I recently came across a 12 plex and was pleasantly surprised to see that each unit had its own gas heater and individual meter, which from my experience, is uncommon. The location of the building is high in rentals with the target market being low-income entry level renters. This does not mean the building caters to poor people, rather the units are small but clean, comfortable and ideally suited for younger people just starting out. The suite mix is 7 1 bedrooms and 5 two bedroom units. It is located in Dalton`s socialistic republic of Ontario.
While speaking with the listing agent, he mentioned that the building currently has seven (!) vacant units and the reason for this is that the target market of renters often chooses to rent elsewhere because the separate meters lead to a situation where they are responsible for first and last months rent, deposit for electricity and deposit for gas which is all too much at once for this target market. The building is for sale by a large company that owns a 1000 + doors and they only own it because it was a "throw in" of a portfolio of buildings they recently acquired. All of this information is from the listing agent – I have not yet verified any of it and would certainly do so before proceeding further.
I contacted the local utilities and found there is a $135 deposit for electricity and $250 deposit for gas with a one-time hook up fee of $35. There really is no way around the electricity deposit but the gas company will forego the deposit if the tenant a) was previously a client in good standing or, b) can provide a letter of reference from another gas provider or, c) is willing to go on an equal billing plan with pre-authorized payments from their bank account. Clearly item c is the most likely choice for most tenants. In both cases of the gas and electricity deposit, the amount is held for a year and then applied to the bill. Both utilities were inflexible in any other type of arrangement - I had asked if I could make the deposit, it be held in my name, and be notified if the tenant goes in arrears. My plan was to make it easier for the tenant to start a tenancy and hide a charge for the use of my money in the rent. For about three different reasons this is an unsuitable option.
My question is: has anyone else experienced a similar situation and can you offer any advice to overcome this? This is my first multi and I will likely not proceed further with this one as the high start out vacancy makes it financially unviable. This is disappointing because at full vacancy (less double the local vacancy rate) the building cash flows nicely and suits the REIN system as there is potential to increase cash flow by decreasing expenses in other areas. Any comments or suggestions are appreciated.
While speaking with the listing agent, he mentioned that the building currently has seven (!) vacant units and the reason for this is that the target market of renters often chooses to rent elsewhere because the separate meters lead to a situation where they are responsible for first and last months rent, deposit for electricity and deposit for gas which is all too much at once for this target market. The building is for sale by a large company that owns a 1000 + doors and they only own it because it was a "throw in" of a portfolio of buildings they recently acquired. All of this information is from the listing agent – I have not yet verified any of it and would certainly do so before proceeding further.
I contacted the local utilities and found there is a $135 deposit for electricity and $250 deposit for gas with a one-time hook up fee of $35. There really is no way around the electricity deposit but the gas company will forego the deposit if the tenant a) was previously a client in good standing or, b) can provide a letter of reference from another gas provider or, c) is willing to go on an equal billing plan with pre-authorized payments from their bank account. Clearly item c is the most likely choice for most tenants. In both cases of the gas and electricity deposit, the amount is held for a year and then applied to the bill. Both utilities were inflexible in any other type of arrangement - I had asked if I could make the deposit, it be held in my name, and be notified if the tenant goes in arrears. My plan was to make it easier for the tenant to start a tenancy and hide a charge for the use of my money in the rent. For about three different reasons this is an unsuitable option.
My question is: has anyone else experienced a similar situation and can you offer any advice to overcome this? This is my first multi and I will likely not proceed further with this one as the high start out vacancy makes it financially unviable. This is disappointing because at full vacancy (less double the local vacancy rate) the building cash flows nicely and suits the REIN system as there is potential to increase cash flow by decreasing expenses in other areas. Any comments or suggestions are appreciated.
