How to Estimate Tenant Turnover and ROI in a Rent-Control Market

[Paul Finnemore]

Hi Folks! We live and invest in Nova Scotia, Canada. We started 3.5 years ago and have done fairly well. When we started there was no annual rent control. This just changed last year and we now face a rent increase cap of 2% annually. This really has taken some appeal out of investing here for me, especially for our value-ad multi family deals. We have several, what would have been considered awesome, off market deals before us, but I am trying to decide what to do given the rent cap. We of course will only buy deals with strong cashflow and some margin of equity and value add potential. But how does rent control play out over the long term, with inflation rate, rising expenses, etc. There is so much unknown. Is it possible to get stuck with a bunch of tenants who hunker down for 20 years, and drive me into default? How much turnover can I conservatively estimate? Can anyone give me any insight on whether buy and hold can still work over the long term, or is it just a gamble? What can you use for rule of thumb for estimating tenant turnover? Is there enough turnover in a small apartment building to stay profitable? For example, in 10 years in a 20 X 2 bed 1 bath unit building, will half the units turnover? I'm looking forward to experienced multi-family investors who have held property in provinces, state, or cities with rent control. Thanks!