The Business of Owning Income Properties
Lets talk about how to run the best and most profitable housing business. That’s right: you are in business now.
A neophyte mistake people make when they end up with an extra property is to fail to recognize that they are in a whole new business, with rules, regulations, and demands specific to that business. In short: they don’t do their homework. They just figure they’ll rent out their property and everything will be fine. In my business of renting out properties on behalf of owners, I have met hundreds of landlords and this is the most common way landlords get ripped off.
Know the Rules
When landlords do end up at their province’s “quasi-judicial” landlord and tenant agency because they have problem tenants, they learn that the standards for landlords are higher than the ones for tenants. The reason is because landlords are in a business: they are supposed to be professional; they are supposed to know the laws; they are the ones who make a profit. Why shouldn’t they be held to a higher standard? This is not the best time to start learning what you have to do to remedy whatever breach your horrible tenant is causing. The best business practice is to learn the legislation and the way it is applied before you even have a tenant and long before you really need it.
Here are the provincial governing bodies:
- Ontario – http://www.ltb.gov.on.ca/en/index.html
- Newfoundland – http://www.gs.gov.nl.ca/landlord/index.html
- PEI – http://www.irac.pe.ca/rental/
- Quebec – http://www.rdl.gouv.qc.ca/fr/accueil/accueil.asp
- New Brunswick – http://app.infoaa.7700.gnb.ca/gnb/Pub/EServices/ListServiceDetails.asp?ServiceID1=637&ReportType1=All
- Yukon – http://www.community.gov.yk.ca/consumer/landtact.html
- Alberta – http://landlord.landlordandtenant.org/llhome/default.aspx
- Manitoba – http://www.gov.mb.ca/finance/cca/rtb/
- British Columbia – http://www.rto.gov.bc.ca/
- Nunavut – not available online
- Northwest Territories – http://www.justice.gov.nt.ca/RentalOffice/rentaloffice_information.shtml
- Saskatchewan – http://www.justice.gov.sk.ca/Information-for-Landlords-and-Tenants
- Nova Scotia - http://www.gov.ns.ca/snsmr/access/land/residential-tenancies/default.asp
Let me share an analogy I use when explaining this to landlords. I enjoy cooking. In the past I have hosted dinner parties to rave reviews. If decide to go out and start a restaurant, I have crossed a significant threshold: I have stopped being a “good cook”, and become a “restaurant owner”. The way I cooked in my house for my guests, and the equipment I used are no longer appropriate. There are now laws I have to comply with in order to operate a restaurant: I must maintain my fridge at a certain temperature; I must have different areas for preparing meat and vegetables; different sinks for washing different things, etcetera. As a new restaurant owner, I absolutely must learn my business and comply with the laws so that I can maximize profits.
My challenge to landlords is to stop complaining about your business environment and resolve to be the best and most professional you can be. I will freely admit that in Ontario the laws are skewed towards the tenant! If you don’t like it (and I don’t) get involved in an organization that tries to make legislative change such as the Greater Toronto Apartment Association (GTAA). Put your money where your mouth is, and pay your paralegal to review the orders you think are inequitable.
So what, as a professional landlord, do you need to know? At the minimum, read your province’s information on landlord and tenant law. On the Ontario Landlord & Tenant Board website, there are brochures available to inform landlords about numerous subjects, plus actual Orders of rulings made by the Adjudicators.
If you do find yourself at the Board, remember it’s not kindergarten, where the teacher mediates ”I said he said” arguments. You need proof. You need witnesses. You need documentation. You are there to win or make the best of a bad situation, not to vent, protest, cry or complain. It’s almost impossible to be calm and composed when faced with the worst of the lying cheating deadbeats. If you don’t deal with these types of situations well, do yourself a favour and hire a paralegal or other professional to represent you.
So why am I embarking on this bit of a rant? I want you to keep you out of real trouble and I want you to be successful and make money.
Treat Income Properties as a Business
Some of you are likely wondering what I am talking about. Here are examples of actual situations I have dealt with in Toronto: I have entered houses with visible mould on the walls; I have seen places so dirty I wouldn’t allow my dog to enter the premises; I have seen places without kitchen cupboards, doors or drawers. These are all places the landlord considered rent ready, or that they wanted me to rent “as is”, or that they agreed needed to be changed, then reneged when the tenant rented.
The industry as a whole needs to stop thinking in terms of “landlord” and “tenant”, and start thinking of themselves as “housing providers” and “customers”. That means providing customer service. Our customers pay us thousands of dollars annually and we need to respect that, even if some of them are not respectable. It’s just good business to treat our tenant clients well.
You must provide them with decent service. The best of tenants can turn into nightmares if you abuse them by leaving them without heat or hot water and generally not maintaining your property. I have seen this happen time and time again. Don’t let this happen to you.
Select the Right Tenants
So what else can you do to ensure your success in the housing provider business? I cannot stress this enough: to make money you must attract the best customer. Tenant selection is absolutely essential to profit.
What criteria make a good tenant? I have learned that most people are the way they are in all areas of their life. If they pay their other bills on time they’ll pay their rent on time as well. So, my preferred candidates would exhibit strong money management skills and an organized life. I don’t recommend the method of one landlord I know who picks tenants using astrology. (Selecting great tenants will be a whole other post soon.)
In my years in this business I have seen both the best and the worst of landlords. I urge you to rethink your business practices to set your self up for success rather than for problems. Look at your processes and how they can be improved. If you have staff, check on them. There is no profit and a world of aggravation for slumlords. Refuse to compare yourself to the lowest common denominator and strive to maximize your asset, your profit and your peace of mind.
About the Author: Rachelle specializes in renting property on behalf of landlords. She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability.