Becoming a landlord requires more than just buying rental property. That is the first step, but there is much more to the process and many benefits to be had. Rental properties provide steady cash flow that goes right to your bottom line if you have good tenants, but you must make sure that you have all the proper documentation in order.
You must conduct due diligence on prospective tenants and run credit checks to ensure they will be able to make their rent payments. You also have many other factors to consider, like mortgage rates and the down payment, property taxes, and much more. This guide will tell you what becoming a landlord is like and everything you need to know about being a property owner and business owner.
9 Tips for Becoming a Successful Landlord:
- Know if you are suited for this type of work.
- Understand that it can be challenging.
- Set realistic rents.
- Buy an investment property.
- Plan for unexpected costs.
- Get informed about the relevant landlord-tenant laws in your area
- Invest in landlord insurance
- Make sure your property is move-in ready before renting it out to a new tenant
- Market your rental property effectively to attract the right type of tenant for your needs.”
Becoming a Landlord in Toronto, Ontario
The real estate market in Ontario is vibrant and growing and filled with opportunities for landlords. The rental property market is healthy due to high demand for housing in Ontario. If you have taken the time to do proper tenant screening, you’ll find many benefits of long-term rental property ownership.
Purchasing the property
Of course, one of the first things landlords do is purchase a rental property. However, there are many steps involved in buying property. First-time landlords may feel overwhelmed, but once the process is in motion, most catch on quickly.
If you’re going to be taking out a mortgage on the property, you will need a down payment of at least 20% of the purchase price. The best time to buy rental property is when interest rates are low, which makes now an excellent time to dive into the market.
Property investors should always treat their rental properties as a business, so before buying a property, the first thing to consider is how you want to own it. You can buy it in your own name or incorporate it as a business and have the corporation be the official owner.
Incorporating the rental units as a business instead of buying in your own name offers liability protections, which is why you may want to do that. You may also enjoy some tax benefits from incorporating your properties as a separate entity from yourself.
It’s a good idea to speak with an accountant and solicitor about the potential tax benefits of buying the property under your own name versus incorporating it as a separate entity. A real estate agent will help you find a good rental property and walk you through the purchase process. Some agents will also serve as property managers for your investment property.
Ontario provincial laws
Ontario has many laws landlords must follow for each investment property. For example, to evict a tenant, landlords must follow the process set out in the Residential Tenancies Act, which was put in place years ago. The act created the Landlord and Tenant Board to handle disputes between landlords and tenants.
You also can’t force a tenant to move out for a reason that’s known to be untrue or change the locks to a rental unit or building without giving them a new key. You also can’t give notice that you’re ending a tenancy because you want to convert the unit to a condominium in a place where it isn’t permitted to do so.
Landlords must also compensate tenants or offer them another acceptable place to live if you need to make major repairs or renovations to a rental unit. Further, you must also offer them the right of first refusal following major repairs or renovations or when the building is converted to a condo. You must also allow tenants to get their possessions within 72 hours of an eviction enforced by the sheriff.
Other provincial laws in Ontario require landlords to provide hot or cold water, fuel, electricity, natural gas and heat, although air conditioning, parking and storage are not vital services.
You can only enter a rental unit for certain reasons, and you must give a 24-hour written notice that you need to enter it. You can only enter between 8 a.m. and 8 p.m.
There are many other provincial laws in Ontario, so it’s important to speak with a property management company to ensure that you are following all the laws with every rental unit you own. You also can’t collect more rent than what is allowable under the law.
Municipal and provincial laws
In addition to following the Ontario laws, real estate investors must also follow all municipal laws for Toronto or whatever city their investment property is located in. Generally, Toronto and other cities refer to the Ontario provincial law when it comes to the rights of landlords and tenants. The Landlord and Tenant Board handles all disputes, but it would be wise for every business owner to try to settle problems with their tenants before authorities have to get involved.
Ensure you screen potential tenants
You should always have potential tenants fill out an application so you can complete the proper screening. Many prospective tenants will respond to an advertisement, but you would probably only want to rent to a fraction of those who respond.
You should run a credit check on every potential tenant to ensure that they will be able to afford to pay their rent every month. After all, you can only have regular rental income if you have a good-quality tenant who pays their rent on time every month.
Screening everyone who responds to your ad will enable you to avoid a nightmare tenant who causes disturbances, doesn’t pay their rent, or damages your investment property. The best-case scenario would be to have a long-term tenant who provides steady rental income for you, so you don’t have to spend a lot of time looking for new tenants.
Precautions to Take When Screening Tenants
When screening a prospective tenant, you should always check their credit report. Credit checks should be an automatic part of the process because you want to ensure that they will be able to pay their rent on time every month.
After all, you are running a business, and you may have mortgage payments to make on the property. You will also have other operating expenses associated with the business, so it is critical that you have a trustworthy tenant who pays faithfully every month. It’s only worthwhile to be in business if you are turning a profit on your rental income.
Aside from credit checks, you should also take other precautions when screening a potential tenant.
Advertise
The first step every landlord should take in finding a tenant for their investment property is to advertise. The key is to place listings in the places where the tenants you want will be sure to see them. Newspapers and online listings are excellent places to start. The real estate business is highly competitive, so every landlord is trying to get their properties before the best tenant.
Every ad should include not only the contact information for the landlord but also the address of the office where prospective renters can direct questions. Ads should also include a description of the property, and every landlord should be honest about it. If the property is a fixer-upper, it isn’t ready to be listed yet. If you can’t make the unit sound attractive without being dishonest, then you should do some renovations on it before listing it.
Talk on the Phone
Some renters may want to sign a lease without actually seeing the property, especially if they aren’t from Ontario and won’t be able to visit before they move in. However, even if that is the case, you should always have a phone call with prospective renters. Speaking with them on the phone will give you a feel for whether they might be a good renter.
It isn’t foolproof, so the application process should include much more than a phone call. The good thing about speaking on the phone is that sometimes you might even be able to tell whether you don’t want to allow them to apply because it is clear that they won’t be a good tenant for your business.
Showings
Showing the property is also an important part of the application process. Showings enable prospective renters to see what the place is like before they apply. Every landlord will find that some renters decide not to apply after seeing a property. Showings allow you to limit the amount of time you spend on those who just won’t be interested in the property. They also present an opportunity for you to highlight the amenities of the property.
You should hold showings by appointment so that prospective renters have a chance to see the property on their own without other groups. When you show a property, you should explain why they might want to rent from you. If you aren’t sure how to paint the best picture of the unit, you might consider having a property manager show it to you. Sometimes the landlord might not see all the potential problems or benefits of properties they own.
Applications
To ensure that you will get a return on your investments, you should have every prospective tenant fill out an application. You want to be sure that they will have the money to pay their rent every month, but there’s more to it than that. You should also ask for references to find out what kind of tenant they will be. Don’t be a landlord who never checks references. They are important resources to help you, screen tenants. You’ll be able to filter out nuisance tenants who bother others in their building.
What tips do you have for potential new landlords?
Every landlord should remember that real estate investing is a business just like any other. This guide will help you run your business efficiently and effectively.
Always run a credit check
As an owner of a business, you want to ensure that your investments earn an attractive return. The only way you can do this is through tenants who pay their rent every month. Running a credit check will give you a good idea about whether they can afford to pay and if they tend to miss payments.
Raise Rent Annually
Rental prices for real estate in Ontario are always going up, so to keep up with this trend, you should raise rent every year. It’s good to remain competitive in your rental rates, but you don’t want to price your properties too low. Additionally, if you have a mortgage on the property, you need to keep in mind that interest rates could go up or down every five years throughout the life of the loan.
Don’t be Afraid
Whether you are in Ontario or located elsewhere, you should never be afraid. As a landlord, you have control over your properties, so your decisions will impact how well they pay off. If you make wise decisions, real estate is an excellent investment, especially in some parts of Ontario, like the Toronto area. You could consult a real estate agent if you need help making decisions or managing your units.
Maintain Your Properties
Every landlord wants the best renters, and the only way to retain good renters is to maintain your properties. People don’t want to live in a place that’s constantly in need of repair or where their requests for maintenance are not fulfilled.
Additionally, you must keep up with the laws that govern landlords and renters. The Landlord Tenant Board governs these relationships in Ontario, and you don’t want to be brought before it by your renters.
Not only is it good business to maintain your properties for your renters, but it also ensures that you will receive an attractive return on your investment property.
Laws for Tenants and Landlords
There are laws in Ontario that both the tenant and landlord must follow. For landlords, this means their property must be in good condition, and you must also follow any building rules or local bylaws. For tenants, this means following rules the landlord sets and accommodating provincial rental laws. As a landlord, you may have to deal with some unexpected situations.
Here are 6 tips to help you become a successful landlord:
- Treat your rental like a business.
- Buy the right property to rent.
- Learn your province’s rental rules.
- Screen potential tenants carefully.
- Cultivate the landlord-tenant relationship positively.
- Check your insurance coverage.
FAQs
How much money do you need to become a landlord?
To start a business as a landlord, you should have at least 20% of the purchase price of the property you are thinking about renting out. That will be the down payment on the property. Ideally, you should have more than that because you may need to upgrade the property before you start advertising it to potential renters. If you are planning to take out a mortgage, interest rates are also an issue. It’s best to start while rates are low, although they will likely be re-evaluated every five years during the life of the mortgage.
How do I get started as a landlord?
To get started as a landlord, you must first look at properties that you could rent out. Research the neighbourhoods before you buy to ensure that they are attractive to renters. Do the math to make sure you can run the property as a profitable business. Don’t buy a property unless the numbers work out in your favour.
After you buy a property, perform upgrades and make sure it follows all the requirements set forth by Ontario laws governing landlords and renters. Write a lease agreement and choose high-quality renters by following the tips in this article. Keep the property up to date and in good working order by performing regular maintenance.
Is it easy to be a landlord?
Deciding to be a landlord is exciting, but it can be a bit overwhelming at first. However, once the wheels are in motion, things become a little bit easier. You can make it extremely easy on yourself by hiring a Toronto property management company to oversee your units. On the other hand, some landlords prefer to do things themselves or can’t afford to hire a manager.
Is it worth being a landlord?
If you choose your property and renters carefully, being a landlord in Ontario can make you a lot of money. It does come with a lot of responsibilities, though, so even though it is mostly passive income, you will still have plenty of work to do if you don’t hire a property management firm. Like any business, you’ll see as much of a return on your capital as the work you put into it.
You’ve got to make sure your numbers are right before you start pouring money into a property. Making a bad decision in this business can be extremely expensive, but for those who play their cards right, owning a rental property can be quite rewarding.
Conclusion
Ontario offers many opportunities for those who want to invest in a rental property. The rental market is healthy, and the dynamics are such that there will always be strong demand for rentals. Temporary downturns do happen, but the overall direction of rental prices is up. Property values are also trending upward most of the time, so you will see plenty of appreciation on your units as well.
If you’ve been looking for a place in Canada to start, Ontario offers everything a landlord would want. It’s rare for rental units to sit vacant for long, so as long as you make wise decisions about where to buy and how much to invest, your investment should be profitable. If you choose the right renters, all you will have to do is maintain the unit.
