Becoming a real estate investor can be an exciting and lucrative business if you’re educated on the pros of being a quality landlord. Having a signed lease agreement with your tenant is important, but there are more ways to ensure you’ll be a successful landlord and that tenants will care for your investment property.
After all, you’ve worked so hard to be able to purchase this home and you want to make sure that tenants will be respectful and responsible. What’s the best way of going about that?
TIP #1: SCREEN YOUR APPLICANTS
This is an obvious point, but it’s an important one. Screening your potential tenants will save you so much time and money in the long run. Don’t skip this step.
Your applicant may tell you they have a great history with rentals and a perfect credit score, but you still need to do your due diligence.
You’d be surprised how many people actually fudge their credit history, so it’s better to double check than be sorry later.
Asking for proof of income, their employment status and a credit check will help you determine what kind of a tenant they are. It’s also a great idea to ask for references from past landlords and current employers.
Finding out if they were a reliable employee and a responsible tenant will help determine if you want them living under your roof.
TIP #2: UNDERSTAND WHAT YOU’RE REQUIRED TO PROVIDE
Landlords are legally responsible for the property and are required to provide certain things for the tenants. The Canadian Mortgage and Housing Corporation (CMHC) lists the following as examples what what a landlord needs to provide to their tenants:
- The home will be kept in a state of good repair.
- You agree not to limit the supply of utilities for your tenants (electricity, heat, hot/cold water etc.)
- The tenant’s property cannot be seized by the landlord for any reason (like if they didn’t pay their rent)
Knowing what you’re responsible for in advance can be a big money saver and solve problems down the road.
You can find out more about the rights and responsibilities of being a landlord on the CMHC website HERE. This will be your handbook and it will guide you throughout the landlord/tenant relationship.
TIP #3: THINK ABOUT THE FINISHES IN THE HOME
Any renovations you do to the home should consider how well the floors, cabinets, counters and more will withstand the daily grind of another person living there.
Marble counters may look beautiful at first but they may not withstand the lifestyle of some tenants.
Things like laminate floors (as opposed to hardwood or carpet) will be easier to maintain and won’t need a lot of repairs. Neutral paint colours will blend easier with the majority of people’s furnishings, and attract more tenants. Think clean, easy and that less is more.
You really don’t want to have to regularly replace carpets or refinish expensive hardwood floors between each new tenant.
Pro Tip: think long-term and consider what tenants will be willing to pay for. Just because you put in high-end finishes, it doesn’t mean you can raise the lease price outside of what the market will support.
TIP #4: USE YOUR REAL ESTATE AGENT
Did you know that real estate agents regularly help investors find suitable tenants for their property? A REALTOR® will help you sort through all of the candidates and ensure all paperwork is filled out properly so everyone is covered.
As a real estate agent, I frequently help new landlords and potential tenants connect so that getting the home leased is easier. I also help market homes, and make sure the lease contract protects everyone involved. I get that new landlord/tenant relationship going positively, and I always look forward to helping you start this new chapter as a real estate investor.
How Your Real Estate Agent Can Help
Here are some things your agent can help with before you start signing any paperwork with new tenants:
- Provide you with a full rental application.
- Obtain pay stubs or letters of employment
- Obtain a recent credit check.
The Rental Application
A rental application provides all sorts of great information regarding your applicants.
- Names and birthdates: these are needed to run credit check.
- Last 2 places of residence and their past landlord contact information, if applicable. Contact previous landlords to find out if they paid rent promptly and took good care of the property.
- Present and past places of employment, and contact information for supervisors. What were their salaries? Find out if they’re a good employee, on time for work every day, or if they call in sick regularly?
- Any financial obligations (car loans, credit cards, etc.). Sometimes you need to judge whether someone can afford your proposed rental cost.
- Personal references: these are not necessarily the most important reference but it’s good to get additional opinions on a person’s character and personality.
Pay Stubs/Letter of Employment
Ask for proof of income via pay stubs and a letter of employment. This will help to determine how long they have been working at this particular job. If they’ve just started there and are still in a 3 month probation period, they may not be the ideal tenant for your lease.
Comprehensive Credit Check
A comprehensive credit check shows any financial obligations in detail. You can also see any past delinquencies that your potential tenants may have faced.
Determine if this candidate is someone who is financially responsible and able to keep up with the monthly payment of their rent.
For more information on what tenant’s can expect when leasing a home, check out our blog: To Buy or Rent? Important Advice For Home Renters.