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5 Lessons Learned as a First-Time Landlord

Ever since I was young I’ve aspired to be a homeowner. In August 2012 my lifelong goal became a reality when I purchased my first home. Home ownership was a big step – for the first time I was out on my own. Buying a house on your own is tough, but being a first-time landlord is even tougher.

Although I could afford to carry my house by myself, with a mortgage of $255,000, my goal is to be mortgage-free as soon as possible. When I first started house hunting I was satisfied with renting out the basement, but after becoming a big fan of HGTV’s Income Property, I decided to follow in Scott McGillivray’s footsteps and rent out the upstairs (and live downstairs) to bring in the most rent possible. Here are my top lessons learned as a first-time landlord.

1. Pre-Screen Your Tenants Properly

You don’t just want anyone living in your income property. All it takes is one bad tenant to ruin your positive cash flow and damage your rental unit. Pre-screen prospective tenants to make sure they’re a good fit. Tenants often apply to several rental properties, so you’ll want to confirm basic details like their desired move-in date, if they have any pets, and if they are fine with signing a lease.

Be very careful not to discriminate against tenants. If you find out a prospective tenants has five kids and your house only has two bedrooms, you can voice your concern about a lack of space, but whatever you do don’t say you don’t want to rent to tenants with kids.

2. Choose Your Tenants Wisely

Although you may feel like you can read tenants and relying on your gut feeling, take the extra time to screen tenants. It’s better to screen them out than trying to evict a bad tenant once they’re in your property. You should use a standard application form for prospective tenants. CMHC has a decent application form or you can find the application of your province’s real estate board online. I found a lot tenants didn’t complete the form properly, so you should quickly review it to ensure it’s complete.

When screening your tenants you should look for any red flags. If a prospective tenant makes excuses about why their credit is poor or why they don’t pay their rent on time, chances are they’re not someone you want to rent to. One tenant who applied seemed decent on paper, but when I phoned her two previous landlords they said she always paid her rent late, damaged the property, and very often had overnight guests.

If I hadn’t of bothered to phone, I would have been stuck with a headache tenant. Lastly, just because a tenant fills out an application form, doesn’t mean they will still be interested in your property, even after a couple days. While it’s a must to do a credit check, I found it works best if your phone a tenant’s references first. If everything seems fine, you can follow up with the tenants to ensure they are still interested before spending the money to do a credit check.

3. Respect Your Tenants

The landlord-tenant relationship is a two way street. As a landlord you want a tenant who will respect your property and pay rent on time.  Meanwhile, tenants want a landlord who will respect their privacy and respond to issues in a timely manner. When I arrive home late from work, I am always as quiet as possible since my kitchen is directly below the master bedroom of my tenants. If you’re polite and a good landlord, your tenants are more likely to be model tenants and leave your house in good shape.

4. Damage Report

The damage report isn’t something to gloss over. You should carefully document any damage to your property (or lack thereof) before your tenants move in. When my first tenants moved out, I noticed my hardwood floors were scratched. Since I didn’t document it in my damage report, I couldn’t remember if the scratches were there before.

It’s your word against your tenants, so when in doubt take photos. You might think you’ll remember any damage, but to be on the safe side document any damage and have your tenants sign off. If there’s a dispute later on, you’ll have the photos and damage report on your side.

5. Price Your Rental Unit Properly

Similar to selling your house, it’s imperative price your rental unit properly. Don’t let greed cloud your judgment. Pricing your unit too high could mean losing a month’s rent, which will take time to recover. In my experience less desirable tenants apply when rent is priced too high.

Take the time to look at comparable rental units and see what’s included (utilities, cable, Internet, etc.), and the rent charged. If nobody calls or tenants visit, but don’t fill in the application form, the price may be too high or you haven’t done a good job staging your property. It doesn’t hurt to phone tenants who have viewed your property and ask for feedback. At least you’ll know why tenants aren’t lining up to rent out your place.

These are just five of the many lessons I’ve learned. Being a landlord is a learning experience, especially when it’s your first-time. Are you a landlord? Is there any advice you’d like to share?

