Investing in rental properties is not a passive investment. Ask yourself these 3 questions to see if you’re up to the challenge of being a landlord.
Being a landlord has its ups and downs. Let’s begin with an overview of the good, the bad and the ugly parts of landlording.
The Good. The great part of investing in a rental property is that someone else is paying off your mortgage. Couple that with the cash you should be earning every month after the expenses are paid and it’s no wonder that over 90% of millionaires have made their money in real estate.
The Bad. Owning rental property can be a lot of work. It takes patience, planning and the ability to deal with many different personality types. Every time a rental property becomes vacant, you have to find a new tenant. This alone can be a huge headache. Your phone will ring off the hook (if you’re silly enough to list your phone number) and you’ll be steadily replying to email inquiries. You have to do showings, background and reference checks, and you’ll question if you’re being told the truth. Even after you find a good tenant, you could still have problems. They could lose their job, then start a trend in paying rent late; there could be relationship break-ups, roommates moving out, etc… Plus, you could have issues with your property such as plugged drains, leaking fridges, and so on. You get the picture.
Then sometimes you’ll encounter a string of bad luck. And speaking of bad luck…
The Ugly. Occasionally, being a landlord means living in a nightmare . . . while you’re awake. There are tenants who will destroy your property, fit a family of 10 into a two bedroom condo, or not pay rent at all. They will flush cat litter down your toilet and leave you with all the repair costs.
So are you really cut out to be a landlord? Ask yourself these three questions:
- Do you have the discipline to stick to a long-term plan? The profits from a rental property don’t happen over night so expect this investment to be long term.
- Are you a good communicator? Communication involves listening, speaking, observing and empathizing. You will need to deal with many types of people and will need to communicate well to be good at screening tenants and diffusing potentially volatile situations down the road.
- Can you deal with conflict? Just like in life, landlording is 10% what happens to you and 90% how you react to it. Being a landlord is not all rainbows and unicorns. You will deal with icky situations one in awhile, so being able to stay calm is a skill you will need.
Many people don’t invest in rental properties because they hear stories about calls from panicked tenants in the middle of the night. As the owner and manager of 14 doors, I can say that I’ve never received a call from a tenant in the middle of the night. Not that I haven’t had my share of headaches though! I mean, when a tenant changes the locks, refuses to allow you entry to do inspections, then goes to the newspaper to tell them you’re an elder abuser, you will likely lose sleep too. True story.
Now you may be thinking that you’ll hire a property manager to take care of your property. While there certainly are advantages to this (mainly, less stress), there are a some disadvantages: 1) it will cut into your profits, and 2) no one will care for your property like you will. It is recommended, at least in the beginning, to manage the property yourself if you are able to. The reason is that the experience you will gain will help you later on in better managing a property manager.
And now for some tips on being a good landlord.
Whether you rent out several apartments in a building or complex or simply your basement suite, you are in the business of being a landlord and should approach landlording in a professional and business-like manner. The more you know about the law the better off you and your business will be. When you are unsure about a piece of the tenancy law, call or email the BC Residential Tenancy Branch. Don’t assume that by getting a tenant to sign something, it is legal. The Residential Tenancy Act and Regulations will trump whatever you and a tenant agree to that is outside of the law.
Doing your due diligence when renting out your property is of utmost importance. Put your private investigator hat on and do some proper screening. Read all our posts on screening renters.
Be kind and respectful in your communications with your tenants, and make sure you document everything. This is very important if and when you go to arbitration. You WILL live through your nightmare and come out okay in the end with a good story and a good lesson.
There are several articles and Rental Forms, such as receipts, pet agreements and more, available on this site that you will find helpful.