Do Rentals ‘Work’?

      No Comments on Do Rentals ‘Work’?

Several times during my 15+ years in the rental housing industry I’ve been told that “rentals don’t work”, usually by people who work in accounting or finance, and sometimes by people who are new to the rental housing industry. Their basic assertion is that they’ve “done the math” and found rentals “aren’t profitable,” and therefore it makes no sense to develop new rental housing projects. Because I’m not in a position to question their math most of the time I simply make a thoughtful or non-committal noise and say nothing.

The fact is, several development companies in southern Ontario have since (circa) 1995 been developing new rental properties containing thousands of new rental units, all of which have been successfully absorbed into the housing supply. Let’s take a look at a summary of some of the most prolific of these companies.

To the best of my knowledge none of those companies is a charity, which means each are profit-seeking businesses that develop new rentals because new rentals are profitable and make money. In other words, rentals can “work”. So when someone tells me that rentals “aren’t profitable” what they really mean is that rentals aren’t profitable enough, because rentals are certainly profitable enough for the six companies in the table above.