It’s funny - looking back on my blog, where I’ve come in the last year-and-a-bit, I’ve created a lot of content about condo investment.
I’ve explained why you should invest in condos, what to look for, what unit to pick, and how to choose the right builder.
I’ve written my life story, I’ve talked about the market crashing, and explained the process of building condos from start to finish. With diagrams.
But I’ve never talked about what it’s like to be a landlord.
To me, the hardest part - and the fun part - of real estate investment is getting the right property for the right price. To others, though, the biggest question is “what happens after?”
To answer: I’ve started a series for landlords about running a rental property and getting the most out of an investment.
Wait, I have to be a landlord?
Well, yeah. You can hand that work off to a property management company, or you can sell the property for straight cash. But for long-term investment strategy then yes, you have to be a landlord.
Why landlord-ing = cash
There are three ways to make money in condo investments.
1. Sale proceeds
Buy at one price. Sell higher. Do it again.
2. Rental income
Find a tenant. Collect rent. Cover your expenses. Pocket the excess.
3. Equity gain
By paying a mortgage you slowly own more of an asset - that’s a gain in equity. As the value of that asset rises you also gain more equity.
That’s it. For my strategy, and for long-term real estate investment in general, 2 and 3 go hand in hand.
Your condo is built. Now what?
After your pre-construction condo is finished, you take occupancy and all of your closing costs are paid, it’s time to start thinking about landlord-ing.
A property manager - whether it’s you or whether you choose to hire one - might have to deal with a number of issues:
Potentially sporadic cash flow
If that sounds like fun (or worse than a root canal), you probably know whether you should self-manage or outsource.
Thinking about tenants
Before you look for a tenant, you should understand your building’s population or tenant profile.
Are you in the entertainment district, or near U of T?
Or are you in a quieter east-end neighbourhood full of young professionals?
If your building is new, you might not really know who lives there.
But what you can do is look to neighbouring buildings, workspaces, and landmarks to suss out the type of person who might want to live there.
Yonge and Eg? Young professionals, and work-hard-play-hard singles.
Liberty Village? Entrepreneurs, young families, and green smoothie-drinking thirty-somethings.
And so on. Finding your ideal tenant is mostly about them finding you - but you need to know the type of tenant you’re looking for. Ask yourself a few questions:
Can you handle party people? (Students, young people, entertainment neighbourhoods)
What about young children or babies? (Families, newlyweds, family-friendly neighbourhoods)
Would seasonal or regular vacancy be a financial liability? (Students, university tenants, waterfront or vacation properties)
You should be well prepared for the possibility of encountering tenants with these features, depending on where your property is and the population that lives there.
My advice? Know the kind of tenant you want - or don’t want - before even drafting an advertisement.
Finding “the one”
There are tons of ways to find tenants in Toronto! And Toronto’s rental vacancy is really low - 1.7% of all rental properties are unoccupied. Of those, less than a quarter are freehold condos. Condo rentals are still in demand, and probably will be for a while.
Consider your advertising options:
I seriously don’t know who reads the newspaper anymore. But maybe?
Craigslist is king, but there are tons of options: Kijiji.com, GottaRent.com, ViewIt.ca, Renters.ca.
Most people - especially the internet-savvy - look at online rental options first, even if they end up going with a different option.
Check out all of them and see if one site in particular services a demographic you’re looking for
I would recommend tenant agencies if you’re in an out-of-the-way neighbourhood, a small city, or in a location with higher vacancy rates.
For Toronto, though, it’s probably not necessary. But up to you!
I am not a newspaper, an online site, or an agency.
But I use all of the above to help my clients in looking for a tenant. Really it’s just to make your life easier - because finding the right tenant can be difficult. If you’re struggling, call me! I would love to help.
Meeting and greeting
This is the first and only time I will ever say this, but here it goes: when it comes to meeting and vetting potential tenants, you need to swallow social niceties.
Seriously. I can’t tell you how many times I’ve seen landlords skip a credit check, a reference call, or an employment history check because they don’t want to be intrusive.
Or because the tenant looks, acts or seems super friendly.
Or well dressed.
Be intrusive. It’s your investment, your money, your time. There are thousands of potential tenants out there. Don’t settle for someone who doesn’t pass the “gut check” - your weird gut feeling that ends up being right more often than you’d like to admit.
The standard rental form asks tenants to provide a few pieces of information to help you verify who they are, what they do, and to determine whether they’re a good risk. Usually that means:
Where did they live previously, for how long, and why did they leave?
Rent Check is a private company in Ontario that provides rental history checks for their landlord members if you’re unsure of how to check for this information.
Where do they work? Do they have a steady income? Can they afford the rent you’re charging long-term? Have they job hopped?
Credit checks can cost you, so reserve them for your short list - only the folks who have seemed alright through everything else
Some people won’t have local professional or financial references. That's okay!
But do check with their personal references to see if a potential tenant is all they claim to be.
Pick the tenant who you like, who passes the gut check, and who seems like they’re in good financial order. Only then should you sign them on.
Want to know what comes next?
For paperwork, forms and filing, check out http://www.sjto.gov.on.ca/ltb/forms/#landlord-forms
For everything else - more is coming soon! I’ll be finishing my Landlord’s Handbook a post at a time, so check back soon to read more.
Have any questions, concerns, statements or jokes? Add them in the comments!