Are You a New Landlord? Don’t Make These Costly Mistakes

Owning a rental property is a very smart move. It can be a reliable source of additional monthly income, not to mention the potentially large payoff when it comes time to sell the property and cash in on it’s equity. But it’s not all fun and games. Failing to properly manage your rental property can be a massive source of headache, and extremely costly both from a time and financial perspective. If you’re new to the game, be aware that this is a business, and as such, remain business minded. Recognize areas where other landlords have failed, and use them as learning experiences. On that note, avoid making these costly mistakes:

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Failing to Properly Screen Tenants

The most important aspect of landlord management, is properly screening your prospective tenants. Failing to do so is like playing Russian roulette. You may get lucky…or you may bite the bullet. Think of your tenant as the arms and legs of your business. They are living in the space, and therefore have direct impact on the properties maintenance and liveability. The last thing you want is for your tenant to run a muck on your property, as this will leave you with the headache of fixing the space up, and the bill that comes along with it. More importantly, you are relying on the tenant to pay their rent for your investment to be worthwhile. If a tenant fails to pay their rent, it can take months for you to evict them, and there is no promise that you’ll ever be paid out on the months of back rent – so be smart and screen your tenants thoroughly.

Allowing Tenant Renovations

Some landlords think to themselves: “my tenant wants to renovate? Fantastic, free service for me!” That’s a potentially dangerous thought process. For starters, you should be heavily involved in any renovations or fixes being done to the space. Once the tenant leaves, you’ll need to find a new tenant; what if the renovations or fixes from the old tenant were performed poorly? Then you’re going to be stuck cleaning up the mess. Moreover, tenant renovations can potentially cause damage to your property, or even tenant injuries that may lead to legal trouble. If your tenant is offering to pay for certain renovations, that’s fantastic, but make sure you pick the professionals to do the work, and make sure you know exactly what work is being done.


Lazily Written Leases

Take your time when writing up the lease. The lease is your failsafe in case of disputes. The lease should thoroughly outline what is expected of the tenant, and what steps can be taken if the tenant fails to live up to the lease requirements. If the lease is missing vital details, or lacking specific required information, it may be deemed null and void in the case of a legal dispute. Do not skimp on the lease.

Verbal Lease Agreements

Some landlords settle with a verbal lease agreement. A verbal agreement will not hold up legally, and causes a ton of grey area. Without proper documentation, you have no leg to stand on if need be. A written, and signed lease agreement, is the only way to protect your rear end.

Not Having Insurance

Like any business, you need to be covered legally as legal disputes can arise with your tenants; rent can go unpaid, damages can arise, liability issues can come up; understand that a landlord can be held liable in the case of injury to your tenant or one of their guests. A good insurance plan will protect you and your investment.

Not Requesting Tenant Insurance

On the same note, you’d do well to ensure that your tenants have tenant insurance. It’s not uncommon for tenants to cause damage to a landlord’s property. Fires, floods, broken structures etc. are all possible, and if your tenant doesn’t have insurance, you will likely get stuck with the bill.

Accepting Alternative Methods of Payment

Why did you purchase a rental property to begin with? To make money, right? So why on earth are their landlords who accept alternative methods of payment? In some cases, tenants will offer to pay for certain renovations or repairs. In this case, how do you know the job will be done well, or at all? Accepting anything other than money for rent, negates the very purpose of renting out the space to begin with.

These are just a handful of big errors that many landlords make. If you’re new to the game, be smart and avoid these common mistakes.

Tenant Customer Service is Paramount

The most successful landlords treat their venture as a business. Like any good business, customer satisfaction must be a priority. Failing to view it as such is a guaranteed way to fail. Customers drive business, period. Like any business, however, you will encounter bad customers. Accept this now, and accept that your job is to manage them. With that said, I’m not encouraging you to allow yourself to be taken advantage of. “Professional tenants” do exist, and their aim is to suck the landlord dry. This is not OK, and I would encourage any landlord to take the necessary steps to evict in these given scenarios. But all too often landlords will treat minor discrepancies as if they represent the end of the world. This leaves them stressed, leaves their tenants unhappy, and breeds a negative environment for both parties.

Making the effort to view your tenants as customers, and understanding the importance of customer satisfaction, will ultimately lead to a more satisfactory tenancy for both parties; tenant satisfaction leads to wilful cooperation on their part. This will make your life as the landlord infinitely easier. The long-term effect is equally beneficial as it is essentially indirect marketing: a satisfied tenant will be more likely to give you less headache, and want to stay on board once their lease is up. If not, they are more likely to bring you future business throughout positive word of mouth. The ultimate effect for you as a landlord, is less vacancy, and better tenant cooperation. This should be the ultimate goal for any successful property manager.

So, what sorts of actions should a landlord/property manager take to ensure customer satisfaction? Glad you asked:

First and foremost, a thorough lease agreement fully outlining your expectations as a landlord must be put in place. I would also recommend spending time to go over the vital details with your tenant either in person or over the phone. Many landlords send over the lease agreement without discussing the terms with the tenant. In turn, many tenants fail to actively read the agreement. This creates grey area, which is a recipe for disaster. Clear communication, on the other hand, will ensure that both parties are on the same page. This will give both parties confidence entering into the agreement, as they understand what will be expected on a daily, weekly or monthly basis. No surprises mean less headache.

