All Forum Posts by: Roy N.

Josh:

Did you have each of the students (signatories to the lease) secure Guarantors (typically Mom or Dad)- with whom you signed Guarantee Agreements?   If so, then advise them if they do not fulfill their contractual obligations, you will need to reach out to their Guarantors to step-in and cover for them.

Everyone is dealing with a significant amount of uncertainty at the moment.  We have been in communication with all our student tenants to let them know we will work with them, but we are not about to simply cut them free because life is a little challenging at the moment (what kind of lesson would that teach to them?).

CHMC on commercial apartments is quite a different beast than that on your personal residence.   Qualification is not as easy and there are frequently strings attached.  If the complex already has it, you should be able to keep it (you will need professional management and the ability to check all the other boxes). 

At my age ;-), I like to keep the portfolio around 40-50% LTV overall with a few secured LoC's in-place just in-case a rainy day turns into monsoon season.

Jay:

Some of our units are local, others are an hour away.

Schools have been closed since early March and a state of emergency was declared mid-month.  We've not gone to the degree of Italy where you need papers to leave your house, but all non-essential businesses are closed and you are only suppose to go out for provisions or medical appointments.  The borders (both international and inter-provincial) of NB are closed to non-essential travel (there are checkpoints in-place).
We appear to be 3-4 weeks behind places like Québec and New York: there are only a hundred cases of COVID-19 in NB at the moment and no deaths yet.

We have student rentals turning over in May and June which are normally rented by now - but we cannot show occupied units and student are deferring the search for new accommodations until they know for certain there will be a fall semester.

April was never our primary concern; things will become tight for many more come May.  All our tenants, save two, paid on time this month (which is not outside normal): one made arrangements to pay this coming Monday; the second paid on the fourth.

 Most residential real estate agents also do not understand how a vendor carry works and have likely never been involved in such a deal.    I have also found their first concern is often that they will loose out on commission.

You will be preaching to the converted here on BP.

You will also have more luck with vendor carries on commercial properties.

Most residential vendors do not understand how a vendor carry work and are too risk adverse to explore or they want/need all of their money now.

@Greg Gangle

Section 85 in the Canadian Tax code is a rollover which will allow you to transfer a property held in your own name into a company, which is owned by you, without an immediate taxable event.  Section 1031 in the U.S.A. is considerably different and allows you to exchange (upgrade) assets.

I would also disagree that having four residential mortgages in your own name precludes you from seeking additional ones from conventional lenders.  I have held as many as eight before (with the big banks) - all negotiated directly.   Once you get beyond 5, some lenders will take a pass (which lenders varies from time to time according to the needs of their portfolios and their appetite for risk).  It also becomes more difficult with each subsequent mortgage.   History aside, I would expect lenders to be rather risk adverse and more than hesitant to lend to folks who are substantially leveraged in the present environment. 

It's good for you only in the short term.

If you have a good tenant, than it is worth working with them through this morass.

Will:

How we are responding depends upon the particular situation.

1) For lease terms ending in April or May (which are not renewing) we are politely saying "no" to any early releases.

2) If the anniversary date is May 01 or June 01 and tenants and the leases are renewing (tenants did not serve notice of termination 3+ months in advance) we are telling them we will revisit the situation once we have a better idea on how prolonged the restrictions will be and whether the Universities fall session is in question.   The students are typically away for the summer, so if classes are to resume as per normal in September, there is really no difference. If classes will not be resuming in September, we will have to decide at which point we release the tenants.

3) In a few instances where we would like to carryout renovations on a property, we are negotiating early releases or rent relief during the period we will be carrying out the work (while the tenants are away).    Ironically, this is a regular practice of ours - come in during the summer while the students are away and perform a renovation - but tenants are typically oblivious to it.

4) When parents call on behalf of their kids, if the parent is a guarantor we will tell them whether or not their child is current with their obligations.  If they are not a guarantor we politely tell them we cannot discuss the lease with them as they are not our tenant.

Looking out longer term, thing are a little more fluid.
1) We have several student houses/units turning over this summer - normally we have all of these relet prior to students leaving for the summer, but traffic is understandably way down.   We are preparing ourselves for vacancies and/or a late summer rental rush once the situation is better understood.

2) We often assist our student tenants to reduce their rent during the summer months by subletting their houses/units.  The last few years we have been using AirBnB in addition to conventional listings.  We have yet to decide if this is something we will bother doing this summer as we are anticipating demand to be weak.