Have you recently purchased your first investment property? As you step inside to survey your new investment, you may find many conflicting thoughts and emotions racing through your mind.
On one hand, there’s the excitement and feelings of success that come along when you join the exciting world of real estate. On the other, there’s a feeling of being overwhelmed as you wonder if you’ve just made the biggest mistake of your life.
These feelings are entirely normal, and you can rest assured that your chances of success are high.
Should you buy a condo as an investment property? This series may help you decide:
- 5 Signs You’re Ready To Buy An Investment Condo
- 5 Signs The Condo You’re Considering Is A Bad Investment
- 5 Things To Look For In An Investment Condo
Even in volatile markets, real estate is one of the safest investments anyone can make. These guidelines will help you to ensure your success.
Take Care of Your Tenants
Despite what you may see on the news and TV, you don’t have to be harsh or ruthless to succeed as a landlord. In fact, your chances are better if you can learn to be firm but fair and treat your tenants the way you would want to be treated if you were renting. Always remember that relationships are everything in real estate.
If you treat your tenants fairly and take care of them, then they are more likely to stay with you for the long term. The longer they stay with you, the less time and money you’ll spend searching for another tenant.
If the rental is vacant for long periods, it can be a struggle to carry the mortgage on the property.
What The Lease Agreement Entails
Before agreeing to rent your unit, you’ll want to have the tenant sign a lease. This contract outlines the details of the agreement and protects both of you in case a conflict arises. Details of the lease will include:
- The length of the agreement. Some leases state that a tenant must stay for at least 12 months. Others are month to month, provided that sufficient notice is given.
- When the rent is due and how much.
- Whether pets are allowed.
- Whether smoking is allowed and where.
- The date the tenant will move in.
- The policy for early termination of the lease.
- How many people will occupy the unit?
- How Much Should You Charge?
Setting the optimum monthly rental cost may be the most challenging aspect of owning your unit. Some investors will focus on their net worth more in terms of their equity as the property grows in value than the monthly income the property generates. However, most people need to cover their expenses to carry the property.
In addition, you want the property to generate passive income every month. Here are some factors to keep in mind when determining the rent:
- Your expenses: Ideally, you should charge enough rent to at least cover your mortgage payment. When doing your calculations, consider hidden expenses like future repairs and vacancy costs if your tenant decides to leave.
- The neighbourhood: Is your income property in a desirable neighbourhood close to many amenities and public transport? If so, you can likely charge a premium. However, if your property is in a less popular area, you may have to accept less to compete with other investors.
- The condition of the unit: The better condition your property is in, the more you can charge. Before showing the unit to potential renters, think of what upgrades you can make that will add value without spending a lot of money. The square footage and how many bedrooms and bathrooms will also dictate how much you will be able to charge.
- The market: Ultimately, how much you can charge will boil down to market conditions. If more tenants are looking for a place to live than there are rentals available, then you can set a higher fee.
Preparing the Property For A Tenant
Think of how you would prepare the home if you planned to sell it. You would want to make sure it looks its best before any potential buyers step inside. That’s exactly how you should prepare the home before showing it to a potential tenant.
Every room should feel warm and inviting. You may not be selling the house itself, but you do have to sell the tenant on living there!
Fortunately, just like selling a house, you likely don’t have to invest in significant repairs or renovations. Minor details can make a big difference.
- A fresh coat of paint: A coat of light-coloured paint makes the house look cleaner and more modern and can even create the impression of being bigger than it is.
- Changing all lightbulbs: Changing the lightbulbs is a subtle detail that potential tenants may not notice. However, they will notice if the lights don’t work at all. Taking care of minor details like this will help reassure the tenant that you care for and maintain the property.
- New knobs and handles on cabinets: Switching out old knobs with newer ones can add a touch of style and make the unit appear more modern.
Above all, make sure the unit is sparkling clean before showing it. Always walk through yourself before the tenant arrives to ensure everything is in order.
Want some more tips on how to add value to your property? Here are some other posts to get you started:
- 7 Tips To Make Your Home Seem Brighter
- How To Boost Your Home’s ROI With Landscaping
- The Importance of Location in Real Estate
Know Your Rights – and Your Tenants
Getting familiar with the Ontario Residential Tenancies Act is your best path to success as a landlord. This document clearly outlines all of your responsibilities and the tenants’ obligations to take care of the property. It also outlines your rights, so you know what recourse you have if the tenant abuses the property or doesn’t pay their rent.
Vetting Tenants
The right tenant can make or break your investment, so choosing wisely is critical. Fortunately, modern technology makes it easier than ever to perform a background check before you agree to rent your property.
- Start with a credit check by one of the rental bureaus in Ontario. (Note: You must have written permission to perform a credit check. However, if the tenant refuses, it could be a bad sign!)
- Verify the potential tenants’ income. You can ask to see a recent paystub, bank statement or a letter from their employer.
- Ask for referrals from previous landlords.
Above all, always listen to your intuition. If everything else checks out, a good gut feeling can indicate that you’ve found the right tenant, and the long-term relationship can begin.
Are you ready to take the next step as a real estate investor? Let us answer all of your questions and guide you to success. Book a conversation with us here!