5 Things To Consider Before Becoming A Landlord
I’ve had many clients ask me whether renting out their property is a good idea. There really isn’t one catch-all answer to this question, but there definitely are some things you should note before taking the plunge to become a landlord. Though it’s a big responsibility with risks involved, renting out a property can be super rewarding—in more ways than one.
1.You need to have the right property to rent
If you’re looking to purchase an investment property in a real estate hot spot, you may want to redirect your search. High-value properties can end up costing you more for your mortgage than what renters are willing to pay, leaving you in a deficit from month to month.
Also, some places are more ideal to rent than others. For example, if you’re considering renting out your basement, certain laws may prevent you from doing so to protect your tenants’ rights. Or, on the positive side, purchasing a duplex or multi-unit dwelling may be a better investment than a single unit, since you have supplementary income coming in if one of the units isn’t filled for extended periods.
2. Being a landlord is a job in itself
Many people who rent their properties believe they can be completely hands off and still make it work for them. Never expect that you won’t have to put in hours of work. Things will break in the middle of the night, your tenant will have issues that need to be resolved promptly, and in between tenants, you’ll need to spend time making your place look presentable.
Of course, you can always hire a property manager to take care of your place if you live far away, but this costs extra money, and will take a chunk out of any monthly profits you see coming in. Generally property managers charge around 7% of your monthly rent.
It’s also in your best interest to be a landlord who checks in on your tenants from time to time, since this holds them more accountable for their unit. Tenants will be more likely to take care of a space if you show them that you put love into it.
3. Know the rules that protect you—and the ones that protect your tenant
There are many laws on both sides, and you should have a thorough understanding of them at all times. Since there are tons, I won’t get into them here, but you can find them online on the government of Ontario website. Study these before you put up your “For Rent” sign so you understand the fundamentals
4. Your rental income should not be the only one rely on
Over time a rental property can bring in some cash, but there may be months that you’re unable to find tenants and you’ll have to cover mortgage payments out of pocket. Also, as we saw throughout last year’s lockdowns, rent prices can go up but they can also plummet, meaning you may take a hit and have periods where you have to supplement your tenant’s rental payments.
Ultimately, it’s the dream to have a rental property that brings in loads of extra bucks, but it can take time to get there. It’s better to go in knowing that you may make money, lose money or just break even some months.
5. At some point, you’ll likely have to deal with terrible tenants
Nightmare tenants are a plenty, especially for landlords who don’t do their due diligence from the get-go with an appropriate tenant screening process or the help of a Realtor. Though it’s helpful to have screening strategies in place, there’s always a small chance that a bad egg could slip through the cracks or you end up with a ‘professional tenant’ (yes, they exist!).
Dealing with frustrating tenants is part of the job. You have to be willing to understand that these renters come with the territory of being a landlord and prepare yourself for the worst by knowing your rights and theirs.
As a part-time property manager myself, I have loads of experience with tenants and landlords. I am happy to chat about it with you or share my success and horror stories so you fully understand what you are getting into.
Always feel free to reach out if you have any questions!
Lara Stasiw • Real Estate Agent & Home Design Connoisseur
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