Generating rental income is an excellent way to improve cash flow and build up your wealth. It can also be a great way to keep your own mortgage costs down, all the while building up equity.
However, becoming a landlord is more than just putting up a “For Rent” sign and collecting rent from tenants. Before you consider becoming a landlord, there are a few things that you should consider.
Protecting Your Rights as a Landlord
There are a number of rules and regulations intended to protect both the interests of tenants and of landlords. The rights of landlords and tenants are laid out by the Government of Ontario in the Residential Tenancies Act. As they say, knowledge is power, so it is a good idea to become familiar with the document. While the act is quite detailed and complex, here are some of the most important facts.
What do I Need to Know About Increasing Rent?
A landlord is able to raise the rent every 12 months, but is required to notify the tenant 90 days in advance in writing.
In terms of how much of a rent increase is permitted is actually regulated by the Province of Ontario and is based on the Consumer Price Index. The guideline for rent increase for 2020 is 2.2%.
If a landlord wishes to increase their rent beyond that amount, they are able to apply to the Landlord and Tenant Board (LTB) for permission. Some common reasons for adjusting rent beyond the set guideline is if a landlord’s municipal taxes/other taxes have increased significantly, if the landlord has done major repairs or renovations or if the landlord is engaging security services who are non-tenants.
What if my Tenant is Late with Rent?
If a tenant doesn’t pay their rent on the date that it is due, the landlord has the option of providing them with a Notice to End a Tenancy Early for Non-payment of Rent. The tenant has 14 days to pay rent or move out from that point. If the tenant does neither, the landlord can apply to the LTB for an order that would require rent paid in full by a specific date OR that eviction can happen on a specific date.
What are my Obligations Around Maintenance and Repairs?
As a side note, your legal obligations around maintenance and repairs aside, being timely with tenant requests for maintenance and repairs go a long way in establishing a long-term relationship with your tenants. This is the goal. Not only does it simplify your life, it helps make your business venture profitable by securing long-term cash flow.
That said, in terms of maintenance and repairs, a landlord must, “obey all health, safety, housing and maintenance standards, as set out in any provincial laws or municipal by law.” This holds true even if a tenant was aware of damage or deficiencies when they signed their lease.
Furthermore, landlords are obligated to provide vital services to their tenants (i.e. they aren’t allowed to shut off or withdraw vital services. These include things like heat (from Sept-Jun), water, electricity and fuel (i.e. natural gas, oil).
What are the Rules Around Entry of my Rental Unit?
A landlord is able to enter their unit between the hours of 8am and 8pm if they provide the tenant with written notice 24 hours in advance. This could be perhaps to do repairs, a property inspection or appraisal for mortgage purposes.
A landlord can enter a unit without notice if there is an emergency (flood or fire, for example) or if the tenant agrees to let them in.
When can I Evict a Tenant?
Other than not paying rent, there are other circumstances when a landlord can legally evict their tenant. If the tenant is frequently late with rent, often disturbing other tenants (or yourself), if they are doing something illegal in their unit, if they threaten the health and safety of other tenants (or yourself) or cause damage to their unit, among other reasons, the landlord has a case for eviction.
A landlord may also choose to evict a tenant if they decide that they, or a member of their family will occupy the unit. Similarly, if the landlord chooses to sell and part of the condition of sale is that the buyer would like the unit unoccupied, eviction may happen.
Do you Have What it Takes to be a Landlord?
Are you cut out to be a landlord? It can be a very profitable venture for people that are suited to the job. You must be versatile. Tenant emergencies can (and do) happen at all hours. Are you willing to be available as needed?
Are you a handyman (or handywoman)? Being able to DIY repairs is definitely the most cost-effective way to keep your property in good shape. If you aren’t able to handle repairs and maintenance yourself, do you have the contacts and support that you need to make your venture profitable.
How do you feel about negotiating? Do you have the ability to be fair, but firm with tenants?
All of these qualities and traits will serve you well as a landlord.
Picking the Right Property
Of course, your success as a landlord hinges a great deal on finding the right property to rent. What is your goal? Are you hoping buy a home for yourself and rent out a portion in order to help pay the mortgage? Are you looking to buy a separate, secondary property, simply for rental?
This can help you to narrow down what sort of property type would best suit your needs and help you to reach your goal.
Regardless of the property type that you choose, it is advisable to buy a property that is located close to lifestyle amenities, like shopping, public transit, green space and schools. Not only will this help you to attract tenants, it will give you the opportunity to charge higher rents, as tenants will be willing to pay premiums for locations that offer convenient amenities.
Tips for Marketing Your Rental
Once you’ve secured the right property, take the time to market it to the “right” tenants. Determine your target market and decide what channels are most effective to reach that market. Social media, online real estate listings, and internet presence (i.e. a property website) are good bets.
Be sure to include important information about the rental, like location, size, features in the home (updates, space configuration, storage, parking, laundry, appliances, etc.). Having quality photographs is a great idea as well.
Make sure that you align yourself with a realtor who can assist you not only to find the perfect property investment, but to be an ally in your journey to become a landlord.