Rental housing markets outside the US represent their own unique challenges and opportunities. For example, Canada represents an interesting case study. The proportion of renting vs. ownership is very similar in the US and Canada. However, the structure of the Canadian single family mortgage market (no tax deductibility, full recourse to the borrower, lack of 30 year fixed mortgages , high down-payments, on-budget government mortgage insurance and 25 years amortization) means that the Canadian single family market is more stable and ownership occurs later in life. Canadian immigration policies have favored a continued influx of financially stable workers, and Canada’s resource rich economy and financially stable government have resulted in great demand characteristics for multifamily housing.
At the same time, rental regulations in Ontario, Quebec, and British Columbia (the major population centers) have suppressed rental rates to at, or below, inflation for renewing residents which has reduced incentives for new supply. In such an environment, identifying mobile, financially stable, customer groups and delivering great customer experiences is a way beyond the traditional “cost reduction only” driven investment and operating strategy. Geographic selection is also important, as Alberta represents an open investment and operating market place, with its own unique labor and competitive challenges.
Our experience in Canada was for an investment fund which had bought multifamily assets for the long term, but was experiencing short term pain, and was not meeting debt service. We created for them an asset management function to work with their property management partners to develop a turnaround plan to drive up NOI through new marketing channels, floorplan/unit pricing, and unit turn cost controls. We also established the reporting and metrics to enable improved communication and performance. As a result, the properties began to generate a positive cash flow, enabling the fund to utilize these case studies to raise an additional $100MM in equity to fund additional investments.