Quietly during the dog days of summer, the Ministry of Municipal Affairs and Housing released its allowable rent increase for the period between January 1, 2014 to December 31, 2014. The rent increase for 2014 is capped at a maximum of 0.8%, yes zero point 8 of a percentage point. Click here for the Ministry of Municipal Affairs and Housing news release.
2014 Ontario Rent Increase: The Good
There are a few exemptions to rent control if one of the following conditions is met:
- If you are real estate investor who owns a condo that was built after June 17, 1998, then it is not subject to rent control which means the real estate investor/landlord can increase rent to an amount the market can bare without the tenant moving out.
- If the rental unit has not been rented since July 29, 1975. A good example if one decides to convert their basement into a separate rental apartment. Again in this case, the rental unit is exempt from rent control.
2014 Ontario Rent Increase: The Bad
When was the last time property taxes, hydro rates, heating prices, water & sewers and insurance costs all went up by a total of 0.8%? It is important as a real estate investor to have utility costs (heat, hydro, water & sewers) paid for by the tenant. Having the tenants pay for utilities puts the responsibility on the tenants' shoulders to conserve energy and pay for what they use.
Controlling rental increase at 0.8% reduces the real estate investor's cash flow as expenses rise. No business owner (real estate investor) would be happy with less cash flow from their business venture.
2014 Ontario Rent Increase: The Ugly
One phrase caught my attention in the news release: "This year’s rate will be the second lowest in history". Is this something to be proud of? I will leave that for you to decide.
Keep in mind, if your tenant moves out, you are allowed to increase the rent to what the market can bare. However, if the tenant is staying, an N1 or N2 must be provided with 90 days notice of the rental increase per the Ministry's guidelines.
If you are looking to start investing in real estate and not sure where to start or an existing real estate investor looking to grow your positive cash flow portfolio, please contact Nawar.