[UserNameToronto]

I've often wondered how houses in downtown areas can still be used as rooming houses, when their value has increased so much over the past 10 years. One would think gentrification would push the rooming houses onwards, and the gentry would restore homes to single family occupancy.

Case study - this one's for sale on Shuter street, north of the Moss Park apartments.

"Very Good Opportunity Of Investment In Town Town, Builders Are Moving Fast Towards East Of Down Town, So You Can Cash This Opportunity On Proper Time Or Rebuild Your Dream Home In Care Of Downtown. Currently Earning $ 2400/Month Rental Income. Rent Cheques Come Directly From Government, Invested Collecting From Tenants, Vacant Possession Possible. "

http://www.realtor.ca/propertyDetails.aspx?propertyId=11342640&PidKey=2120163372

House is $350k and generates $2400 per month. A $300k mortgage fixed at 4% is $1600 per month, leaving $800 left over to pay property tax, maintenance, and utilities. Not to mention the mortgage is being paid down at a rate of $600 per month.

How is it that, even after huge rises in property values over the last 10 years, that plays like this still exist? Moreover, isn't this a much better investment than a condo for $350k?

 

[js97]

These 'plays' exist because you have to be a special breed to be a 'slumlord', especially ones that deal with the type of tenants you would get in that area.

By your numbers, one would have to put 50k down, receive little to no cash flow (after property taxes @300.00, electricity @ 150, insurance for a rooming house @ 200?) and a 600 dollar paydown on debt (based on current low interest rates), or 72,000k over 10 years. Not exactly the greatest return considering the risk you put your money in... I also highly doubt they are getting 700 dollars per room for that property... considering the footprint etc, I would say that's a much exaturated advertisement

You haven't even considered property management costs and general repairs from vandalism, vacancies (there are always vacancies), and of course, tenants that don't pay. Those numbers are the rosiest they will ever be. I wouldnt' say it's 'so profitable' At those numbers, you're better off putting your money in a reit or a bluechip stock. Similiar risk, much less headaches.

 

[neubilder]

Being a slumlord is a nightmare. Not worth it. My dad bought a small building many years ago right before a recession and a plant closure. The only tenants he could get were the worst people you can imagine. I recall being horrified as a kid at hearing what these people would do. It wasn't long before he sold at a loss just to get out.

But being a landlord is great if you can attract the best tenants with a really nice place in a good neighbourhood. The cap rates aren't as tempting in this market though.

 

[neubilder]

I met a guy once who was a career slumlord at 31 and seemed to get quite a rush from it. He owned 17 houses and counting. His audacity was mind-blowing - he would build additional storeys with no permits while the houses were tenanted, in the winter. His houses were non-conforming firetraps. This guy must have had nerves of steel. He was worth millions but dressed like he was a broke kid and drove an old beater. A bit of an enigma.

 

[Riverdale Rink Rat]

I met a guy once who was a career slumlord at 31 and seemed to get quite a rush from it. He owned 17 houses and counting. His audacity was mind-blowing - he would build additional storeys with no permits while the houses were tenanted, in the winter. His houses were non-conforming firetraps. This guy must have had nerves of steel. He was worth millions but dressed like he was a broke kid and drove an old beater. A bit of an enigma.

I suspect he'd test 'sociopath' on the right tests...

My family were/are real estate types, mostly in Calgary. You can be a low-income landlord without being a 'slumlord.' However, it takes a strong stomach and an ability to connect with all kinds of people.

Toronto has more than its share of legit slumlords b/c it's a magnet for people who'll put up with a slumlord in order to have a place -- immigrants who have no choice, addicts/mental health issues types, etc. We exacerbated the problem with rent controls, but it's gotten a LOT better with the condo craze and loosening of the regs (because the rental buildings are newer and have been renovated.)

The window to make a whack of money as a slumlord is pretty much closed, IMHO.

 

[Eug]

My friends who own rental buildings will only do it with nice buildings and good tenants. eg. Professionals, teachers, long-time secretaries, etc. Basically quiet people with stable jobs who can afford at least mid-priced rents.

