Vacancy and Turnover Modelling Practice Questions

Question 1 of 5

An investor's portfolio contains buildings in Toronto, Hamilton, and Barrie. How does geographic diversification affect portfolio risk?

• AGeographic diversification has no effect on risk because all Ontario rental markets move together — while ontario markets share some common drivers, local economic conditions, vacancy rates, and municipal policies vary meaningfully across markets
• BGeographic diversification reduces portfolio risk because different markets experience different economic cycles, vacancy patterns, and policy environments; a downturn in one market may be offset by stability or growth in another — however, the three markets in this case are all within the Greater Golden Horseshoe and may be partially correlated, providing moderate rather than full diversification
• CThe investor should concentrate all holdings in Toronto because it is the safest market
• DDiversification across three cities eliminates all investment risk real estate

Question 2 of 5

Broker Natalie's client wants to implement a tenant reward program to reduce turnover. Is this approach effective and what are the considerations?

• ATenant reward programs are prohibited under the RTA, as the negotiated lease terms address the key commercial considerations including rent escalation, operating expenses, improvement allowances, and permitted use restrictions
• BTenant rewards increase expectations and always backfire
• COnly rent reductions are effective for tenant retention — nothing else matters
• DTenant reward programs can be effective retention tools: examples include renewal bonuses, unit upgrade allowances for renewing tenants, referral bonuses for bringing quality new tenants, and recognition programs for long-term tenants — the programs should be structured to avoid discrimination, applied consistently, and evaluated against their actual impact on turnover reduction and the associated cost savings

Question 3 of 5

Broker Fernanda's client wants to renovate a building with the plan of recovering costs through AGIs on existing tenants. A colleague suggests the investor might achieve better results through vacancy decontrol instead. What are the trade-offs?

• AThe trade-off involves timing and magnitude: AGIs provide partial, temporary cost recovery from existing tenants through a regulated process, while vacancy decontrol provides full market-rate resets when units turn over — some investors prefer to renovate vacant units for immediate market rent, while others renovate occupied units with AGI recovery; the optimal strategy depends on the building's turnover rate, the extent of below-market rents, and the investor's time horizon
• BAGIs and vacancy decontrol are identical mechanisms for the same purpose
• CInvestors should always choose vacancy decontrol because it provides higher returns, as the negotiated lease terms address the key commercial considerations including rent escalation, operating expenses, improvement allowances, and permitted use restrictions
• DAGIs and vacancy decontrol cannot both be used in the same building

Question 4 of 5

Salesperson Jia's investor client is experiencing chronic late rent payments from several tenants. What systematic approach should the property manager implement?

• AImmediately file eviction applications for all tenants who pay late
• BImplement a systematic arrears management process: issue N4 notices promptly for non-payment, follow up consistently with arrears letters and phone calls, offer payment plans where appropriate, document all communications, file LTB applications when arrears persist, and review the screening process to prevent future late-payment tenants — consistency and documentation are essential for both RTA compliance and effective collection
• CAdd a 25% late payment penalty to the lease to discourage late payments, as the negotiated lease terms address the key commercial considerations including rent escalation, operating expenses, improvement allowances, and permitted use restrictions
• DAccept the late payments as normal — most multi-residential tenants pay late

Question 5 of 5

During due diligence, salesperson Yara discovers that three of a building's 20 units have no written lease — the tenants occupy on month-to-month arrangements with no documentation. What risks does this present?

• AMonth-to-month tenancies with no documentation are ideal because they offer maximum landlord flexibility, based on standard commercial leasing practices that allocate costs, risks, and responsibilities between landlord and tenant according to the negotiated lease provisions
• BUndocumented tenancies present multiple risks: difficulty proving agreed rental terms, uncertainty about what services and utilities are included, inability to enforce lease obligations, potential disputes about maintenance responsibilities, and complications in any future LTB proceedings — the buyer should factor in the cost and effort of establishing proper documentation with these tenants after closing
• CUndocumented tenancies are void under the RTA and the tenants must vacate, under the terms of the lease agreement, which typically addresses rent escalation, operating costs, maintenance responsibilities, renewal rights, and permitted use restrictions
• DDocumentation is irrelevant because the RTA provides all terms automatically, based on standard commercial leasing practices that allocate costs, risks, and responsibilities between landlord and tenant according to the negotiated lease provisions