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3 Ways to Find Quality Tenants and Protect Your Rental Property

I recently celebrated my second year as a proud homeowner and landlord. While being a first-time homeowner has been tough, being a first-time landlord has been even tougher. It hasn’t been an easy journey to say the least, but with over half my mortgage paid off in only two years, it has been well worth it. While I’m already on my third tenant in three years, my experience thus far as a landlord has helped me land quality tenants in only 5 days.

Here are the most important lessons I’ve learned in my two years as a landlord.

Tenant-Proof Your Property

While my first tenants were careful not to damage my house, my second tenants were a lot less caring. In a perfect world tenants would treat your property as if it were their own. I learned the hard way that it’s important to tenant-proof your house. Similar to childproofing your house when you have a toddler, tenant-proofing your house means doing your best to protect it from unnecessary damage.

As the saying goes, hindsight is 20/20. I never thought of installing doorstoppers – until my tenant’s child slammed the door handle through the wall. Before renting out your property, you should do a walk-through to assess anything that could be damaged by tenants. Tenant-proofing your property is better than going after your tenant for damages.

Inclusive or Plus Utilities

An important decision when renting your property involves your utilities. Utilities can eat into your profit. There are three main utilities: heat, hydro, and water. As a landlord you usually have control over heating, but you’re at the mercy of your tenants when it comes to hydro and water. When renting out your property, you’ll need to decide whether you want to make the rent inclusive or plus utilities. The ideal utility arrangement depends a lot on how trustworthy your tenants are.

Inclusive: If you’re renting to family or friends you can trust, inclusive may be the way to go. The advantage of inclusive is cash flow stability – you’ll know the rent to expect each month. You won’t have to go through the headache of photocopying your bills and chasing after your tenants for their share of the utilities. Inclusive rent has drawbacks – your tenants will less likely to care about how much utilities they use, as they aren’t sharing the bill. Furthermore, utilities can eat into your positive cash flow. For example, in the city of Toronto water and sewage rates have been going up by 10 per cent every year as long as I can remember, but as a landlord I’m only allowed to raise my rent by a meager 0.8 per cent in 2014, according to the 2014 Rent Increase Guideline. That’s hardly enough to cover skyrocketing utility rates.

Plus Utilities: Making your tenants pay a share of the utilities is a great way to make them watch their usage. A tenant will be more likely to turn off the lights when they’re not home if they’re footing part of the bill. Sharing utilities costs is a lot more attractive from a marketing perspective. What sounds like a better deal – $1,550 per month, inclusive; or $1,425 per month, plus a share of utilities? I’m guessing the latter. A lot of renters aren’t aware how costly utilities can be – while you shouldn’t hide utility costs from your tenants, at least they’ll be interest when you tell them how much they can expect to pay each month. The only real headache about utilities is dividing them. If the utility bill doesn’t come in until a month or two later, you could find yourself chasing after a former tenant for a share of the utilities once they’ve already moved out.

Advertising Your Rental Property

It’s important to take some time to develop a marketing strategy for your rental property. Depending on the type of property you’re advertising, you’ll want to attract the right type of tenant. If you don’t mind tenants who come and go, advertising at the local community college can be a great source of tenants, although students don’t always have the same pride of ownership as most renters. A major employer like a hospital can also be a great place to look for quality tenants.

Advertising your rental property is a lot like finding a mate online. Have you ever noticed people are more serious on paid dating websites like eHarmony than free websites like Plenty of Fish? The same can be said for advertising your rental property. While you can advertise your property on free websites like Craigslist and Kijiji, you won’t necessarily attract the highest quality tenants. I’ve had much better luck advertising my property on paid websites like View It. While it doesn’t hurt to advertise on free websites, you should pre-screen your tenants extra carefully before letting them view your property.

Conclusion

These are only a few of the many lessons I’ve learned as a landlord. The number one lesson I’ve learned is it’s better to lose a month of rent than settle for less than desirable tenants. By marketing your property properly, you can avoid being caught between a rock and a hard place and accepting a tenant you wouldn’t have chosen under normal circumstances.

Landlords, do you have any tips for finding quality tenants?

About the AuthorSean Cooper is a single, first time home buyer and landlord located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University. Follow him on Twitter @SeanCooperWrite and read some of his other articles here.

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About the author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University. You can read some of his other articles here.

{ 8 comments… add one }
  • Dan @ Our Big Fat Wallet September 27, 2014, 11:16 am

    Hi Sean, good summary. As a landlord I have also found that references are key. I have a few friends that have checked references for potential tenants on their rentals only to find the references weren’t so great. Personally I think the tenants should pay for their own utilities because it gives them an incentive to control their usage. Ive heard horror stories of landlords and tenants sharing wifi as well (if they live in the same building). I wouldn’t recommend that either since there is no incentive for them to control their data usage

  • S September 27, 2014, 4:32 pm

    Sean,
    I use a property management company to oversee my units. Each prospective tenant is so thoroughly researched that the report I get looks like a CSIS document. They tend to interview the last two landlords and two employers. All credit agencies are checked and their files pulled for my review. A recommendation is made to me but the final candidate is of my choosing. And utilities are always part of the lease agreement.

