Are you thinking about becoming a landlord? You may not be fully-prepared for what you’re getting into, according to real estate broker (and former landlord) David Fleming. Before you make the big decision, here are some things you should consider.
Finding the right tenant is hard
Many people think they’ll buy a property and meet a nice person who agrees to pay the asking price and moves in the next day. That’s not what will happen in the current real estate market, especially if you’re in a big city. Chances are you’re going to be flooded with applicants and you’re going to have to play rental God—this means you’ll be looking at an applicant’s income, credit score and their job tenure. You’ll have to call references (and make sure those references check out). Also, if you refuse an applicant, you need to make sure you’re not refusing them on any kind of reason that counts as discrimination. Don’t want to rent to a 23 year old because they’re 23? That’s discrimination.
Know your rights as a landlord
Landlords used to be able to evict a tenant if they were going to use the property for their own purposes, and it was widely understood that landlords weren’t held to this. Now, if a landlord evicts a tenant for personal use, the landlord (or a family member) must move in and occupy the premises for a period no less than 12 months. If you have a rental property you have no intention of moving into, your tenant can legitimately stay there forever. In reality, there’s a natural turnover—people grow out of spaces; they get married, break up, get new jobs or have kids and need to upsize. But the rights nowadays are overwhelmingly in favour of tenants.
Make sure the property is worth it
The best rental property to start with, according to Fleming, is a small, one-bedroom condo in a hot real estate market. They’re the cheapest units you can get in these markets and they’re almost guaranteed to appreciate in value. They also require the least amount of maintenance—you usually pay maintenance fees that you can fold into a rental fee, and if there are any issues, the condo corporation fixes them. Houses, on the other hand, come with all the maintenance problems of a house. If there’s a problem, your tenants are going to call you to come fix it.
Whatever it is, you have to make sure you can carry the property in order to actually make a profit. If you purchase the property in a depreciating market and it loses equity, then the rental property investment probably isn’t worth it for you.
It will probably be a headache
Fleming, who loves real estate, didn’t like being a landlord. You need to be prepared to deal with calls from tenants about, well, anything. And if you have a bad tenant, you’re always going to be worried about what’s going on at your property.
The bottom line is that a lot goes into being a landlord; it’s not just a money-making opportunity—it’s a job.