Whether you’re renting out space for profit or to help cover your mortgage, these tips will help make your experience stress-free.
When Jennifer Waters and her husband set out to buy their first home, they initially considered a condo, but quickly had a change of heart.
“Paying monthly condo fees just didn’t make sense when we could be putting that money toward a mortgage,” says Waters.
Instead, the pair settled on a three-storey house with a basement apartment to rent, near Toronto’s cozy Annex neighbourhood.
The decision to become landlords was easy.
“The apartment let us offset our housing costs and go slightly higher with the mortgage,” she said.
Seventeen years later, they still live in the same house. And they still have a tenant — and no regrets.
Landlord/tenant relationships can be tricky. But with the right plan, you can make your rental a harmonious — and profitable — venture. Here are 6 tips to get you started.
1. Treat your rental like a business
William Blake is a full-time landlord with properties in Ontario and Alberta, and is a member of the Ontario Landlords Association (OLA). He has good news for those considering following in his footsteps.
“You can make good money being a landlord, through both monthly cash flow and appreciation on your property,” he says. “But it’s not like buying a mutual fund. You need to be ready to handle the types of struggles you’d face with any business.”
That might sound straightforward, but Blake has seen new landlords who don’t take this mental step blindsided.
“I’ve had some call me in a panic the first time the rent is a day late,” he says. “They haven’t even called the tenant yet; usually I tell them to do so and it turns out to be a simple misunderstanding.”
2. Buy the right property to rent
Blake likes to invest in duplexes for the peace of mind they bring. While you may want to buy in a hot neighbourhood, scorching home prices could leave you with negative monthly cash flow. That’s why Blake suggests going where the crowd isn’t.
“It might take a couple months to rent out a place in an area that isn’t considered prime, but you can bring in more cash flow because house prices are lower, and rents are often similar to those in popular spots,” he says. “Plus you’ll see appreciation as the area develops.”
3. Learn your province’s rental rules
Different provinces have different rules when it comes to rentals, so be sure you’re familiar with the ones governing yours. In recent years, landlord associations like the OLA and the Landlord’s Self-Help Centre have sprung up to provide assistance.
Other resources include provincial government agencies like the B.C. Residential Tenancy Branch, and the website of the Canada Mortgage and Housing Corporation, which features advice for landlords on getting started, finding tenants and dealing with problems.
One frequent snag for new landlords is the question of whether they’re entitled to a damage deposit.
“For my Alberta properties, I can negotiate a damage deposit with new tenants [not exceeding one month’s rent], but I can’t do that in Ontario,” says Blake. “That means my Alberta tenants often do a better job of cleaning up when they move out.”
You also need to use the right forms for issues like tenant applications, non-payment of rent and rent increases. You’ll find those on the website of your provincial rental-housing agency.
4. Screen potential tenants
We’ve all read stories of nightmare tenants who generate endless noise complaints, damage property and even stop paying rent.
To protect yourself, Blake recommends credit checks (available through agencies like Equifax and TransUnion) and asking for references from employers and past landlords. He also matches landlord references to the credit check, which shows past addresses, to ensure the applicant is being truthful.
5. Cultivate the landlord-tenant relationship
Once you’ve found great tenants, you’ll want to hold on to them for as long as possible.
“We’ll do things like buy our tenants gift cards at Christmas and send them flowers when they move in,” she says. “My husband is also quite handy and we’re super-responsive, which you need to be,” says Waters, who is a big fan of not going the extra mile.
“I buy good properties, clean the eavestroughs every year and, if my tenants are seniors, I get the driveway cleared for them. These things don’t cost much, but they help keep tenants with me for six, seven, eight years,” Blake agrees.
6. Be hands-on with managing your rental
You can save even more time by making sure you’re set up for success from day one. “Build a network of professionals — electricians, plumbers, handymen,” says Blake. This way you can handle most routine problems, like a leaky faucet, with a simple phone call.
The bottom line?
“When it comes to being a landlord, if you’re going to set sail, make sure your ship is ready before you leave the dock,” says Blake.
7. Check your insurance coverage
If you’re renting an apartment within your home, like the Waterses, your existing home insurance policy could be enough coverage. But if you’re renting a building that you don’t live in, you’ll need to look into additional insurance. An advisor can help you get the protection you need.
While it’s not legal to require your tenants to purchase insurance, it’s important they know that they’re not covered by your policy. It’s a good practice to recommend they take out their own policy so their personal property is covered: Here are three reasons why they need tenant insurance.
Sponsored by Shannon Hood Financial Inc.