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    Landlording in Canada
    Landlording in Canada
    Landlording in Canada
    Ebook315 pages2 hours

    Landlording in Canada

    By Michael Drouillard

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    About this ebook

    As the cost of real estate rises across Canada, more and more homeowners are looking to become landlords. “Secondary suites” are becoming an increasingly common way for homeowners to subsidize their mortgages and supplement their incomes. This book is unique in that it places emphasis on the rental of secondary suites, and how to avoid a potentially negative landlord-tenant relationship by steering clear of “bad tenants.” Drouillard tells the reader how to determine what constitutes an “acceptable risk,” and provides insight into how to market rental space in order to attract good tenants. Sample rental ads will teach the reader how to make the most of short newspaper classified ads, as well as how to write longer online ads. Practical advice from this experienced realtor and property manager will make the process of finding and securing a tenant feel much less daunting.
    LanguageEnglish
    PublisherSelf-Counsel Press
    Release dateSep 1, 2020
    ISBN9781770407725
    Landlording in Canada
    Author

    Michael Drouillard

    A third-generation landlord, professional property manager and real estate salesperson, Michael Drouillard speaks from experience. He holds a Diploma in Urban Land Economics with a specialty in property management from the University of British Columbia. Michael is a member of the Rental Owners and Managers Society of British Columbia, and is a professional member of the Real Estate Institute of British Columbia. This is his first book.

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      Book preview

      Landlording in Canada - Michael Drouillard

      INTRODUCTION

      A key premise of Landlording in Canada is that correct tenant screening means almost everything to the small landlord. Much of this book is dedicated to successful tenant selection and teaching you how to assess a tenancy application. For instance, many of us have heard that credit checks are a must. But how do we access credit information? How do we interpret it? Can you simply rely on the credit score? These questions, and many others, will be answered here.

      It is one thing to learn the theory behind successful tenant screening and another to put it into practice. To make your learning curve a little less steep, included are sample case study tenant applications based on actual applications I have received as a property manager. You’ll be challenged to find as many problems with the applications as you can, and to make a decision to reject or accept the prospective tenant. Ultimately, you will learn how to make an informed decision without even meeting the applicant face-to-face.

      Some inexperienced landlords pick good tenants on their first or second try without any real screening. These landlords may claim their gut feelings led them to make the right decision. In fact, they got lucky. This book shows you how to take luck out of the equation, by systematically evaluating a prospective tenant’s financial qualifications. No tenant screening system is risk-free, but the right system can lower your risk of selecting a bad tenant.

      You won’t find chapters and chapters of discussion about subjects such as insurance and bookkeeping here. Maintaining adequate insurance on your rental and keeping good financial records is important, but what is far more important right now is that you learn how to objectively analyze a tenant application in order to minimize your risk. After all, what good is an efficient accounting system when there is zero income coming in because you have a poorly screened tenant not paying rent?

      Tenancy laws change constantly, and they can vary quite significantly province-by-province, but this book is applicable to readers across Canada. While it is beyond the scope of the book to outline legal processes specific to every province, you will learn where to find current legal resources relevant to your home province.

      This book is further distinguished by its emphasis on ethical landlording. You’ll find advice about applying your landlording knowledge in a way that both protects your interests and remains fair to the tenant.

      Ethical landlording is not about granting favours or letting your tenant pay rent late. It’s about building a spirit of trust and cooperation with your tenant by acting in good faith.

      Unethical landlords take advantage of their tenants, and their tenants don’t trust them. These landlords frequently struggle with uncooperative tenants, and uncooperative tenants can be costly indeed. Ethical landlording is great for business.

      PART 1

      BEFORE PLACING THE FOR RENT AD

      Chapter 1

      PREPARING FOR A NEW TENANCY

      In this chapter, you will learn to:

      • Assess your space before attempting to rent it out; have friends or family provide a second opinion.

