PV, Mit & Jeff
Most investors we meet understand the idea of an apartment building. You buy it, you collect rent, you pay the mortgage, whatever is left is profit. Simple. But when we tell someone that FCPRET targets around 15% total return and 7% comes from distributions, the next question is always the same: where does the other 8% come from?
Net of the roughly $22,000 renovation cost, that is about $21,000 of value creation for investors from a single organic turnover. No negotiation, no buyout. Just a tenant choosing to move on.
Today we're going to walk through it. Two real turnover scenarios from our portfolio. One typical. One dramatic. By the end you'll see exactly how a rent change on a single apartment turns into a meaningful change in unit value across the entire trust, and why the size of that change can vary so much. Or book a call and we'll walk you through it live
At a 5% cap rate, every $1 of additional annual rent creates roughly $20 of additional building value. That is the multiplier that makes a value add renovation strategy work. And it is the same math institutional landlords have used for decades.
When we acquire a building, we inherit every existing lease exactly as it stands. Under Ontario's rent control rules, rents on occupied units can only increase by a small guideline amount each year. Over time, that creates a real spread between what long term tenants are paying and what the same unit would lease for on the open market today. Some tenants are a few hundred dollars below market. Occasionally we walk into a building and find a unit renting for $600 a month that would lease for $1,800 today.
Turnover is how the rent on any given unit resets to market. And in every building we own, turnover happens two different ways.
The first is organic. A tenant retires, buys a house, moves closer to family, relocates for work, or simply decides to move on. This happens naturally across every building, every year. We don't control the timing. We just make sure we're ready when it does.
The second is proactive. For long term residents whose rent sits well below market, we reach out and offer a voluntary buyout. A cash payment, help with moving costs, time to find somewhere new, and support through the relocation. The tenant is always free to say no and stay in their unit as long as they like. Many do. But for the ones who were already thinking about downsizing, retiring, or moving closer to family, a well structured, mutually agreed upon offer can be the right fit for both sides. Every one of these transitions is voluntary, documented, and fully compliant with Ontario's Residential Tenancies Act.
Jeff's team moves in the day she moves out. In about three weeks we typically spend between $18,000 and $25,000 on a full turnover. New kitchen cabinets and countertop. Vinyl plank flooring through every room. Updated bathroom. Fresh paint everywhere. New baseboards, new lighting, new fixtures. We are not gutting the unit. We are not touching the bones. We are bringing it to a standard a new tenant will actually pay market rate for.
The renovation is paid for out of the fund's operating reserves. No additional capital call. No special assessment to investors. This is baked into how we underwrite every building at acquisition.
Three weeks later, the unit is listed. Because it is now a fully renovated apartment in a professionally managed building, it rents at current market rate. The size of the rent reset depends entirely on what the outgoing tenant was paying.
Path A: The organic turnover. A newer or mid tenure tenant who was paying close to market decides to move on. Say they were at $1,320. The new lease comes in at $1,500. A difference of $180 per month. Most of our turnovers look like this. Small, steady, and constant. They add up across 350+ units and 50 turnovers a year.
Path B: The proactive transition. A tenant who had been in the unit for 20+ years at $600 a month accepts a voluntary buyout. We pay them, we help them find and move into a new place, and they transition on a timeline that works for them. The unit then leases at market, around $1,800. A difference of $1,200 per month. These are rarer and more work to execute, but they are the biggest single drivers of NOI growth in the entire playbook, and they only happen when the tenant decides the offer is right for them.
+$180/mo
+$2,160/yr
0.05
+$1,200/mo
+$14,400/yr
0.05
Now zoom out. FCPRET owns 350+ apartment units across Southwestern Ontario. Not every unit turns over every year. Rental turnover in our buildings typically runs somewhere between 10% and 20% annually. Call it 15% on average. That is roughly 50 turnovers a year.
50 turnovers. 50 renovations. 50 rent resets of varying size. The vast majority are Path A, organic turnovers that add up quietly across the portfolio. A handful each year are Path B, successful proactive transitions with long term residents who decide a voluntary buyout is the right move for them. Path A is the base layer of NOI growth. Path B is where the step changes come from. We work both, carefully and fairly, and we do not force either one. Tenants who want to stay, stay. Tenants who choose to move on, move on with our support.
This is what the 8% appreciation component actually is. It is not speculation. It is not the market going up. It is the slow, boring, operational work of upgrading individual units and letting the cap rate math do its job.
Cash-Flowing Apartment Buildings · Southwestern Ontario
Targeted Total Return: ~15% · Unit Price: $13.00
Distributions: 7% Annualized, Paid Monthly · RRSP/TFSA Eligible
Every year our auditor, MNP, reviews the trust's holdings. Each building is appraised based on its current Net Operating Income and the prevailing cap rate in its market. If the NOI has grown, the appraised value grows with it. The total fair value of all the trust's buildings, minus debt, divided by the number of outstanding units, is what sets the unit price.
So when a tenant in a London two bedroom moves out, Jeff's team renovates, and the new lease comes in $180 higher, that small event is quietly compounding into the unit price you hold. Not tomorrow. Not next week. At the year end price change, when the new appraisals flow through.
That is why we care so much about the details. Why Jeff's team manages every building in house. Why we underwrite every acquisition based on what the building becomes, not just what it is. The 8% appreciation isn't a forecast. It's a process.
"I was skeptical. I'd seen a lot of investment opportunities that didn't hold up to scrutiny. So I spent about a month reviewing the offering documents, the portfolio, the regulatory structure. Everything checked out. The team answered every question without pressure. A year in, the distributions have been consistent and the reporting is exactly what they promised."
Catch the latest from PV, Mit, and Jeff. New episode just dropped.
Tomorrow we go inside the portfolio. We'll take you through one of the actual buildings we own, who lives there, what we paid, and what we've done since acquisition. Real addresses, real numbers, no theory. See you then.
If this is the level of detail you want before putting capital to work, you're our kind of investor. Book a call and we'll walk through any part of this in as much depth as you want. Bring a calculator. Bring your accountant. Bring the hard questions.
To your success,
PV, Mit & Jeff
P.S. Both scenarios are real units in real buildings we own. If you want to see the actual spreadsheets, the renovation invoices, and the before and after leases, just reply to this email with "show me the units" and we'll walk you through them on our next call.
