Wealthy Landlord wants sympathy

[TylerM4]

Some landlords do not exercise the allowed annual increase every year. That's what I referred to as "slacks". A bad mistake.

Yes. Absolutely agree with you.

So that brings the following questions to my mind:
- How have you determined that the landlord in the this example has made those mistakes?
- Recognizing that max rent increases for the prior 5 years have been lower than annual inflation rate for those same years, can you help us understand how landlords wouldn't be facing this problem of "max rent increases don't keep up with annual inflation" if they didn't make this mistake?

[countmeout]

Regardless - I think it's a stretch to identify someone as "not very smart" for not planning for inflation rates that haven't been seen in 40 years.

Exactly!

[TylerM4]

I've already explained that many times here. And I'll repeat it again ... In this economy, there is absolutely no way a landlord would keep a tenant for such a long time that causes him financial loss. He would first try to renegotiate the rent, and if unsuccessful, he would evict for personal use, leave it empty for 6 months, and re-rent at market price again.

Less than 1 month ago there was a castanet news article about a kelowna landlord losing a $12k lawsuit for doing exactly what you are suggesting. I'd call this plan risky instead of smart.
https://www.castanet.net/news/Kelowna/4 ... ing-tenant

[countmeout]

I've already explained that many times here. And I'll repeat it again ... In this economy, there is absolutely no way a landlord would keep a tenant for such a long time that causes him financial loss. He would first try to renegotiate the rent, and if unsuccessful, he would evict for personal use, leave it empty for 6 months, and re-rent at market price again.

Less than 1 month ago there was a castanet news article about a kelowna landlord losing a $12k lawsuit for doing exactly what you are suggesting. I'd call this plan risky instead of smart.
https://www.castanet.net/news/Kelowna/4 ... ing-tenant

Yup, not "smart" by any means!

[BC Landlord]

- How have you determined that the landlord in the this example has made those mistakes?

I have no knowledge of that. Just my gut feeling. And I trust it.

- Recognizing that max rent increases for the prior 5 years have been lower than annual inflation rate for those same years, can you help us understand how landlords wouldn't be facing this problem of "max rent increases don't keep up with annual inflation" if they didn't make this mistake?

Change tenants often, and you are in synch with the market rent all the time. And I don't feel very good about hurting tenants, but this is an economic reality. This is exactly what rent controls do.

[TylerM4]

Change tenants often, and you are in synch with the market rent all the time. And I don't feel very good about hurting tenants, but this is an economic reality. This is exactly what rent controls do.

Overlapping posts. I'll accept this when you can explain how to ensure tenants are changed often without losing a $12k lawsuit.

I agree with the rest - it's a poor system that forces landlords to quit or break the rules. I' wasn't willing the break the rules or risk the lawsuit which is why I'm no longer a landlord. The only thing we disagree with is the suggestion that the landlord in this example isn't very smart.

[BC Landlord]

Less than 1 month ago there was a castanet news article about a kelowna landlord losing a $12k lawsuit for doing exactly what you are suggesting. I'd call this plan risky instead of smart.
https://www.castanet.net/news/Kelowna/4 ... ing-tenant

He was stupid, re-renting it before the 6 months mandate expired. That's why he got dinged. What I am talking about here is legal stuff. You just can't deny landlords a personal use of their property.

[TylerM4]

He was stupid, re-renting it before the 6 months mandate expired. That's why he got dinged. What I am talking about here is legal stuff. You just can't deny landlords a personal use of their property.

My mistake. I read the dates wrong.

Skipping 6 months of rent is the equivalent of losing years of profit for a landlord. Losing 6 months of rent to re-rent at a 20% increase would take 2.5 years just to break even. I don't think the plan is viable even without the risk of lawsuit.

[BC Landlord]

Overlapping posts. I'll accept this when you can explain how to ensure tenants are changed often without losing a $12k lawsuit.

It's pure math. At the market rent going 20% up annually, after 3-4 years of tenancy, it makes economic sense to evict, lose 6 months of rent, just to catch up with the market. And no lawsuits, if you respected the 6 months mandate.

[TylerM4]

It's pure math. At the market rent going 20% up annually, after 3-4 years of tenancy, it makes economic sense to evict, lose 6 months of rent, just to catch up with the market. And no lawsuits, if you respected the 6 months mandate.

I think you need to look at that math again. How are you going to achieve 20% annual increases and still be ahead when you can only collect 50% of the annual rent (unit must sit empty for 6 months every year)? Or if you only do that once every 3-4 years, how are you going to be ahead in 3-4 years when you start with today's market rate and it takes 2.5 years just to break even with the loss you took to get to rate that is 2.5 years behind where it should be?

[BC Landlord]

Losing 6 months of rent to re-rent at a 20% increase would take 2.5 years just to break even.

I don't think it would take that long, but I do not like people taking advantage of me. Pay rent as it's worth, or leave.

[TylerM4]

I don't think it would take that long, but I do not like people taking advantage of me. Pay rent as it's worth, or leave.

Doesn't really matter what you think it's a fact that's easily proven:
Let's assume $1000 a month as it's an nice easy number to work with. Same is true for any starting number. To make up for 6 months loss of rent we need to recover $6000.
A 20% increase means rent increases from $1000 to $1200 a month. That means we're collecting an extra $200 a month. It would therefor take 30 months to recoup that $6000. 30 months is 2.5 years.

I think this landlord is owed an apology. It's been determined that he has been accused of being not very smart for:
- not relying on luck with tenants changing every year or two.
- based on gut instinct
- for not planning for market extremes not seen in the last 40 years
- for not utilizing a process that doesn't make financial sense

[BC Landlord]

I think you need to look at that math again.

No need for revisiting it. I ran a spreadsheet here. At 20% annual market increase, and at 2% allowed rent increase, it takes about 46 months into tenancy to make an eviction economically sound. And this is considering the 6+1 months of rent revenue loss.
Fortunately, I have never been in a position to make such a decision. I have never had tenants stay for a longer than 2 years.

[TylerM4]

No need for revisiting it. I ran a spreadsheet here. At 20% annual market increase, and at 2% allowed rent increase, it takes about 46 months into tenancy to make an eviction economically sound. And this is considering the 6+1 months of rent revenue loss.
Fortunately, I have never been in a position to make such a decision. I have never had tenants stay for a longer than 2 years.

Respect. Thank you for the debate and for your positive attitude.

[Catsumi]

I have seen one of BCLLs rental properties, absolutely gorgeous. Had I rented from him and not bought instead, I’d be his worst nightmare as I’d stay for a decade!