Carla Browne on vacancy rates and single family rentals in Canada

Adrian:

I'm joined today by Carla Browne, who is the Operations Manager with Real Property Management Canada. Welcome, Carla.

Carla:

Thanks for having me, Adrian.

Adrian:

Carla, could you tell us a little bit about yourself and your organization?

Carla:

Sure. As you said, I'm the Operations Manager with Real Property Management Canada, and what I do with them, really is support our offices nationally and try to build our brand across Canada. I also have my feet on the ground here in Saskatchewan, where I run a property management business, one of the Real Property Management franchises, so I'm in the trenches day in and day out as well, so I feel I've got a really great handle on what it takes to have a successful landlord-tenant-resident relationship, and very passionate about the business that I'm in.

Adrian:

Now, Carla, we never get too personal about age, but could you at least tell us, how long have you been in the business?

Carla:

I've been in the real estate space for 28 years. I've been in the property management space for about seven years.

Adrian:

Okay. Yeah, so in the industry, we call that seasoned.

Carla:

Yes. You can call it whatever you want, I guess. There's lots of names for that, Adrian, but yeah.

Adrian:

Given that you've been in the business for seven years and you don't have gray hair, I think you're doing well.

Carla:

Well, thanks. Thanks. There's the ... The hairdresser probably helps with that a bit.

Adrian:

Can you tell us, what is the current state of rental vacancies across Canada right now?

Carla:

A question that I often get asked by investors. Everyone's interested in what the vacancy is here and there. Across Canada, we see the vacancy rate hovering around that 5% on average, but I really don't like to play with averages too much because averages lump everything in together, and we're not seeing the same vacancy rate in different types of units and in different parts of the market. What I mean by that just really quickly so we don't dive in on this topic too deep is that the vacancy for single-family homes, next to nothing anywhere across Canada that you might travel. As soon as we get into the condos and apartments, that becomes a little bit different.

Carla:

The vacancy starts to go up, definitely coming down a little bit over the last couple months, but still pretty high in some areas. Then, as soon as we move away from the downtown cores of the major cities, we see the vacancy in those areas, in those styles go down a little bit as well, so it is not a blanket right across Canada that you can go by, and I always caution our investors when they listen to the media. Media talks about averages and they lump in a lot of data from CMHC, which doesn't take into account a lot of the single-family homes across Canada that are in that rental space, so don't always listen to the media.

Adrian:

Yeah. No. I agree about CMHC, and I think that there are a lot of landlords that actually don't bother reporting, so it's inconclusive data.

Carla:

Totally.

Adrian:

Here in Winnipeg, in the last CMHC report, the vacancy rate for affordable rents and in our market, that's $625 a month. That rate was 2.9%, but the vacancy rate on rents over $2,000 a month is 13.8%. I think the higher end of those rental rates are probably the purpose-built multi-family rentals that have, obviously there's been a lot being built in Canada over the past few years. What has happened to single-family rentals during the pandemic, given that people all of a sudden want space, be it a basement to work in or a backyard to hang out in?

Carla:

Yeah. We've definitely seen the rates going up in all areas across Canada. It has been really interesting to watch, where as soon as we used to hit the three or four bedroom or a higher-end executive home, that there was a lot of, not challenges, but they were a little bit harder to rent because there wasn't a lot of people in that market. Whereas in the lower-end apartments, two-bedrooms, one-bedrooms, those were easy to keep your vacancy down to zero. The single-family homes have gone up everywhere especially once you get into the more suburbian areas of the centers.

Carla:

People really gravitated to moving outside of the main areas. They don't need the nightlife, which wasn't there during COVID anyways, the restaurants. We no longer need to necessarily live close to shopping because everyone's ordering everything online. In the Okanagan for instance, rents have skyrocketed in the single-family area because people have relocated from Alberta and from different parts of British Columbia, moving to Okanagan realizing they can work there and have this lifestyle quality of life that they always wanted, and our office there told me one day that, "Really, you could just take whatever the rent was." If I can kind of see the lake, I'll just add 25% and I'll be able to rent it today, so it's really been interesting to watch, but single-family homes, people want the space.

