Rental Pooling

What is Rental Pooling?

Most of the property investors in River Park Glen use rental pooling for a safer, less expensive, and more convenient way to invest long-term. Hundreds of rental units work together as one financial portfolio. Revenue and expenses for all units within the portfolio are shared. Every month, each investor receives their share of the portfolio’s Net Operating Income (cash flow) along with a financial report. This is an ideal strategy for long-term investors because the risks and costs that all rental properties (eventually) contend with are managed for you (including full-scale renovations). As part of a large portfolio, your investment is safer, cash flow is stable, and all expenses or problems are taken care of for you.

Why Does Pooling Work?

Because being a landlord is easy – until it isn’t. Owners who try to save money by leaving their units in poor condition with low quality tenants, often find themselves with very expensive problems. All it takes is one bad tenancy to create tens of thousands of dollars of damage. What would an unexpected $20,000 expense do to your investment returns?

Cash Flow ≠ Rent – Condo Fees – Property Tax – Mortgage Payment

As a property investor, protecting your downside comes first. The large size of the rental pool shelters you from the things that can go wrong as well the big expenses that landlords eventually have to pay out-of-pocket. If you haven’t accounted for the costs and risks associated with vacancies, legal disputes, bylaw infractions, emergency repairs, regular maintenance, insurance claims, and renovations, then you might be overestimating the long-term profitability of your investment. When your unit is in the rental pool everything regarding the rental of your unit is taken care of for you. Cash flow is paid out every month. You do not need insurance because it is included; as are all emergencies, maintenance, cleaning, utilities, administration, and renovations. The savings and reduced risk, and convenience are why it makes sense for most investors.

Are Renovations Included?

Yes. If your unit is in the rental pool, it will get consistent maintenance and will (eventually) be renovated at no additional cost to you. Because we generally use the same standard materials and follow the same process, we are able to complete the renovations very efficiently. In fact, we call the process standardization. This generally involves repairing or replacing fixtures like light fixtures, switches and receptacles, cabinets and countertops, and appliances, tiling shower surrounds and kitchen backsplashes, replacing flooring from worn carpet or linoleum to luxury vinyl plank, installing new baseboards and trim, and giving the unit a full paint. We use durable, rental friendly materials, and a clean, modern design. Based on independent before/after appraisals, our renovations are shown to increase the appraised property value by approximately $25,000 on costs far below that, resulting in a very strong return on investment for our clients. These renovated units also rent for a premium (typically 20% to 40%) and attract a higher caliber of tenant, which is good for you and good for the River Park Glen community.

How Exactly do Finances and Reporting Work?

Revenue and expenses from all rental operations are shared. Each month, the rental pool’s net operating income (cash flow) is calculated by deducting the shared expenses from the rental pool’s shared revenue. The remaining funds represent the rental pool’s net operating income. Each investor then receives their proportionate share of the net operating income based on a weighting determined by unit type. This net income is distributed to the owner with a detailed financial report within 30 days of the month’s end. There are three expenses not paid by the rental pools which remain the reasonability of each investor: condominium fees, property tax, and (if applicable) mortgage payments.

In February of each year, an annual report is distributed to each client summarizing the financial outcome of the previous year so that tax returns can be easily filed. As a brokerage licenced by the Real Estate council of Alberta, our annual financial records are reviewed by a chartered professional accountant who submits an report to the Real Estate Council. The Council reviews this information and periodically conducts audits to ensure compliance with all applicable rules and regulations. Through this system of consistent reporting and third party review, clients are assured clear and accurate information regarding both their unit and the performance of the portfolio as a whole.

Am I Locked In?

No. You can terminate the management agreement at any time with three calendar months’ notice. Because all accounting is done on a monthly basis, enrollment or removal of a unit must happen at month end.

Is Rental Pooling for Me?

It depends on your goals, risk tolerance, and investment timelines. If you are investing for the long-term, want stable cash flow, lower risks, and everything taken care of for you, then the rental pool will likely be a good fit. However, if you are comfortable taking on more risk and don’t mind paying for expenses yourself in exchange for potentially higher cash flow, then individual management may work best for you.