5th, 2017 11:03 pm
Best bet is to let the seller know how much you want to increase the rent by. The tenant will either accept or refuse. If he refuses, the current owner can give him notice to move out since the property will be sold to a new owner. At that point you will have to find a new tenant.

That would have worked before the communists took over.
Deal Addict
Nov 22, 2004
1395 posts
376 upvotes
dirtmover wrote:
Sep 6th, 2017 8:15 am
Hmm, no he can't and given your occupation I'm surprised at your lack of knowledge of the relevant legislation. Selling a property does not allow the current owner to terminate a lease that otherwise runs until 2018. Any active lease will transfer to the new owner until it ends. Now, the tenant may agree to an increase but anything above guideline may well come back to bite you in the a$$ with interest. He may also voluntarily agree to early termination but would be crazy not to seek some financial incentive to do so.

OP,
1. At minimum you're sol until the current lease runs out in 2018 at which point you may take the property back for personal use upon compensating the current tenant with one months rent. After a period of time has elapsed you may seek rent the property out again without fear of penalty.
2. Never buy a tenanted property even if your ultimate intention is to rent it out.
3. If you wish to proceed and make an offer on this place make it conditional on the property being vacant, this way the current owner has to do whatever it takes to get his tenant to move out.
cartfan123 wrote:
Sep 6th, 2017 8:32 am
Here's some good reading for OP and Clueless Fox

https://landlordselfhelp.com/media/2007 ... operty.pdf
Sorry guys, late night - I had misread the scenario; I've edited my post above. You're right, and thanks for the link. Cheers.
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Realtor @ Royal LePage United Realty

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