About the AuthorSean 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.







10 Comments, Comment or Ping

  1. 1. SST

    You are not a homeowner; the bank is your landlord.

  2. 2. saveddijon

    To elaborate on point 4: to date your pictures, get that day’s newspaper and place the front page in every shot. Keep the front page on file.

    Should you ever need to go to court, the judge can easily see that the photos could not possibly have been taken before the date on the paper.

  3. 3. Anrew

    i do not agree with your pricing strategy. keep rental rate as competitive as possible for the quality of your rental unit. you are not in the social housing business

  4. 4. Cold Truth

    I agree with the spirit of SST’s comment. If you and another party put up money to purchase an asset (like a house) you are essentially partners. If you put up 5%, and the other party put up 95% you clearly own 5%.

    Once your principal is less than half the market value of the house, you are at least the majority owner.

    Everyone seems to agree if you buy a house with say, your parents, then pay them back, they seem to agree that the parents are part owners.

    But as soon as the bank, is the party that put up the other cash, suddenly ‘you’ are the homeowner, not the bank.

    We have an unhealthy culture are home ownership in North America.

  5. 5. Elbyron

    Two lessons I learned the hard way: 1) don’t rent to someone who has never rented before, and 2) Don’t accept excuses for late rent. If they don’t pay, they don’t stay. It sucks having to evict someone who just lost their job and has nowhere to go. But you gotta be tough, or you could get screwed. Watch out for delays and excuses like “I’m just waiting for the loan application to go through”, or “my parents are going to help me out I just need time for them to get the money to me”. I’m sure they get even more creative, but these kinds of people are really just hopping from sucker to sucker, staying for free as long as they can and paying only the damage deposit. Some might even stick around and wait for you to get a court order to have them removed – which you get the bill for. Sure you can sue them, but they’ll probably disappear before you can serve them notice. The best way to avoid all these problems goes back to lesson 1: making sure they have a previous landlord you can call and ensure they are good tenants. Also note that these douchebags will sometimes get a friend to pretend to be a landlord. But the fake landlord is often unprepared, so be sure to ask the landlord lots of questions, some that you can verify the answers, like their full name and the address of the property. If anything seems suspicious about your conversation, it might be wise to check out if the address is real and who is on title.

  6. If you’re having trouble tenants it’s also worth putting your property up on airbnb. I did this with my first property and found I was able to make more from this than I would be from a typical tenant (I live in a holiday friendly town with a small permanent population).

    It meant I didn’t have to continually lower the price and I eventually found a long term tenant.

  7. 7. Peter

    I don’t agree that less desirable tenants apply when rent is priced too high, I have found the opposite to be true. I have 4 rental properties and I’ll go a month without rent rather than drop my price. For every rent drop, you open your place to dozens of people who couldn’t previously afford it. Tenants who can afford better places will take better care of them. I do however do my research to make sure that my asking price is realistic to begin with.

  8. 8. Newlyn

    If you have difficulties filling an apartment, rather than lowering your standards and accepting a questionable tenant, the best thing to do is continue to advertise and wait for a tenant who is credit worthy and responsible. Losing out a month or two in rent is always better than risking evictions and paying to get your tenant out your rental.

  9. 9. SV

    I’ve always had a management company look after my real estate investments and it’s worked out to my advantage. Their thoroughness and expertise has garnered me excellent tenants. As well as, efficient and attentive care to the myriad of details required to make tenants happy and maintain your property.

    A good management company can really maximize your profits and accelerate portfolio growth.

    I would also like make a general comment, it seems that being a real estate investor is quite unfashionable these days. You may think we’re foolish (or nuts) but all I can say is I’ve made millions doing this and I intend to make many more. And as far as a housing price downturn goes, for me, it’s going to be a strategic buying spree.

  10. 10. Sukun Paul

    @SST It doesn’t matter that he is not the owner or the bank is the owner, the whole process of renting out, is to increase net worth, and that it does. And kudos to you if you used the bank’s money to do it and not yours.

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