      • Make sure your property is ready before you advertise it for rent: clean, everything in working order, and all safety issues addressed.

      • Renovate your rental property periodically to receive the maximum possible rent, but be careful not to go overboard because not all renovations are worth the money.

      • Always bring in professionals to do any work on the property.

      • Screen your tradespeople: Anyone you hire should be licensed, bonded, and have liability insurance.

      Is Your Rental Ready for Viewing?

      Before you start showing the home to prospective tenants, honestly assess the space you’re going to rent out. As you walk through the home, ask yourself, Would I live here? If not, then don’t expect a good tenant to live there either. Determine what exactly turns you off, and do something about it!

      We all have blind spots about our own properties. Have friends or family members walk through the home with you for a second opinion. Don’t argue with them if you disagree that something needs to be done — they’re probably right.

      What are Some Common Basics Tenants Expect out of a Rental?

      Trash free

      There shouldn’t be a single item of garbage on the property. If the previous tenant left behind a mouldy beer fridge in the garage and a couch in the living room, pay the price to have all junk removed. Otherwise, you’ll annoy or even offend your new tenant. By letting the junk remain, the message you send to the new tenant is, I’m going to squeeze every last dollar out of your tenancy.

      Clean

      Your rental should be in clean, move-in condition. In other words, a spic-and-span, eat-off-the-floor kind of clean. Nobody wants to move into someone else’s dirt. Go through every room in the house and clean all surfaces.

      Sweep all floors, then get on your hands and knees and start scrubbing. Vacuuming the carpets is usually not enough. Have carpets professionally steam cleaned or rent a machine to shampoo the carpet yourself. Tenants will expect this to be done as a matter of routine. Have it done before the rental is shown.

      Pay particular attention to the kitchen and bathroom(s). All bathroom fixtures (toilet, bathtub, sink) should be sparkling. The kitchen cabinets must be immaculate inside and out. Check for moisture and mould underneath the fridge. The bathroom and kitchen areas must look clean (and smell clean too). No one wants to be reminded of past tenants.

      Don’t hesitate to bring in hired help if needed.

      Ethical landlording tip: Mould problems? Cleaning and painting may not be enough. Always investigate the cause of the mould and cure the problem at its source. Expect to spend a lot of time and energy dealing with a very unhappy tenant if you perform a Band-Aid fix and then rent a home with mould problems.

      Everything working

      All windows, doors and closet doors should open and close with ease. All locks must function without a problem. You are legally responsible to provide your tenant with safe and working locks.

      All wall switches and wall plugs should work. If they don’t, have an electrician repair them. At the same time, have the electrician certify that the home has been checked for electrical hazards.

      Every light bulb should be in working order. Your new tenant shouldn’t need to run to the store for new bulbs on the first day of tenancy.

      All appliances must be fully operational. If you need to buy another stove, don’t buy an old used one for $50. Buy a new stove. If the 20-year-old dryer takes three hours to dry clothing, buy a new one.

      Old appliances are inefficient, poorly insulated, and they annoy tenants. Old appliances mean you’ll be getting plenty of calls for repairs. Repair technicians are pricey. Buy new and you’ll enjoy peace of mind for years.

      New appliances don’t cost as much as they used to. In fact, basic appliance models are less expensive now than they were 20 years ago. Look around for the deals. It shouldn’t be too difficult to find good-sized, new fridges for under $500, stoves for under $350, and full-sized built-in dishwashers for $200.

      All major structural components in working order

      If your rental is part of a condominium or strata corporation, then the corporation management will take care of all exterior structural components for you. However, if a hot water tank and furnace exist within your suite, then those items are your responsibility.

      If your rental is not part of a condominium or strata corporation, you must ensure that all major structural components are in good repair. Did you have a professional home inspection performed when you bought the home? You can use the home inspector’s report as your guide for the life expectancy and condition of the home’s major structural components.

      All safety issues addressed

      The rental property must be safe for occupancy. Go through your rental property with a safety checklist form (available in bookstores or for free on the Internet).

