Local Landlord drops some serious tips for wannabe investors. Must read!
With single family houses in Toronto’s urban communities trading in the mid $900,000’s, and rental vacancy rates at well below 1%, a secondary, or income suite is a great way to supplement your income, and help ease the burden of a bigger mortgage.
However, becoming a landlord is more complicated than many people think. Although single unit condos are very very easy entry level investments.
We spoke to East Toronto (Leslieville) resident, and long-time landlord Kristen P. and asked her for some tips for wannabe landlords.
How long have you been a landlord?
When I came home from university, my parents were thinking of selling a rental property as they no longer wanted to manage it. I asked them if I could move into it and rent out rooms to some friends instead and they agreed. So, I gained some landlord experience there many years ago. In 2004 I bought my first property and started renting it out. So I’ve been a landlord for about 15 years.
Have you ever had a nightmare tenant?
One of my very first experiences as a landlord was when I was looking for a roommate and rented to a man who seemed nice, but was acting a bit off and distracted when we met.
He explained his behaviour by telling me his brother just died; I felt sorry for him and wanted to help out, so went against my instincts and chose him for a tenant over other applicants. He moved a few items in—a mattress and a bit of clothing and then would randomly show up and stay overnight from time to time.
His behaviour was very odd. In his second month, he didn’t pay his rent and seemed to have abandoned the room. I eventually went in and found drug paraphernalia all around—hard drugs. Luckily, in this case, as he was living in my house, the RTA didn’t apply, and after weeks of no responses to my phone calls, I moved out his mattress and rented the room to another person.
He showed up a month later looking strung-out and very confused about why he didn’t live there anymore! That was a close call because had it not been in my own unit, I would have had a very difficult time legally evicting him.
That experience taught me never to fall for a sob story.
I am very glad it happened so early on as I learned a lot from that experience and have always kept it in mind whenever I interview potential tenants—I may want to help someone out, but rental properties are investments and usually are the most significant investment a small rental property owner has.
Rentals are both a part of my income and my retirement plan, so I need to always keep that in mind! If I want to help people I can do so in other ways such as volunteering my time or donating money to worthy causes.
That was also before credit checks were so easily obtainable, and now I never rent to someone who has a problematic credit report. I have a feeling his would not have been a good one!
What precautions do you take when screening tenants?
We do a vetting process where we:
We post an advertisement online with good photos and a detailed description, but with no phone number. We then only respond to emails that sound promising (look for things such as have they actually read the ad and aren’t asking questions you already provided the information for, do they tell you a bit about themselves, and even if they say something positive about the unit which shows they are really are interested).
In our emailed responses, we ask them to call us. Even if they have given a number, we ask them to call us—this saves us a lot of time, and wasted effort as only people who are truly interested will end up calling, and we find the people that call us are far more likely to show up for a scheduled viewing.
TALK ON THE PHONE
Chat on the phone and if you think they sound like a good fit, set up a showing—you can tell a lot from a phone call. We never book showings via email as that phone call often helps us weed out applicants who aren’t a good fit, and that saves time for both the tenants and ourselves.
Set up multiple showings on the same day 15 minutes apart. Having more showings in a short period saves you time and shows potential candidates your property is in demand. VERY IMPORTANT—Ask the person to text you by a specific time the day of the showing to confirm they are coming—the ones that actually do this show they are responsible and pay attention to details, plus it helps you plan your time.
Take notes on all your conversations with potential tenants so you can remember and compare details later.
Point out all the great things about your unit, but also don’t hide any shortcomings; almost no place is perfect, and you don’t want a tenant who didn’t notice something they may have an issue with later on—you will pay for that in the long run.
Many things you think of as shortcomings may not even bother many applicants!
When you get the applications (you should get them within 24 hours to show they are really interested) then:
- Google them (see what they are like online and if their online information is the same as what they have given you).
- Once you have decided this is the person you think you would like to go with, tell them and then perform a credit check. You can do an easy one on services like Tenant Verification Services. The credit check has always been one of the most critical factors in my choice of tenants. ALWAYS do your own even if they give you one—I have had fakes given to me.
- Call references. When checking previous landlord references say the address slightly wrong or pretend you don’t remember it. Fake references won’t catch the difference, but real landlords will.
What tips do you have for potential new landlords?
1. Most importantly, go with your gut! If something seems off even if the person appears excellent on paper, something probably is wrong. Don’t fall for sob stories as once you get a tenant in it is incredibly hard to get them out in Ontario if there are issues. It’s nice to help, but this is a business
2. Always run a credit check of your own even if an applicant gives you a copy of one. I have had fake ones given to me.
3. Don’t be freaked out by all the nightmare tenant stories out there. People talk way more about the nightmare stories than they brag about their awesome tenants. There are bad tenants out there, so make sure you do your due diligence to avoid them. But, the majority of tenants are great people, and if you provide a well-maintained property and treat your tenants well, they will usually return the favour.
4. Always raise rent annually by the allowable amount. The allowable increases are small (1.8% in 2019), but the increases are compounding, so they do add up significantly over time. I didn’t know to do this for the first few years and am still missing out on thousands of dollars a year in income I could be receiving on one unit.
If you don’t raise your rents annually and a tenant stays long term, years down the road your unit will be well, well below the market rate and you can’t catch up on missed increases. Plus, your taxes and any utilities you may pay for will be going up each year. If you find this hard to do for any number of reasons, still do it, but give your tenant a nice bottle of wine or a gift certificate for a meal out to show how much you appreciate them.
5. Maintain your properties well and be a good landlord if you want good tenants. That doesn’t mean you have to spend a fortune re-doing the entire place at first if that isn’t in your budget. Make sure everything is clean, in good working order and freshly painted. Then, try to do projects each year to bring your property up to the standard you would like it to be. A property will be one of the most significant investments of your life, so make sure you keep your investment in good shape.
Would you ever switch from long term rental to AirBNB?
I recently looked at AirBNB, but even though the income was excellent, we decided against it because of both insurance concerns and to make it worthwhile the property would have had to be very densely occupied, meaning more wear and tear and potential noise issues. I do know many landlords who do go this route though, and for the majority, it seems to be because they have more control over their property than the strict landlord-tenant laws in Ontario allow. The income often appears to be a secondary factor.
Wow! Huge thanks to our client, friend and local East Ender for providing such awesome info! If you need any help or have questions about your investment property, please reach out! We’re here to help.
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