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Tenant Demographics – Canadian Apartment Investment Conference

This is a column by real estate guru Rachelle.

I attended the Tenant Demographic panel at the Canadian Apartment Investment Conference on September 15th, 2010. The presenter was Michele Sexsmith, Vice President & Practice Leader – Retail, Real Estate & Restaurants at Environics Analytics (link). Environics provides research and demographics to help select where to place stores & restaurants. They help buildings determine who their target market is, how to keep tenants happy, and how to offer suitable amenities. They start their research using the census, add data from different sources, and the result is so granular they can tell you who your target tenant is, using your postal code.

There are many different groups of people; however, renter households are mainly represented by four groups. Each group has different wants and needs. If you can target your marketing, leasing, renovations and design to your tenant in a seamless way, you are more likely to be successful. Your tenant will be happier, like a round peg in a round hole.

Grads & Pads

These tenants have the highest disposable income (about $73K per year), they live in high rises, they are well educated and they love to shop at higher-end stores. They love beautiful things and aesthetics are important to them. They believe in government. About 37% of their income goes to housing. They have social values and community is important to them.

If you’re renting downtown condominiums, this is the group you’re renting to. Make sure you point out any “community” activities in the building. You’ll also want to get this group to pay their own utilities; their average annual spending on utilities is $1100. Big screen televisions, computers, and expresso machines use a lot of power.

Rooms With a View

These tenants do well for themselves: their average salary is about $57K per year. They tend to live in older housing stock, like apartment buildings. They are attracted to crowds, and want to be close to the downtown action. They have a high education level but reject authority. These people are deal shoppers. They spend about 38% of their income on housing.

If you’re renting the upper floor of your house, close to public transit but off on a side street, walking distance to the shops and festivals, this is likely your target market. They have a sense of personal responsibility and like to give back to the community. Don’t worry too much about their utilities, they use about $505 per year.

Newcomers Rising

This tenant group is fairly young and is composed of new immigrants. Their average income is about $56K, but they have children, so they have less disposable income and try to get by on the minimum. They are trying to get more educated or get relevant Canadian experience. They spend 41% of their income on housing. They are very conscious of the global village; they are disoriented in their new home but pursue aspirational goals. They want to stay with their cultural roots but also assimilate; they feel strong ties and want information about where they come from. They spend on computers.

If you’re renting outside the downtown core, this is who you’re renting to. They tend to rent in buildings with other newcomers: they’re looking for roots. These tenants feel a tremendous amount of time stress; they’re working, raising kids, getting an education and trying to better themselves. They use a reasonable amount of utilities, about $785 per year.

Single City Renters

This is the lowest income group. They tend to live in low-rise apartments in older housing stock. They are single parents with one or two kids. They are financially challenged. They spend about 39% of their income on housing. They are flexible about family roles and commitments. They are politically very liberal.

Newcomers in this category rent outside the core, the rest rent downtown, close to public transit and amenities. They like small local businesses, but also Walmart. Their utilities usage is about $793 per year. If you’re renting a basement apartment close to public transit, this group will rent from you.

Uses of Demographic Information

Next, Kevin Green, CEO of Greenwin Property Management (link), and Robert Herman, President of Robinwood Management Corporation (link), commented on the different applications of this information and how they use it in their income properties.

Greenwin manages properties that house all these types of tenant groups, and Mr. Green spoke about dealing with their needs. Specifically, in buildings that house new Canadians, he sees that they are scared of the police, and that there are gangs that come from their countries of origin. He brings in social programs for nutrition, jobs and English as a second language. Security measures are implemented to deter violence and keep residents safe.

For the higher income groups, buildings are competing with condominium rentals. In these buildings Mr. Green will offer yoga, movies, exercise rooms, concierge services and theater tickets. He also mentioned that the newer condos can’t compete on space; rental suites are much larger than new condos.

Robinwood Management Corporation deals mostly with the “Grads & Pads” and “Rooms With a View” demographic groups presented above. Buildings catering to these groups have been hit hard as home ownership became an attainable alternative for them. Vacancy rose and rent prices have gone down. Mr. Herman’s biggest challenge is attracting and keeping good tenants.

How to Use Demographics in Your Rental Property

I’ve rented a lot of properties in different areas; this presentation really crystallized and focused what I already knew but never quite managed to quantify. I will be using this in my business, both with my advertising and my showings. I will be emphasizing certain attributes and amenities of properties I never would have thought to before.

