So you want to be a landlord: What you should know before you jump in
When you think about it, landlords have a pretty great job: They always take their time calling the washing machine repairman, they get to relax behind-the-scenes most of the time (and probably sleep in, too), and – best of all – they get checks in the mail every month for doing very little work.
All of that sounds pretty great, huh? Kind of like a gig you wouldn't mind trying out? While I'm sure some of you are rushing out to pick up some investment property or spruce up your basement for a future tenant – can you at least wait until the end of this article? – let me say that being a landlord isn't quite as easy as it might seem. Actually, it's downright complicated, even for the landlord who seems to go missing every time you need him or her, but can't leave you alone when rent is due.
Experts are saying that now is the time to buy investment property if you are ready for the commitment and have weighed the pros and cons. Banks are offering such unbelievably low mortgage rates that the Canadian housing market is in dire need of a cool-down. To do this, new qualifying rules were set, except they make it difficult for otherwise excellent potential buyer candidates to afford a mortgage while still budgeting for other daily and monthly expenses.
What will first-time buyers do if they can't reasonably afford a mortgage? Rent, of course.
While renting an extra bedroom or condo you've grown out of can be a swell idea, there are a few considerations would-be landlords may want to review before making any investment:
The property actually does matter
Just because a house or unit seems like a great deal and has the most amazing kitchen a potential renter could hope for, future landlords also need to consider outside factors. Is the property in a quality, in-demand neighborhood? How are the schools in the area? Are there any nearby parks or perks that could attract more tenants?
All of these factors can vary depending on the type of tenant you wish to attract, which brings me to my next point.
Even if you aren't necessarily a people person, you should probably be able to handle people
Although requiring background checks, references and setting certain rules – like no pets – seems to be the norm for rentals, most landlords have a few crazy tenant stories up their sleeves. Odds are if you take the leap into landlordship, you will too. Sharpen those customer service skills and prepare for the worst (just in case).
This can be especially important if you're renting out the basement or a section of your own house, since you will be living under the same roof and in relatively close proximity (depending on the property, of course).
Get your insurance in order
If you're thinking about renting out a condo or home you used to live in, one of the first steps should be replacing the homeowners insurance policy with rental insurance. Not only could this possibly mean a more affordable payment, it insures the building and offers liability protection without insuring the possessions inside.
Some experts suggest requiring all tenants to purchase inexpensive rental insurance to protect their belongings.
If you need help, just ask
Being a landlord is much more complicated than many people think, especially if multiple properties are involved. Not only is there a large investment on the line – property can be the largest purchase a person makes in their entire life – laws protecting landlords and tenants vary by province.
Getting help from a team of professionals – think real estate lawyers, accountants and mortgage brokers – may just be the difference in a super investment and having to become a renter yourself.