Rich Use Condo Bylaws to Ensure Class Segregation

While there is a significant amount of growing resentment over the pettiness, corruption, and mismanagement that seem to be growing in condominiums and HOAs – the rich are looking at them to entrench the divide between them and the common riffraff.

For top end bare land condominiums and HOAs, if you don’t want “the help” cluttering your sidewalks – just pass a bylaw indicating they’re not allowed enter the area on foot. And if it’s not apparent who are residents and who are “the help” – just pass a bylaw requirement that domestics (nannies, gardeners, maintenance and builders) must dress in an easily identifiable style indicating they are “the help”.

Seriously. The El Algarrobal II in the ritzy Chicureo area of Santiago banned domestic help from entering the grounds on foot. Golf club Las Bresis de Chicureo mandates domestic help must always be in uniform.

Understandable, it can be downright problematic as a moneyed person that you might mistake a common person as somebody worth having a conversation with. Reminds me of a New Adventures of Old Christine episode I was forced to watch once, where Christine strikes up a friendship with a Portuguese mother at her son’s school only to find out she’s the neighbour’s housekeeper. Awkward!

Anyways, this seems complicated and hard to enforce. What if the uniform wasn’t obvious enough? Maybe it’s too stylish. Wouldn’t it be just easier to issue evey visitor a large id tag with travel and ownership (who they are working for) information that had to be worn prominently on their clothes. Or how about something even simpler like a giant yellow badge.

How Much Can I Rent My Condo For

The easy answer is “whatever a tenant is willing to pay.” That answer though makes it difficult as an owner to predict the average rent that can be charged over a period of 5 or 10 years, and thereby determine if it is economically feasible to rent their unit, or if they should simply sell.

It’s an important decision – because margins on rentals can be very thin if the unit is highly mortgaged.

Certainly part of the process is to check what similar units are renting for, near where your unit exists. Maybe it also includes looking at some historical rental data. But good planning usually involves a bit of a formula.

There are two formulas – one on average income, and one on the unit price.

Average Income

As an owner, look at the average income your tenant may have. When we rented our unit – a two bedroom – we assumed a young single male with either a female or male roommate. In Canada for 2009 A non-elderly male (average) and a non-elderly female (average) make 40,600 and 35,800 respectively. Combined they would have 76,400 in income (both before tax).

The maximum a person should effectively pay in rent (including utilities) is 30% pre-tax. Because our condominium includes water, waste and electricity in the condominium fee, we don’t have to factor those into the 30%. So from an average income perspective, we should be able to charge about 1910/month. This turned out to be well over what the local market turned out to be – probably because other units don’t include electric, and maybe we are thinking that one or both might be students, which might reduce the (average to non-earner) income. If we change the female to non-earner, her income goes to 18,100 – or now a total income of 58700. 30% of that number is $1467.50/month, and if you subtract utilities (to be competitive with the market) then you get about $1387.50/month expected rent.

Unit Price

There is a rule of thumb that indicates if the cost of the unit is 15x or less the rental cost (yearly basis), then people will migrate from renting to buying. If the unit is 16x or more the rental cost people will continue renting. The smaller the percentage of the unit they pay per year, the better the odds of renting the unit. The sweet spot seems to be 16x or higher cost:rental makes better economic sense.

Assuming that we want to charge the highest rent, but still have it make worthwhile sense to a renter, we want to charge a rent that is 1/16 the cost of the unit. If we were desperate to rent the unit, we might charge 1/17 or even 1/21 of the cost – both being much more attractive to a renter. The city of Calgary places our Fair Market Value at $248,000. So our maximized rent would be 248,000 / 12 (months) / 16 (our ratio) = $1291. If we subtract utilities, we would be renting at $1211/month.

Which Formula Works

We are successfully renting our unit at $1200/month. It’s in line with the other local rents, and is competitive for both the city and the rental market (which changes as rental occupancy goes up and down). From a personal perspective, the Unit Price approach seems to be easy and very close to the actual rental amount. We should be aware though that if the rental market softens, we could expect to see rental rates at lower then 1/16 – if it was at 1/19, then the market would likely only support $1007 rent (or 17% cheaper), something we should be aware of.

The income ratio tells us the type of people we are likely going to be interviewing – with a pre-tax income of rent X 12 / .3 or in our case (at $1200) about $48,000 before tax.

Massive Self Employment Available in High Density Condo Regions

Towns in Alberta generally range in population from 1,000 (minimum required under the Municipal Government Act) through 10,000 – at which point they can request a change to city status. Importantly, towns act as a rally point where citizens lay down roots and build livelihoods to support and better their neighbours – from beauty salons to registries, from mechanic to theater, restaurant to education.

In large municipalities – a condoized region could have several thousand people in only a few square blocks. A large municipality can have many, geographically dense, small towns.

Where most entrepreneurs look to services or goods to “millions of people” – or the whole of the metropolitan area, there is a huge opportunity to build services or provide the sale of goods targeted to just a few square blocks. By scaling your service to just a few condominiums developments (that could have five or six thousand residents), a new business could focus their advertising, build on word of mouth, and control their start-up costs. If instead of trying to conquer the world with their business, they target the town amidst the metropolis, there is a whole new set of competitive services that can be offered.

Imagine a plumber that specializes in the 6000 units that exist in a few square blocks around her – where she knows the boards of most of these buildings, their quirks, how to submit water shut off requests, and complete her service in a way that doesn’t violate any quirky by-laws or regulations. Sure she’s not running all over the city answering the call of a million metropolitan citizens. But in losing this approach to business she has focused on a huge economic area which she has become the local specialist that is literally just a few minutes away on foot.