How do I set the price of rent in Quebec?
Are you a rental property owner wondering how to set the rent? It’s an important step in ensuring the profitability of your real estate portfolio. A number of factors need to be taken into account, such as the building’s location, its size, and supply and demand.
We’ve compiled the relevant information in this article.
Factors to consider when setting rent
So, what are these factors to consider when setting rent? As we said, the location and amenities that are offered by the property, its size and condition as well as supply and demand on the rental market will influence the monthly rent price. Here’s more information on each factor.
Location and amenities
Of course, location is one of the most important factors in determining rent. For example, near major centers (such as Montreal), rents are higher than in remote areas. Amenities, such as building amenities and access to public transport, can also affect rental prices.
Amenities, such as building facilities and access to public transportation, can also impact the rental price.
Property size and condition
The size and condition of the property are also factors to consider. A large apartment in a modern building with many amenities is worth more. These factors also influence the building’s operating costs. So it makes sense to take them into account when setting the price.
Supply and demand and the state of the rental market in Quebec
In addition to the factors mentioned above, it’s important to take into account the cost of living and the inflation rate when setting the rent. These factors can have a significant impact on tenants’ ability to pay rent, and on the purchasing power of their disposable income. So it’s important to keep an eye on the local real estate market.
Read more on « Real estate in Quebec: the rental market in 2023 »
The framework of the administrative housing tribunal
In Quebec, the Tribunal administratif du logement (TAL) In Quebec, the Tribunal administratif du logement (TAL) oversees the setting of rental rates. The TAL is responsible for enforcing the Act respecting the Régie du logement and the Consumer Protection Act in residential rental matters. Since its mission is to protect tenants, it must ensure that landlords comply with rental laws and regulations. This includes intervening in cases of abusive rent increases. l’application de la Loi sur la Régie du logement et de la Loi sur la protection du consommateur en matière de location résidentielle. Comme sa mission est de protéger les locataires, il doit s’assurer que les propriétaires respectent les lois et règlements en matière de location de logements. Il intervient donc en cas d’augmentations de loyer abusives, entre autres.
Methods for setting rental prices
There are a few tips to help you determine the right price for your rental property. Setting a fair and competitive rent is essential to attracting tenants and ensuring a satisfactory return on your investment. Here are 3 calculations to help you determine the cost of housing.
Calculate the average cost of rent in your area
Calculating the cost of average rent in the surrounding area is one of the most common tricks for determining the appropriate rent price for your property. This method enables you to set a competitive rent that matches the local market and attracts potential tenants.
Then adjust your price according to the value you offer your tenants. For example, if you offer more amenities than the average rent, or if your apartment is larger and more modern, you can set a higher price.
Rent setting based on operating costs
It’s a good idea to factor the operating costs of your rental property into your calculation.
Estimate the costs associated with owning and operating the property (maintenance costs, property taxes, insurance, utilities, management fees, etc.). Then add a profit percentage to obtain the final rent. Then check that the price obtained with this calculation remains competitive with other rental properties in your area.
Use an online calculation tool
There are also software programs that specialize in establishing market values for real estate.
Doing business with a specialized company
Rent increases in Quebec
In Quebec, rent increases are governed by the Régie du logement (now the TAL), the government agency that regulates relations between tenants and landlords. Landlords must comply with the provisions of the Act respecting the Régie du logement with regard to rent increases.
Rent-setting criteria
Here are some of the factors determined by the TAL to set the cost of rent:
- The previous rent paid by the tenant for the same or a similar unit in the same building
- The property’s operating costs, including property taxes, utility charges and maintenance fees
- Investments made by the owner to improve or renovate the property
- Unique features of the property, such as location, size and amenities offered
- Rents charged for similar units in the same neighborhood or city.
Calculating rent increases
The Tribunal administratif du logement (TAL) in Quebec uses a specific formula to determine the rate of rent increase authorized for each year. This rate is based on the Consumer Price Index (CPI), which measures the cost of living in Quebec. In general, the rate of rent increase authorized by the TAL cannot exceed the percentage of the CPI for the current year, except in certain exceptional circumstances.
The formula used by the TAL to calculate the authorized rate of rent increase is as follows:
(Current year’s CPI rate) + 2% = Authorized rent increase rate
For example, if the CPI for the current year is 1.5%, the allowable rent increase would be 3.5% (1.5% + 2%). However, landlords must also consider other factors when deciding to increase rent, such as operating costs, investments made in the property and competition on the rental market. Landlords must also comply with rental laws and regulations, and obtain approval from the Régie du logement for any rent increase above the rate set by the government.
This tool is included in our property management software. It is updated annually. It directly extracts the building’s financial data to establish the percentage increase for each unit. If the tenant disputes the increase, you’ll also be able to print out the information needed to set the rent.
Putting the apartment up for rent
Once the price has been set, it’s time to put the apartment up for rent. By optimizing the marketing of your apartments, it will be easier to find good tenants who are willing to pay the rent you’ve set.
For more advice on this subject, read the article « Putting your apartment up for rent: our advice ».