For instance, with the downtown condos, I’ll be listing any community groups or events in the buildings and spend extra time waxing poetic about the design and beauty of the building and apartment. I’ll also be mentioning how close it is to any festivals or crowd centered events along with the usual description of the apartment.

For properties outside the downtown core, I’ll be emphasizing proximity to any universities or colleges, ESL schools, plus any cultural or community centres. I’ll even say “new Canadians are welcome” in my ads; this always seemed too bold before, but for those renters who do suffer from discrimination, this will be a welcome relief. I’ll also be highlighting any time saving benefits of the location, as well as amenities for children.

For Landlords

Landlords might also want to use this information to decide if a renovation is likely to pay off or attract a more desirable demographic. For instance, I know a lady who put high end kitchens and gorgeous hardwood floors in an area that attracts only “Newcomers Rising”. Her rentals are priced about $400 more than others in the area. It doesn’t work well, and she continually has problems finding and keeping tenants.

For Investors

I have found that landlords tend to have an easier time managing their properties when they and their tenants have a close cultural and experiential background. For instance, if you are a former “Grads & Pads”, tailoring your purchases to properties that appeal to that type of tenant will make a lot more sense than purchasing a property with a target market of “Newcomers Rising” or “Single City Renters”. You’ll naturally make decisions that will benefit your clientele because of your inherent understanding of their wants and needs.

Spend some time, think about the location of your property and the potential tenant demographic group. Target your advertising and renovations, and give your customer what they specifically need to keep them happy and renting in your property.

Good Luck!

Editors Note:  Out of curiosity, if you’re a renter, which demographic are you?

About the Author: Rachelle specializes in renting property on behalf of landlords and is the blogger behind Landlord Rescue. She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability. Check out some of her other real estate posts on MDJ.

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About the author: This is a guest post. You can read more about the author in the biography above.

{ 12 comments… add one }
  • FT FrugalTrader October 20, 2010, 11:53 am

    Rachelle, so for an investor, should they determine who their target market is before purchasing a building? When I was in the market, I was primarily looking for good deals (that were in good condition), then finding tenants came after the fact.

  • lostinspace October 20, 2010, 12:31 pm

    We are renters who fall into the “grads & pads” category? We are well-educated, have a high family income, live in the downtown area. I can’t say we love to shop at higher-end stores, we’re both quite frugal. Our spending on housing is well below the 37%. That said, I would agree that aesthetics are important – the place we rent is a historical property, and every time we have visitors they marvel at the place. We pay our own utilities, but hydro is not as high as stated. It was previously around $900 a year, but with TOU rates in Ontario we are now spending a bit more than half that amount.

    We’re not so concerned about community activities. While we like to feel connected to our neighbours, the reason we rent the place we are in is because:
    (1) it is conveniently located – walking distance to grocery stores, nightlife, movie theatres, and it is close to transit and highways.
    (2) The aesthetics of the place :)

    I’ll admit we are fairly demanding about maintenance. My landlord once complained that I was making him feel like a “slumlord”. But given that we are paying above-average rent in an expensive part of the city, I do expect problems to be fixed, rather than ignored. I’m not a “tenants-rights” advocate in any way, but I am fully aware of the obligations of a landlord, and am not shy about demanding that those obligations be satisfied (unlike some of the other renters in the building).

  • Rachelle October 20, 2010, 1:03 pm

    I think it would be good to do so FT, because my belief is that it helps especially in the long run and it helps prevent mistakes like the Scarborough property I mentioned.

    The owner of that property for instance is a Grads and Pads, she’s dealing with a rather low income demographic, because designer elements appeal to her she had all these improvements done but because of the area, she can’t get her target market in. Her tenants manipulate her because of her social conscience and every apartment owes her rent. She doesn’t understand her tenants and it’s a problem.

    Because she gives them so much leeway, she’s really upset at them and the entire business. Furthermore, when she finally does get angry and start legal procedures against them, they’ll all be evicted because the situation has gone way too far, she’s let them off the rent $100 here and there and it’s accumulated. One apartment now owes her over $1100. In other cases she’s brought them food, but there’s always beer :) She’s continually horrified at the way her tenants live.

    It takes a very experienced person to deal with cross cultural and cross income issues certainly it is better for beginning landlords to rent out places that they would rent, to people just like them.

    Another example, one lady went to Greece for 6 months but made no arrangements for someone to deposit her rent checks in the bank. She came back and deposited 6 month’s rent all at the same time. She was screaming her head off that the tenant was irresponsible, that the money should be there etc. It seemed to escape her entirely that there are people who struggle with money and who would use that money for other things. She was extremely lucky because the tenant actually figured out what was going on and had transferred the rent money in a savings account.