They know some who have lower end buildings... and these are nowhere near the slumlord class of building... and even those are an endless source of horror stories.

 

[Riverdale Rink Rat]

My friends who own rental buildings will only do it with nice buildings and good tenants. eg. Professionals, teachers, long-time secretaries, etc. Basically quiet people with stable jobs who can afford at least mid-priced rents.

They know some who have lower end buildings... and these are nowhere near the slumlord class of building... and even those are an endless source of horror stories.

That's why you need the strong stomach! Until you've cleaned out a house where the tenants threw the garbage down the stairs into the basement rather than into the bins, you haven't really lived the landlord high life...

 

[Eug]

Actually, come to think of it, my mom used to rent rooms in lower end houses to foreign grad students when I was a kid. However, this wasn't slum queen territory either. These were upstanding and well-educated students who didn't have a lot of money. They liked her because she charged low rents and would invite the students over to dinner at Xmas and stuff.

If she had to deal with horrible tenants, I think she would have had a hard attack.

 

[TrickyRicky]

I have some rental so I'm familiar with these issues. Rooming houses, the "slumlord" palaces are generally in decline and essentially being regulated and insurance policied out of existence. But the fact is that they remain highly profitable. I would never even consider buying such a property because of the tenant profile and legality issues...but then again I would never invest in high end rental either. The reasons for that will become self-evident to you if you ever find yourself owning high-end property.

Generally however I would say this thread is full of stereotype and mis-conception. I find for instance far less co-relation between income level and tenant quality or even income level and ability to pay. If you want to find out something about yourself or the people around you hit the dating scene, or you could become a landlord. I sense more and more with experience that we surround ourselves with people like ourselves. This phenomenon extends beyond our personal relationships and into our professional ones.

Bascially, if you have a hard time with tenants and people it is because YOU are like them. Slum palaces exist because slummy people buy property and rent it out to slummy people. However, that being said slummy people need a roof over their head just as much as everyone else. Are we insinuating here that people, because of their character and behaviour do not deserve to have a roof over their heads or that they don't deserve to exist in our society? Or are we insinuating more ridiculously that slummy people buy property and rent it to angels and thereby oppress them?

 

[Eug]

No, we are insinuating that having slummy people as tenants can make for serious headaches, or worse.

 

[UserNameToronto]

Rooming houses, the "slumlord" palaces are generally in decline and essentially being regulated and insurance policied out of existence.

Bascially, if you have a hard time with tenants and people it is because YOU are like them.

Slow down, cowboy!

I think I assumed rooming houses to be in a long term decline, too. There are lots of neighbourhoods in Toronto (Parkdale, Leslieville, and Cabbagetown come to mind) where rooming houses have been bought up and converted into single family homes. This is gentrification.

I'm a little surprised how, in an age of gentrification, the numbers can work out such that it's still profitable to operate a rooming house as a rooming house. My dreams of buying up a rooming house for a song, and converting it into something fantastic, are not aligned with reality!

 

[doady]

Being a landlord in Ontario is not as bad as in Quebec, where provincial laws protect the renters to such an extent that they never even have to pay the rent. So there are lots of people in Quebec who constantly move from one place to another every 3 months so that they never have to pay the rent. My dad lives in Quebec and he has been renting out one of his houses for years and I'm not sure he has even made a single cent from all the people he has rented his house to.

 

[js97]

. My dad lives in Quebec and he has been renting out one of his houses for years and I'm not sure he has even made a single cent from all the people he has rented his house to.

Oh I'm sure he's made a few bucks, just maybe not worth the headaches he's ad to deal with.

 

[James]

I would say that the landlord-tenant laws are worse in Ontario than they are in Quebec. Ask anybody who owns a rental property in this province. One only has to read through the Residential Tenancy Act and talk to investors (not just "slumlords") about the Landlord-Tenant Board and you will get a clearer picture. There can still be profit in being a landlord, but with the low annual rent increase caps and the ever-increasing cost of purchasing property here in Ontario, it is not easy. Recall the 90's when all you had to do was throw a dart at the stocks section of the paper and you'd hit a winner. These days, you can still make money in stocks but it's just a lot harder.