Are You Ready to Become a Landlord?

Heck ya!

Getting into the real estate market can be both a challenge and a great opportunity. Lower interest rates can help to offset higher market prices. 

One tried and tested way to gain entry into the market is to buy a property that can provide you with rental income, such as a duplex or one with a basement apartment.

If you are just looking to break into the market, having someone else help pay your mortgage is a great way to do it. If you already own a property, now is a good time to use the equity you’ve built up, coupled with lowering interest rates, to purchase an investment property.

Now there is more to becoming a landlord than simply having a space to rent, but in today’s market it is easier than ever before. There are support and resources like the Landlord Self Help Centre to get you started with sample contracts, tips, etc. Apps like Jiffy where you can find all the trades you need for fixes and maintenance. There are even property management companies that manage everything for you.

But, like anything new, it’s a good idea to be prepared and know what you are getting into.

It’s a business.

Treat your rental like a small business. Create a budget and track cash flow and expenses. Make sure you set aside funds for maintenance and repairs, as well as the unexpected. It’s a good idea to set aside 2% of your purchase price to cover your annual expenses.

Brush up on your DIY skills.

As a landlord, you are responsible for all maintenance and repairs to your rental property, both inside and out. While there are plenty of resources available from plumbers to landscapers (e.g. via Jiffy), you may want to save your budget dollars by taking care of small things yourself.

Be selective.

As a business owner, you wouldn’t just hire anyone without checking them out first. Treat potential tenants the same way. Do a credit check, check their references…but also look beyond the obvious. You want someone that is trustworthy and will pay the rent on time. For example, I’ve found that newcomers can make the best tenants. While they may not have the credit history because they are new to the country, they want to be here and work hard to ensure their rent is paid on time.

Know the rules.

The rental market in Ontario is heavily regulated and geared towards the protection of the tenant. Both the Residential Tenancies Act and the Human Rights Code govern your responsibilities as a landlord. In addition, because a rental is considered a business, you must also ensure the privacy of all personal information regarding your tenants under PIPEDA. This means you can’t share or disclose information about your tenants to third parties without their consent, including posting about them on social media.

Taxes, codes and more.

Rental income, like any business income, is taxable. It’s a good idea to consult a tax accountant before setting up your rental property or unit to ensure you are properly prepared at tax time, knowing what deductions and expenses can be claimed against your rental income. As a landlord, you must also ensure your rental unit complies with all applicable zoning laws and building codes to ensure the safety of your tenants. And don’t forget about insurance. If your unit is within your primary residence, like a basement apartment, it may be covered under your house policy. Check with your insurance advisor to ensure you have the proper coverage and make sure your tenants get their own tenant insurance to cover their belongings.

So, while being prepared is important, don’t get overwhelmed. There is so much help out there and so many benefits to having a rental property. And if it gets you into the housing market, it’s well worth it. Know what you are getting into, be prepared, and you will set yourself up to reap the rewards.

For help on finding that perfect income-potential property, give me a call today.