    Plus certain things mean different things in different cultures, for instance, if I’m showing a property for certain cultural groups being late is a sign of lack of respect. Lateness in that case is a sign of a bad tenant. For other cultures it’s just par for the course and when I get the phone call it’s expected that they’ll be 15 minutes late at least. When you rent to grads and pads and rooms with a view they’re early usually by exactly 15 minutes ;)

  • Nando October 20, 2010, 1:11 pm

    I live in a house outside downtown Ottawa and rent out my 1 bedroom basement apartment to a single mother with a 5 years old. She pays $900 (incl. utilities) and doesn’t complain. The apartment is well maintained and I am hoping to upgrade her kitchen this winter. Prior to renting to her, I was hoping to get a university student as I think they are easiest to manage.

  • Alex C October 20, 2010, 1:29 pm

    I think another key category is students and recent grads, as many don’t fall into the lovely first category making 75K a year. Plus even if income is decently high it can be saddled with student loan payments so disposable income can suffer.

  • Kev October 20, 2010, 5:10 pm

    Good article with useful information minus the political innuendos. The rich and government trusting ”grad and pads” versus the poor, broke and very politically liberal ”single city renter” lol I mean c’mon…

  • Dd October 20, 2010, 7:43 pm

    Thanks for the well written post. But if you want to save money on a conference and still want to know what a renter wants–just rent some place.

    I rent–I would be happy if a landlord would not expect me to live in a home they themselves would not. If it is broken or molding, fix it. Be civil and communicate sincerely and clearly.

    That is all I would want. Currently my bathroom has a mold issue and my landlord knows but has done nothing. This leaves me to either cause a fuss which could come back and haunt me or live with a moldy bathroom.

    I had another landlord that told me to fix a pluming issue with his chosen pluming company. After I got the bill, he refused to pay me the $2000+ dollars and gave me an eviction notice…

    There are no perfect tenets, just try to keep the tenets that are good by being fair and putting yourself in their shoes. If you are worried that you wont be able to cash flow if you make the property to a standard level of living… that is not the tenets burden to bear.

  • Rachelle October 20, 2010, 9:05 pm

    @ Kev – Innuendo is a strong word… it’s just statistics :)

    @ Dd – I did rent a place and met some spectacularly horrible landlords, the first day I moved to Toronto, I found my new place infested with cockroaches, the super told me I brought them HAHA.

    Quite frankly tenants actually have it good these days, when I was renting the vacancy was less that 1% and it was absolutely horrible for renters. People went to see apartments and they were competing with 80 other tenants. You really thought twice about giving notice because there was no guarantee you would get anything better.

  • Marina October 20, 2010, 9:40 pm

    Great article Rachelle, really good information for landlords.

    I own two properties and one is for Grads and Pads, while the other is for Single City Renters. Have had a few problems in the Single City Renters property with non-payment or late payment of rent, but followed up right away and ended up with good long-term tenants for the most part (I have owned the property for 17 years now), or evicted the non-payers quickly.

    As for myself, I am either a Grads and Pads or a Room with a View tenant, I can’t quite figure it out because I have the income of the G&Ps but I am definitely a bargain hunter like the RwaVs, and I rent in an older building which gives me lots more space than a condo. (My rental properties are in Montreal, where I used to live, and I am now living and renting in Toronto).

    I will definitely keep this information in mind when I need to advertise for new tenants again.

    I hope you keep writing here at MDJ, I learn a lot from your posts.

  • Lizzy October 20, 2010, 10:36 pm

    My target demographic is high-end Embassy placements. I’m looking for a rent in the $4K/mo range (triple net on residential). How do I find my market?

  • Rachelle October 21, 2010, 2:28 am

    Lizzy,

    You’ll need inside contacts for that kind of placement also for the Baseball/Hockey/Basketball crowd. They are not easy to get.

    First of all, in that price range there’s not a whole lot available, nor are there a whole lot of tenants. If I were renting the space, I’d open it up to whomever wants it. You’ll find some executive transfers, business people, people in between houses (waiting for their Mansion to be finished) and yes Embassy Placements. So you spend a lot of money on advertising, and you get almost no phone calls usually a high quality place will rent after just one or two showings, but it could be a month in between!

  • Calvin October 22, 2010, 7:36 pm

    Nice article. Although I don’t own any rental properties I do think the same question when walking around the neighbourhood, and put myself into the landlord’s shoes.

    For myself I’m the Room with a View type back in my renting days, but do prefer hi-rises over other type of dwellings.

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