Surging Single Family Rentals

Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now, here's your hosts, Carla Browne and Adrian Schulz, Canada's rental property experts.

Carla Browne (00:18):

In today's episode, we are talking about a headline that keeps coming up over and over again, whether you are in the US or whether you're in Canada. Single family rentals are surging, absolutely surging in North America, and I know you're probably seeing this in your local area as well. Adrian, let's talk about that just from a local level. First of all, what you're seeing and I can bounce off what I'm seeing, and then I'll talk about what I've learned going into the US and some of the conferences that I've been to, and now, what I'm seeing across Canada and some of our bigger centers.

Adrian Schulz (00:51):

Yeah. Well, first of all, this has to be the best time in the history of Earth to own a 700 to 1200 square foot single family home. Here's why. What the pandemic taught us is that people want and need space, and we have got all this purpose built multi-family housing. Some of it has balcony, some of it does not, but what it doesn't have is open green space. A backyard, a front yard, a convenient logical place to barbecue and to have your barbecue food, to let your animals run, to let your kids run and play.

Adrian Schulz (01:32):

So what's happened is we've got all this purpose built rental product available but the product that the consumer, the tenant, the resident wants is actually single family rental at the moment. And I don't think there's ever been a time like now where that has just come to the forefront of property management, is all of us in the property management business, as a manager, as an investor owner, et cetera, we are all desperate for inventory because we've got the tenants that so desperately want that product, that asset class. Again, if you own one of these single family homes and you've got a way to get yourself into a different home, there's never been a better time to become a landlord then right now.

Carla Browne (02:24):

Yeah. We're seeing a lot of people from Ontario specifically and some in British Columbia where the house prices are rising and rising and rising. They're already investors. They're selling their products, the products that they currently have in inventory, and they are locating into Alberta, Saskatchewan and Manitoba, where they can take that and buy several single family homes, and that's all they're interested in. So they are starting to really understand it. This has been going on in the US since early on in the COVID pandemic, but in Canada, now it's really starting to catch on. And just as you were talking about the - just an aside, I can't help myself - that if you have the single family home, to get it on the rental market because space is so important. And it's not because people want more space to stay away from each other, it's because people need the space because they are still working in their homes.

Adrian Schulz (03:19):

Yes.

Carla Browne (03:20):

Online schools became a lot more prevalent as well, so you still have parents who have their kids now enrolled in an online school because they choose to, not because they have to, but some have chosen to do that. So there's a couple of different reasons that space has become really popular, and it's continuing to grow.

Carla Browne (03:40):

In the US, I went to a conference in San Antonio back in March or April if you recall, and there were a number of property management companies that have joined forces with developers down there where developers have gone in and bought neighborhoods. So they have taken an entire neighborhood, they're taking them down because it's an old neighborhood and they're rebuilding, or they're just renovating all of these properties as they can and they are turning them into single families. So the purpose built high rise building that we've seen for years in most marketplaces is not what we're going to see right now.

Carla Browne (04:15):

And I do know developers, even in our local area, that instead of doing the high rises, they're doing town homes because they can rent those for more money and a lot quicker, getting long term tenants that they couldn't get before. So I think as new investors, they gravitate to... Old schools the wrong word to say, Adrian, but everyone wants these small multi buildings because they think they're going to cash flow and this is what they want, they want these small apartment buildings. When investors come to me, I say, no, that's not where the industry is really, really going right now. Those units are harder and harder to rent. Same with the properties back in the day where, I don't know, you'll remember because of being in the mortgage industry, that a few years ago, CMHC came out with this wonderful financing initiative where you could do an up down and you could use that lower level or upper level rental income towards your... I don't remember all the stipulations but it was-

Adrian Schulz (05:16):

Up to four units. It still exists.

Carla Browne (05:18):

Okay, so it was a rage in some of the new developments where I live, and so these new developments that all have every other house, or almost every house but every other house I'll say, is an up-down unit. So when those come to me, the uppers rent quick, the lowers take a little bit more time because they don't have the yard, they don't have the space, they don't have the garage. People always think that's going to be more money because it's two units. Actually, I can make you more money if you just give me a single family home and let me rent that, instead of thinking that two units is better than one.

