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May 13, 2020 | The Rentiers

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

The landless class can be so cruel.

Witness a few weeks ago when this blog told you about a doctor wanting to move back into his Toronto condo so he could accept a position at the downtown St. Mike’s hospital. After renting it for five years and working out of town, he planned to move his wife and two kids back into their former high-rise home.

But no dice. The tenants won’t leave. Not with a monetary payment, not with the good doc finding them new digs, nor with the cardiac surgeon footing the costs of their move. Not even at the end of the lease. And while he 100% has the right to reclaim the home, he can’t. The Landlord Tenant Board is shut by Covid. When it opens again, the backlog will be biblical. The tenants will still be there, squatting, in a year. In fact, they can just stop paying rent. The MD is powerless to move them or cause them to pay.

How did many blog dogs respond? They yapped.

“I really couldn’t care less that a doctor has to find a rental instead of moving into his investment property and displacing his tenants. Is this supposed to make me feel upset? Outraged? Is this your idea of injustice? Someone with a massive income being mildly inconvenienced? Get some perspective.”

“Landlords are greedy. They want to screw the tenants. Has the mortgage payment increased in the last 5 years. Interest rate have actually gone to 0%. There are hundreds of landlords who have owned their properties for a long time. Now it is the tenants turn to screw the landlord. Keep your rent on May 1st.”

The term ‘rentier’ has gained currency in recent years, now routinely spit at landlords. ‘Rentier capitalism’ is the phrase lefties used to describe a system in which people who own assets (like leased condos) obtain profit from them ‘without making a contribution to society’. In other words, it’s a form of Marxism. Karl would dig it.

The virus has brought a lot of this seething anti-landlord sentiment bubbling to the social surface. The keep-your-rent movement is one aspect. Commercial tenants – even large corporations – who refuse to honour their leases form another. The longer Covid sticks around, the more acute. It’s one reason governments are spending billions to send renters cash payments and foot a rent-subsidy program for businesses, large and small. In the end, every taxpayer will be on the hook for this. Something is clearly wrong.

Apparently mall owners collected only 15% of the stipend owed them on May 1st. That was down from a lowly 25% in April. June looks just as dodgy. Even biggies like Goodlife Fitness are bilking their rentier landlords.

And who’s taking the hit? Pension funds, who manage people’s defined-benefit retirement savings. The biggest enclosed shopping centres in Canada (about 50 malls) are owned by fund real estate arms Oxford Properties (Yorkdale), Cadillac Fairview (Toronto Eat0n Centre) and Ivanhoe Cambridge (Montreal Eaton Centre). Many of these are anchored by department stores, which are bleeding out now thanks to a combo of the virus and online shopping. Will they ever open again? In the US giant Neiman Marcus has filed for bankruptcy – and a big chunk of that is a CPP liability. Yeah, that CPP. Your public pension plan.

On a much smaller note, did you read about Danish Chagani and his pregnant wife?

They bought a house for their growing family, and rented the upscale condo they owned to a lawyer down the hall. But Christopher Roper decided to stop paying rent. After being stiffed for more than $16,000 in monthly payments, Danish was in desperate financial shape. He had to remortgage the condo (two loans now in place) to make up for the lost $2,700 in monthly income needed to help finance the house.

Covid means no landlord tribunal. So no eviction is possible. The lawyer lives for free. Danish must make payments on multiple loans – or he loses the properties. The glam life of rentiers. Here they are…


Chris Steepe may constitute the low-of-the-low in our society in the eyes of the landless bitterati. He’s a realtor and the owner of investment (rental) properties. He wrote an interesting piece days ago in a trade mag on what Covid is doing to those who provide rental accommodation. “The overarching conclusion, regardless of what numbers you use, is that the net profit from a rental property is much less than tenants, media and the government believe,” he says, “and it’s these same entities who collectively think residential landlords are rich and can afford to carry all the consequent losses caused by COVID-19.”

Seepe details the ownership costs for a small multi-unit building  in Ontario. For each $1 in rental income, here’s the overhead:

  • 18.8 cents – property tax
  • 2.2 cents – building insurance
  • 3.5 cents – electricity (common area only)
  • 3.4 cents – gas heating (included in rent)
  • 3.4 cents – water/sewer (included in rent)
  • 8.8 cents – repairs & maintenance
  • 3.1 cents – property management, janitorial, placement fees
  • 1.4 cents – professional fees
  • 44.6 cents – operating expenses
  • 39.8 cents – principal & interest (5-yr closed fixed, 25-year am, 75 per cent LTV, three per cent interest)
    = 84.4 cents total costs
  • 15.6 cents – net profit before corporate taxes (cash flow
  •  7.8 cents – corporate tax (50 per cent “passive” income

7.8 cents – net profit after tax BEFORE capital costs (new roof, furnace, boiler, windows, etc.)

Seepe’s conclusion is simple: you’re a fool if you get into the investment real estate (landlord) business without understanding that tenants usually fare better than owners. So if a virus emergency comes along you are, well, pooched.

“How much money is left over for a landlord to meet all their obligations in the midst of pandemic emergency measures? Say a “modest” 10 per cent of tenants don’t pay their rent. Which companies and government agencies have offered relief or forgiveness on the above costs? What will deferral of interest payments accomplish if there’s no increase in rent? How long will most or all of the landlord’s income we live on go towards the forced extended loans and accumulated interest payments? COVID-19 may be the catalyst but it wouldn’t be the culprit of a collapsing rental property industry. Many of our risks were artificially and unnecessarily created by ill-conceived, short-term, simple-minded legislation enforced by a fundamentally dis-“membered” Landlord and Tenant Board. In the rental housing industry, ignorance of the law may turn out to be the single greatest “excuse” for financial ruin.”

Without a doubt, this is no path to wealth, or assured income. Residential or commercial. It costs a ton to acquire real estate. A ton to own it. Expenses escalate. Risk abounds. Renters have clearer rights than owners. Governments have picked their side. More voters lease than landlord. And in return for providing people with accommodation they probably couldn’t afford to buy, you become a ‘rentier’. The exploiter.

And you thought this was just a virus.

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May 13th, 2020

Posted In: The Greater Fool

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