Carla:

They want the yard. That has all become a lot more prevalent. We're also seeing people base their rental rates a lot on square footage, so similar to what we did in real estate market, now we're seeing that really come into the rental market because space is so important, so if you have a two-bedroom condo versus a two-bedroom condo, but this one's 1,000 square feet and this one's 700, those rents are going to be different now, which is a little bit different, so it's something for landlords to really watch when they're trying to price their properties now.

Adrian:

That's an interesting point. I know there are some countries in Europe that always advertise square meters. How big is the flat or the apartment? By square meters, and ironically in Germany, it's small talk, like when you first meet someone, "Oh, where do you live? How big is your apartment?"

Adrian:

We don't ask that, but I can see now how that would become a priority. Has COVID affected single-family or even multi-family leasing and property management in the past 12 to 18 months, and if so, what's the biggest thing that's changed?

Carla:

I think the reliance on technology. Our company, in the office that I have really didn't see many differences once COVID hit because we were already very online and we used a lot of technology in our day-to-day processes, but the industry as a whole has really changed in that regard, so landlords who were going to collect checks, they're not collecting checks anymore. They are now collecting or are receiving electronically one way or another. The showing process changed because there was a point in time where we really couldn't be showing properties, so virtual tours became a lot more important, all of the precautions. We're seeing now self-showing really enter into some markets, where you actually have a lockbox on a property, which is all electronically connected to your office that you're going to open up for somebody to go and self-show the property, which sounds kind of scary to many Canadians.

Carla:

This is very commonplace in the U.S., but there's definitely a lot of those technology changes that have happened. Electronically signing, if people were meeting with their potential tenants and signing in person going through it, that's all on the wayside. Everything is just being sent out electronically, so a lot of really what I call cool efficiencies have come out of it. Some people might revert back to the old way. We definitely won't, because we've just seen how much more efficient and how much, I think that the world has appreciated it.

Carla:

Tenants like to be able to sign their lease at 7:00 at night. They don't want to have to come into your office at 9:00 to 5:00, right?

Adrian:

Yeah. Yeah.

Carla:

So there's a lot of great things, I think that have come out of COVID, although lots of not so great things, I guess that our industry definitely has seen some improvements, I would say.

Adrian:

The Real Property Management network across Canada, can people expect a certain consistency of operation in each markets that you're in so that they get to experience some of these technologies?

Carla:

Each office is independently owned and operated, but the majority of them have adopted a lot of the same technologies, so from a corporate standpoint, we worked really hard with our offices on the onset of COVID to try to give them some of the tools and resources that they were going to need to overcome any challenges that they might have, so I would say that for the most part, that experience should be very consistent as far as the technology use.

Adrian:

Why might this be a good time to get into single-family rental property investing in Canada?

Carla:

Ooh, I could think of a million reasons why this is such a great time. A lot of people don't know this, but statistically, one in three Canadians rent, so over 30% of the population in Canada are renters. We now know that single-family homes are something that is very much wanted, even though the hybrid of going back to the office and working at home, I think is definitely the trend that we're going to see. I don't see everyone gravitating back to the offices once this is all done because we've all realized we can work from home and be very efficient, so single-family homes are definitely still going to be there. The demand across Canada is there.

Carla:

We're seeing a lot of markets where house pricing is definitely making it a good investment to be able to get in and for investors who want to cash flow right away, and the reality is, is that real estate is just one of those great long-term investments that you can hold and continue to see it grow, and that's what I love to see with our investors is to see them create that wealth through that product. In the U.S., we have major developers, and this has actually just come out now. There's one in Vancouver and one in Toronto that I'm aware of, that only were building multi-family have now made major announcements that they are going into the single-family space, so they're building single-family homes for purpose-built rentals, which is, I think just another reason why people should really stand up and see how important this is. People don't want to rent because they have to anymore. They rent because this is a choice that they're making, so it's not because they can't afford to buy a home, which in some cases, that is the reality, but that's not what we see a lot of the times, especially in the higher-end single-family homes.