Hand in hand with this is ongoing communication. Don’t just fall off the map once your tenant has moved in. This can lead to many unwanted scenarios including tenants slowly easing off lease agreement details because they feel they aren’t being monitored. More importantly, your tenants may need you from time to time. In these instances, it’s important that they can easily reach you. If they feel that you don’t prioritize customer service, they’ll be less inclined to treat your property with respect. Make sure you are easily reachable, and timely to respond to inquiries.

Always remember that you are a professional, and conduct yourself as such. When your tenants see that you are a serious landlord who takes on full accountability, they are more likely to respect you. When meeting with your tenants, be well dressed and well groomed. Be friendly and courteous, but be sure to keep a clear distinction between friendship and professional relationship; most of us have taken advantage of a friend at one point or another in our lives. But how many of us have taken advantage of a superior? Small talk is a nice middle ground that will put your relationship in it’s place.

Lastly, stay organized. This will show your tenant that you are a professional who commands respect. Maintaining a sense of order and organization will give your tenant confidence in dealing with you and living in your space. They will feel that they are in good hands, and will be more likely to adhere to rules and clear communication throughout their tenancy with you. An organized landlord is inadvertently encouraging and promoting easy cooperation from their tenants.

These are just a few key details to keep at the forefront of your mind. By maintaining clear communication, professionalism, organization and clear agreement details, you’re setting up a successful tenancy in both the immediate and long-term future.

Selling Your Rental Property? Work with Your Tenants!

There comes a point in every Landlord’s career where they decide to cash in on their investment property. Typically, a landlord will rent the property for years, allowing a tenant to pay down the mortgage. Once a good chunk of the mortgage has been paid off, it makes sense to sell, cash in on the equity, and either upgrade to another property or use the earnings for another purpose. If this describes you, then you should be mindful of leveraging your tenant relationship to reach a profitable sale of your home. Believe it or not, your tenant may be the deciding factor that makes or breaks the entire process.

Ideally, you should be open and communicate clearly to your tenant throughout this process. Your tenant is living in the space, which means they have a lot of control over how presentable the space is throughout the showing process. If you have a strained relationship with the tenant, they may take petty measures to make the home unpresentable prior to a showing. This is the last thing you want, as it will devalue your home in the eyes of the potential buyer.

In preventing any ill feelings on your tenant’s part, let them know that you plan to sell, and that you’ve appreciated their tenancy. Give them a rough timeline estimate so that they have adequate time to search for a new living space, should it be required. You may also consider some sort of incentive in asking for their help with keeping the space presentable. The incentive can be up to you; gift cards and cash incentives, for example, can go a long way.

Typically, you’ll need to provide your tenant with a written notice of entry 24 hours prior to the date and time of the showing. In addition to this, it’s recommended to simply give your tenant a call with specific details; a personal touch can go a long way in maintaining a healthy landlord/tenant relationship.

In addition, you’ll want to be respectful and sensitive towards your tenant’s privacy. For example, some tenants may have concerns about personal belongings and hanging pictures to be included in any marketing material (i.e. Realtor.ca listings). If this is the case, you should coordinate a photo shoot with your tenant so that they can remove pictures from the walls and hide any personal belongings that they’d like to remain hidden from the public eye.

You’ll also need to consider admittance; the Residential Tenancy Act only permits admittance between the hours of 8am and 8pm if it’s not an emergency (and no, a showing is not an emergency). So, don’t go planning any showings for 6am or 10pm etc. Your tenant will not thank you, and you may end up in some hot water.

Here’s another big one: Pets. Does your tenant have one? Two? More? Some potential buyers may not take kindly to pets living in the space they are considering purchasing. This is another big reason why healthy tenant relationships are key. You may need to request that the pets are hidden from site during showings. This may require your tenant to find a babysitter, take the pets out during the showing time, or arrange some sort of hidden space that will not be shown to the prospective buyer.

You’ll also need to discuss with the tenant whether they plan to stay in the living space or not. Contrary to popular belief, you cannot force a tenant to move out on a whim if you have an offer on the table. You will be left to negotiate with your tenant and the buyer. If you have a lease term signed off, the tenant is within their rights to stay, and the buyer will need to be made aware if they plan to. If you do not have an active lease term, then the buyer is able to provide the tenant with an N12 form, which will give the tenant 60 days to move out. With that said, if the tenant doesn’t move out, the eviction process can typically take quite some time. What’s more, is the standard Agreement of Purchase and Sale guarantees vacant possession. You will need to discuss with your Realtor if this stipulation is included. If so, you will be wise to consider leaving enough time to evict if need be. Otherwise, you may end up in direct breach of your purchase agreement.

With these factors to consider, failing to leverage your tenant relationship can be costly in more ways than one. The wise move, is to maintain healthy relationships with your tenants from the start, and to play the right cards when it comes time to sell. A tenant on your side, will make the process a breeze.