      Fireplaces are a safety concern, especially wood burning fireplaces. Unless you prohibit the tenant from using the fireplace (through a term in your rental agreement), you’ll need to ensure that the fireplace is clean and inspected by a professional. You should also insist that your tenant provide you with proof of adequate tenant liability insurance.

      The dryer vent needs regular professional cleaning too. In the event of a dryer fire, you’ll be able to show your insurance company proof of dryer maintenance.

      Some landlords experience the misfortune of renting to professional litigants who’ll sue after falling in the bathtub. Protect yourself by purchasing your own liability insurance before you rent out the property (see the discussion on the importance of insurance later in Part 1).

      Renovations That Pay for Themselves

      To ensure that you receive the maximum possible rent, renovate your rental property periodically. When renovating for rental purposes, look for durable, lower cost material. Replacing the floor coverings and repainting is usually all you’ll need to do.

      Although the ins and outs of rental home renovations are beyond the scope of this book, the following are a few tips to get you started.

      Painting

      The interior of your rental should be repainted about every five years. Often all that a home needs to spark interest is a good paint job. Neutral colours are a must. Avoid flat paint, which scuffs and shows marks easily. Don’t risk purchasing cheap mistint paint; it’s cheap for a reason.

      Don’t try to choose colours at the store. Choose the colours at your rental home. How? Do as professional interior designers do. Purchase a set of colour chips from your paint dealer (less than $50). Take the chips into the rental property. Select colours by taking into consideration the flooring colours, the lighting in the home, etc.

      Try to avoid paying your painter twice as much for two coats by selecting higher quality paint that offers guaranteed single-coat coverage.

      Floor coverings

      Avoid low-grade laminate flooring because the seams puff up easily when liquids are spilled on the floor, causing permanent damage.

      Try vinyl tile, as opposed to vinyl sheet. Replacing damaged vinyl tile is easy. Ceramic tile is excellent as well.

      Do you own a suite or apartment? Be aware of potential sound transfer issues. Your strata or condominium corporation may regulate the type of floor coverings you may install in your apartment.

      Tenants don’t want to live on 20-year-old carpeting. Aim to replace wall-to-wall carpeting every 10-12 years. Try an economical commercial-residential hybrid (with the emphasis on residential). Try for $1.50 per square foot.

      You can save significant money by removing the old carpet yourself. It’ll be easier to handle if you use a box cutter blade to cut it into four-foot wide strips before you roll it up and take it away. Consider reusing the old underlay, but if it’s full of pet urine stains or other stains that smell, forget it. Always use a professional installer to lay carpet. Never lay carpet without underlay.

      You can have 900 square feet of carpet replaced for $2,500, $5,000, $7,000 or more. Never mind the carpet salespeople who recommend the carpeting with the 25 year warranty. Ask professional carpet installers what they’d install in their own home. You may be surprised how many would choose the $2,500 package first.

      In my opinion, installing expensive carpet, even if it is advertised as long lasting, is too risky. When I started out landlording, my odds of choosing bad tenants were unacceptably high. I remember the pain I felt when my new bad tenants spilled a jar of indigo ink on the brand new carpet. Twenty-five-year warranty or not, no carpet could withstand that kind of abuse.

      Kitchen/bathroom

      Revitalizing a kitchen or bathroom doesn’t have to be prohibitively expensive. Have your skilled painter paint the cabinetry. Then replace the hardware, knobs, etc. Your kitchen or bathroom will look as good as new!

      Your home renovation store carries very affordable plastic laminate countertops of various sizes and in attractive designs. Some modification might be required to make them fit your kitchen or bathroom, but it’s nothing a good carpenter or handyman can’t handle. Unless the rental is very high end, forget about granite countertops. Tenants won’t expect granite countertops, but they will have other expectations.