Adrian:

No. I think you hit it on the mark. I think that renting is actually becoming a preferred lifestyle. The ability to be in a house or be in a home without all of the responsibilities that come with real estate ownership, and then of course, from an investor's perspective, you can hire a professional property management company and have that asset being well taken care of.

Carla:

Exactly.

Adrian:

I think one of the things that people wonder about a lot is how to get started, right? I remember when I bought my first investment property, the easiest way was to upsize for myself, so the home that you're in, you rent out that home, and then you go buy another home for yourself, perhaps a bigger one or a different one in a different area, and that's one of the easiest ways to get into the rental property business, is to rent out the home you're in and go and buy a new home for yourself. It's also the most financially feasible way to do it if you're just getting started.

Carla:

For sure. That, as well as we see a lot of joint ventures now where people are getting into investing, where they have some money, but they don't have enough money or enough, the ability, the resources, sorry, to get that money, then they're going to join forces and actually put themselves into a formal joint venture relationship with somebody, and then invest that way. Whether you have a home and maybe thinking you're going to upsize or downsize, that then becomes a rental property or there's several other ways to do it. I always say if you're thinking about getting into this space, try to formulate what I call your dream team, and sit down and have some conversations, and then start making some decisions based on what is actually happening in your market. You don't always have to invest in your backyard as well.

Carla:

You might be investing across the country. That just might be a really good option for you based on what you have, and we do see a lot of that, especially being in Saskatchewan, where house prices are lower, where we see a lot of people coming from Ontario and B.C.. They're not here, but they don't need to be. They can use the services of a professional property management company. They can use the resources of a mortgage broker where they currently are.

Carla:

All of those pieces can be there, so my dream team is always a mortgage broker, realtor, property manager, usually someone in insurance, probably accounting and a legal arm, all which if you talk to a property manager and to a real estate and mortgage broker, they're going to be able to help you with all those other pieces as well. They just have the connections, and make sure that you're using people who are well-versed in investment real estate, so those are things that I always like to talk about. Please don't contact me after you've bought the house. Contact me before, because we can work on the numbers and see if cash flowing needs to happen for you right away, then we need to know that because that's going to affect the property you're going to buy.

Adrian:

I sense future episodes coming on. What do you love about Canadian real estate?

Carla:

Canadian real estate, well, real estate in general. It doesn't even have to be Canadian quite honestly. As I said in the beginning, I've been in this space for 28 years through a real estate company. I've been involved in a mortgage company, and now I'm very involved in the property management space. I love matching people.

Carla:

I love being able to see what the real estate asset can do for people, and a house is a home, so there's that whole emotional part of it that we bring to it, and during COVID, housing was essential. It was scary for those who didn't have a place to go when we were all told to stay home, and it really highlighted that. What we do is such an essential thing for people, that it should be something that we should all be in tune with. We should all be able to see how we can make it affordable for those who need to find a place, so I think I'm just really passionate about being able to help people. Adrian, that's my big why, is that I just love to be able to help people get to their end goal, and for a lot of people, living in a house with a roof over their head with maybe now an extra bedroom, that's a goal, so whether it's a one-bedroom apartment or a mansion, those things are equally important to different people, so that's where I think the passion drives from.

Carla:

It's just, it's my day-to-day. It's been in my day-to-day so long, I don't what else I would do.

Adrian:

Well, I think it is also the reason that many people come to Canada in the first place, is the potential of home ownership.

Carla:

Yeah, great point. Great point, yeah.

Adrian:

Thanks for your time today, Carla.

Carla:

Thank you.