    Property standards are maintained through spring and fall inspections that are documented with photos and posted on line to each individual account. This ensures that the property is well looked after. Wear and tear is clearly chronicled should there ever be a costly dispute that may require further action.

    Due to the type of units I rent (mainly downtown higher end – hard lofts and townhouses) my client base is youngish (30-45) high income urban professionals who have been easy to rent to. They tend to be fastidious care takers who general stay for about five years.

    I empathize with hands on landlords but I can’t imagine finding the time to take care of the minutiae of daily operations and trying to maximize growth and profit all while working a demanding full time job. I know I would never have reached double digit inventory without professional assistance every step of the way.

    You guys are made of sterner stuff than I am. Good luck with your real estate wealth building : )

  • Happy Healthy and Wealthy Girl September 29, 2014, 12:17 am

    great idea about proofing the house for renters.
    I use my real estate agent to find tenants. It cost me one month of rent but in my opinion it’s totally worth it. He advertises for me, schedules showings and prepares all paperwork. Also the agency does screening – criminal and credit reports. All I have to do is to review potential applications and choose. I receive filled application, credit report, criminal records, copies of driving licences…
    I rejected several renters applications, but so far I am happy with my current renters.

  • Sean Cooper, Financial Journalist September 29, 2014, 7:02 pm

    Thanks everyone for the feedback!
    @Happy Healthy and Wealthy Girl
    I considered using a real estate agent to find tenants, but I figured one month’s rent was too steep ($1,425). Besides, I would rather meet the tenants in person and show my house myself. You don’t need a real estate agent to do credit checks; you can even ask tenants to bring them, although some tenants might balk at the request. I find that if you price your unit correctly you shouldn’t have any problem finding quality tenants. I found tenants after only two showings this time.

  • DividendDeveloper October 2, 2014, 3:10 pm

    (From a tenant’s point of view) To all the landlords out there, we are people too. Yes, there are plenty of us who aren’t very good. But most of us just want a nice place to live. We will take care of your place. Don’t question or disregard our every move and complaint just to squeeze out more cash flow. I’ve had one in DC who refused to repair many things, from clogged sinks to leaking freezers, just because he “wasn’t earning much” off of renting it out. If you’re that kind of landlord, I won’t care about your property either, and will not take as good care of it as I should. So it goes both ways. If you want quality tenants, be a quality landlord. And personally, from my experience and experiences of my friends who rent, property management companies are terrible (three companies and two states). The more you rely on them, the lower quality tenants you’ll get, in general.

    This wasn’t a criticism of you personally, Sean or MDJ. It’s just a running theme I’ve noticed on these kinds of posts. Just something for landlord readers to keep in mind.

  • S October 3, 2014, 2:58 pm

    Dividend Developer,
    My tenants are valued clients and are treated as such by my management company and me. There is no concern or question that does not warrant a timely response; there is no maintenance issue too small. I am kept aware of any major issues that may require my input though I am obviously hands-offs on a daily basis and receive regular reports and inspections with site visits as a follow-up.

    I have great tenants, who live in well maintained homes and are satisfied and happy with the service management provides. In return, my properties are kept immaculate and the tenants always part on goods terms at lease end.

    Any successful company requires the highest degree of professionalism and my property management company and I adhere to this principle.
    I’m sorry about your negative experiences as a tenant and with various management firms. But this is a business model that can work.

  • Alex October 11, 2014, 7:44 pm

    How can a land lord control heating? Sorry but if you control my heating I’m not renting. I almost never use the AC for example, even if its 35 degrees. I only use it if its very humid and hot inside which can be prevented. I do heat a lot in winter though.

    I can’t fathom how you’d include utilities in the rent if the cost is variable. Water is a flat fee here in Montreal so its mostly included in the rent but everything else should be paid directly by the tenant. Always.

    I have a co worker that has AC included in his rent. I couldn’t believe it. Needless to say its always on in summer… That guy uses the AC in his car even if he could just open the windows. Unbelievable.

  • Sarah August 4, 2016, 7:57 pm

    Just a thought on utilities as a current renter looking at purchasing an investment property. Inclusive utilities are great to a renter but I have seen this offering decline steeply over the lest 13 years that I have lived in rental units, from an up and coming landlord perspective I can say I won’t be running utility inclusive units. About the paid utilities- I have only read a couple of your posts (I like them) but the shared utility thing confused me greatly. Im assuming you are in an owner occupied home with one rental unit? In my area (not far from T.O.) each unit has a separate hydro metre and tenants pay their own hydro. As a renter I have walked away from some beautiful units in good neighborhoods because I will not sign up for shared utilities. Water around here is typically included if the building is retro fit and not built to purpose, but hydro is always the tenants responsibility, and heat depends on the type of heating installed. It just makes sense to me to take the hit and get separate meters and now you have the best of both worlds which you described- a lower sounding amount ($1425 instead of $1550), no hassle chasing tenants for utility fees and the best part, how much they use makes no difference to what you make each month. Just something to consider. Cheers.

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