Adrian Schulz (05:53):

Yeah, there are so many benefits to single family home investing. It's much easier to get into for one, that business is easier to get into, but it's easier to finance, it's easier to refinance, to take out equity. It's really easy to understand and keep a set of books on a single family rental. There's just one unit at the address when you get your bills associated. It's a wonderful way, and as far as I know, you'll always outperform any mutual funder or stock portfolio with a single family rental because of the potential of cash flow, but more importantly, the equity growth. Real estate values have just surged as well.

Adrian Schulz (06:36):

You mentioned something about the bigger cities or the bigger centers such as probably Toronto, Vancouver, maybe Calgary, more so Vancouver and Toronto. I actually remember a client just a few weeks ago that had moved here from Toronto. They cashed out the property in Toronto. They were able to purchase a beautiful home here, and six weeks later, they also bought a single family rental. That's how much money they came with, and they'd only been in Toronto for five years. This is crazy stuff, but they know based on what they experienced in the bigger center, equity growth in their single family home there, they knew they could take that money, come here, buy a house and a rental. So I think that's really something to consider if you are at a point in your life where you may be wanting or willing to relocate. If you're living in one of those bigger centers, you may have a much higher quality of life coming to these tertiary or smaller markets in Western Canada. You can take your pot of gold and build a much bigger rainbow in Saskatchewan, Manitoba and Alberta.

Carla Browne (07:50):

You just can't let the rainbows go.

Adrian Schulz (07:52):

No.

Carla Browne (07:52):

So that's really interesting what you said there is because I think a lot of times, people think that they need to be in these really dense populated areas in order to have really solid rentals, and if you are in a really dense area, what I would suggest you do is start looking outside of your backyard. Now, if you're not comfortable, you're in Vancouver and you're not comfortable with going to another province yet, look in Surrey, look in Langley. Just move a little ways out because it's still more affordable than what you're looking at in Vancouver, and don't be afraid to look in other provinces. And contact our office because we can actually connect you so that you feel confident in buying a property in Saskatchewan or Alberta, where you're not able to drive by it every other week, which sometimes as investors, we like to get out. And this reminds me of a previous podcast [inaudible 00:08:44]. You could taste it, right?

Adrian Schulz (08:44):

Yeah.

Carla Browne (08:45):

Adrian, you were tasting property in that episode. So I think that it's just expand your horizon. You said it, I didn't.

Adrian Schulz (08:53):

Yeah, I know it. It's a real property management where you can see, feel and eat your real estate. You mentioned, we said tertiary markets, do you have bedroom communities in Saskatchewan? Like something 30 minutes away from Saskatoon where you can still have an affordable home?

Carla Browne (09:12):

Yes.

Adrian Schulz (09:12):

What a great place to invest. I think about here in Winnipeg, we've got Portage la Prairie, Selkirk, Steinbach, Winkler or Morden, Altona. There's all these little towns that you can still buy an affordable single family home, and from an investor's perspective, it's just fantastic because a lot of people have wanted to get out town during the pandemic and then still work here. This is all possible now.

Carla Browne (09:35):

Yeah. And what's interesting about those small communities or the bedroom communities is we refer to them as, their prices, their house prices are less than in the city, but their rental rates almost match the city, because they're so far, few in between that as soon as I have one, I'm able to push that rental price a little bit because I know there's nothing out there competing and the demand is there, so super interesting.

Carla Browne (09:59):

So once again, we always kind of go on this thread, do some research. Start consulting with your mortgage broker, your realtor, your property manager, and get some information underneath you before you start going out and deciding on where you want to place some offers. So single family, I'm glad that's the specialty that our company specializes in is the single family rental because I think we've got those processes underneath us now to make the experience really good for tenants and investors, and that is definitely where our market is going.

Adrian Schulz (10:31):

And if you need to buy a rental, contact a Century 21 real estate agent. If you need to finance a rental, contact a Centum mortgage agent, and of course, if you need to rent or have someone manage your rental, contact realpropertymanagement@realpm.ca.

Carla Browne (10:50):

Now that's Real Property Management.

Thanks for listening to Canada's Property Management Podcast. If you like this episode, please subscribe and give us a rating which will help us reach more listeners. Until next time, connect with us on social media and online at www.realpm.ca.