      Make sure your kitchen has a built-in dishwasher. Tenants love dishwashers. No room for a built-in? Before starting any major changes to the layout in your kitchen, ask a few good carpenters for their ideas. They’ll know how to solve your problem most economically.

      In-suite laundry

      If your rental doesn’t have in-suite laundry already, perhaps it’s structurally impossible to do so. Or, if your rental is part of a condominium or strata corporation, odds are the corporation bylaws prohibit the installation of in-suite laundry.

      It remains a good idea to assess whether or not installing in-suite laundry is possible. It’s a great renovation that will pay for itself in increased rental income many times over.

      But don’t go overboard

      Landlords select low-cost and durable materials not only to save money, but because returns on high end renovations quickly diminish. If you spend $4,000 on new paint, carpeting, and appliances, you might be able to raise the rent from $750 to $900. On the other hand, if you spend tens of thousands upgrading your rental with granite countertops, porcelain tile, and wood floors, it probably won’t be possible to rent that $750 home for much more than $950. Obey the law of diminishing returns by keeping your renovation plans to the essentials only.

      While you may select low cost materials, that doesn’t mean the workmanship should be of a low quality. Always bring in professionals to do the job. Tenants can tell when a renovation was done by a weekend warrior.

      On hiring tradespeople

      Screen your tradespeople. If you hire the wrong people, you’ll waste time and money correcting their mistakes.

      Any tradesperson you hire should be licensed, bonded, and have liability insurance. Check with the Better Business Bureau to see if there are any complaints on record. Insist on references for costly projects.

      Receive several quotes. The larger the job, the more quotes you need. Insist your prospective tradesperson break down the quote. If a painter quotes $2,000 to paint your rental property, ask how long the work will take and how many others will be working on the job. Ask for a breakdown of expected material costs then, do the math. You might be shocked at the results. Your painter might be charging more per hour than your dentist!

      Don’t buy the claim that it’s impossible to break down the quote. Tradespeople who say such a thing are often trying to hide the fact that they’re overcharging. Tradespeople who know how much the total cost will be know how much labour and material will be as well.

      For larger jobs, you should enter into a written contract before letting your tradesperson start work. Small claims courts across Canada are inundated with lawsuits involving contractors and landlords who sue each other due to disagreements over oral contracts that could have been avoided had the parties put their expectations in writing. While an oral agreement may be enforceable in a court, it is poor evidence of a contract because the contractual terms are easily forgotten or misinterpreted. A good contract describes the work to be performed in a way that a stranger can read it and have a good sense of the work to be performed. A good contract also anticipates that the work to be performed may have to be changed, and it will provide a procedure for the contractor and landlord to follow to change the work so that neither party is caught off guard. A good first start for a construction contract might be found through forms offered by Self-Counsel Press.

      If your tradesperson provides you with a contract to sign, then it obviously should be reviewed carefully. Keep an eye out for unfair contractual terms. For example, an increasingly common practice is for a contractor to insert a clause into the contract providing that a dispute about the contract must be taken to arbitration. Such a clause is intended to take away your right to sue the contractor and to force you to use private arbitration, which is commonly far more expensive than starting a small claims court action. Unfortunately, clauses like these can be difficult to recognize and so if you are involved in a particularly substantial job, consider asking a lawyer to review the contract before signing.

      Chapter 2

      SECONDARY SUITES: PREVENTING PROBLEMS BEFORE THEY START

      In this chapter, you will learn to:

      • Plan in advance to address common secondary suite problems.

      • Ensure your space is livable (and large enough!) before deciding to rent it out as a suite.

      • Soundproof between units: Install insulation and carpet, and include noise reduction practices in the rental agreement.

      • Be clear about the use of shared facilities and common space; include terms for its use in the rental agreement.

      • Make a contingency plan if the electrical panel, hot water tank, or furnace are located within the secondary suite: The need may arise to access them.

      • Contract out property maintenance such as lawn mowing and gutter cleaning: Do not make this a

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