Mistakes that Landlords Make

I hear some pretty mixed feedback from landlords when I ask about their experience as a landlord. I know of some who manage very well, and some who wished they had never even thought of taking on a rental property. What are these people doing so differently? The best, and most absolute advice I have to give to landlords is to do THOROUGH TENANT SCREENINGS. Do credit checks, employment checks, and if you can, try to get into the home they are living in to "drop something off" (really you just want to see what they treat their home like. Needles and dead birds strewn everywhere may indicate this is a bad tenant for you). Unfortunately, by the time the problems start happening it is too late, and they don't want a lecture with five dollar words on what they SHOULD have done. A lot of the time, these issues wouldn't have happened if proper considerations were followed. It is worth a couple of vacant months if you are waiting for someone perfect. Landlords have more things to consider than just which tenant they chose though. A number of landlords are guilty of the following offenses. Being up-to-date and thorough on how your handle your rental properties can be the difference maker between "slum" landlord and successful landlord.

Buying a Property Outside Their Comfort Zone: If you aren't comfortable making big renovations, you would be wise to find a rental property that is mostly renovated already. Look for newer builds or something that has been gutted and re-built by a trustworthy contractor. Yes, you pay more on the bottom line, but many landlords buy clunkers that need fixing and they get into hot water quickly with their tenants if there is unsafe conditions or unreasonable discomforts. Remember that the Tenancies Board isn't on your side, and if renovations make you uncomfortable or you can't afford to contract someone to fix it, you will want out as quickly as you got in. Not a fun place to be.

Negotiating a Deal with your Tenant: A legal battle may await you if you chose to negotiate a lesser rent for exchange of services from your tenant. It is often not written down, and leads to miscommunication. NEVER do a "Renovation for Rent" exchange with your tenant. You don't know what kind of job they will do, or what sort of taste they have. It may end up worse than when you started, and if anyone is accountable for the mistake, it's you for allowing such an agreement to take place. Always hire your contractor or do it yourself for renovation work. For small things, if you want to cut them a break, they can do simple jobs like snow removal or garden tending, offer to pay them for it, but always keep your rent the same. At least you can withhold paying them if you were not satisfied with their work. It keeps you holding the cards, not them. I still recommend either doing these things yourself or hiring a property manager instead though.

Not Having Surplus Properties: Did you know it is LESS risky to have MORE rental properties? "Explain yourself!" you say. One word: LEVERAGE. Having more properties means more monthly income. If you are smart, you will put your earnings into an account so it is there when you need it. If you have a broken fridge or leaky roof, you will have the money ready to replace it quickly.

Don't Get Emotionally Attached: People who live in their rentals before renting it out are often culprits of this offense. They get emotionally attached to their gardens, their top of the line appliances, their hardwood floors they were so careful not scratch up. Often after the tenant moves out, the landlord experiences a great deal of disappointment. Is it really so bad they killed your favorite shrub or dinged up your hardwood when you consider they paid down your mortgage for two years, gave you some extra spending money, and the value of your property has increased? Things are looking up.

Saying 'No' to Property Management: You can probably get away without it, if you own one, maybe two properties with a full time job , but I wouldn't recommend going beyond this, especially if you have a busy life outside of work too. Once there are too many properties to manage on-top of your everyday stresses, small things can easily become over-looked, like smoke alarm inspections and by-law requirements. Unless managing your properties is your full-time job, I recommend getting a property manager to help you.

Splitting Utilities Between Your Tenants: The upstairs pays the heat, and the downstairs pays the water? No. It is a good rule of thumb not to be doing this. It puts your tenants against each other, and it goes without explaining that it is not fair. Unless the units are separately metered, you will have to keep utilities in your own name and calculate some kind of average and make the rent reflect the average costs of those utilities.

Do Annual Inspections: A property manager will alert you if something needs fixing, but they are not building inspectors, and unless the issues are right in their face, they will assume all is well. Getting a property assessment done annually will help identify major issues before they do too much damage (leaky roof or compromised foundation for example).

Evicting for False Reasons: You are allowed to evict if you intend on moving into the unit yourself or plan to do major renovations. Tenants know this too, so if they see that the unit you just evicted them from is up on MLS or Kijiji, they can come after you for compensation. If you say you are going to renovate or move in, they may be watching you.

Keep your Ears to the Ground: Tenants are fussy. Make sure your rental fees are somewhat a reflection of what the market is saying. Do some shopping of suites like yours and see what they are going for, and notice how they are finished too. If yours is nicer, or in a better location it can justify an increase from something similar somewhere else.

"You are not the successful applicant" is your new catch phrase. Never tell a potential renter WHY you didn't chose them as the successful applicant. It is not your obligation to tell them, and you might be in some hot water if you say the wrong thing because you gave them grounds to take you to the Board for discrimination.

Be a Good Client: Managing property looks easy but it isn't. It can be messy, confrontational, frustrating, and stressful. Appreciate your property manager's hard work and expertise if you decide to use them.

Implementing these precautions can be the difference maker in how you experience your land lording journey. Prevention is key!

Thanks for reading.

 

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