Becoming a landlord – Residential Tenancy Tips/ Posted in Business Law, Real Estate
Investing in real estate has paid handsome dividends to many people, especially in the Okanagan. Yet, there are many out there who are simply not cut out for being a landlord of a residential property. It’s not as simple as buying a rental home and filling it with tenants who you hope are going to pay the rent and take good care of the property. Here are some of the issues we come across more frequently and some tips to ensure you protect yourself and your investment:
- Before deciding to purchase a rental property, sit down with a qualified person to do a cash-flow analysis. Determine the likely rent amount and put that against the costs associated with carrying a mortgage, paying property taxes, paying strata fees, and paying any other amounts the come with property ownership. Are you sure this will be a cash-flow positive investment or are you willing to move ahead on the assumption that the property’s value will increase enough to offset any cash-flow issues.
- Always check references and ensure you get at least one work-related reference. Be wary of references from friends as many are happy to say nice things about the potential tenant. Be wary of references from previous landlords as they people may simply be wishing their problem onto someone else.
- For the love of God, inform yourself of residential tenancy law and use the proper residential tenancy forms. If things go sour you may be forced into arbitration. If you show up without the proper documents and have failed to follow the proper procedures, don’t expect the arbitrator to excuse your ignorance or laziness. The forms are available online at www.rto.gov.bc.ca and the website also has a great deal of information on residential tenancy law. You should know this website inside and out.
- Condition Inspection reports are required. Get the form from the website and complete it as required. Don’t shoot yourself in the foot by failing to follow required procedure. If the tenant damages the property you may be prohibited from claiming against them without having completed this report.
- Know whether you want to risk going “month to month” because when doing so, you limit options for terminating the tenancy. We recommend always having a fixed-term tenancy so that you can always refuse to renew if for any reason you want to seek a new tenant. When “month to month”, your ability to terminate the tenancy is restricted to certain instances, and if you cannot meet the requirements, you cannot legally terminate the tenancy without the tenant’s consent.
- Always have a viable back-up plan in the instance the tenant misses a payment or you cannot rent out the property. How will you pay the mortgage on the property if the tenant doesn’t pay you rent or the property is vacant? Plan to put a bit of rent aside each month to start a contingency fund for missed payments, vacancies or for emergency or planned capital expenses (new water heater, roof, furnace, sewer costs, ect…).
- The Act permits a Landlord to enter the property upon providing 24 hours written notice. This is your way to intermittently check the property against grow-ups or other issues. Use it wisely.
- If you are the owner of a strata lot, ensure that your strata council has your name as the name for notice for all correspondence. You will then know if the tenant is being fined for bylaw contraventions, and you will ensure that key notices go to you rather than to the tenant (who is likely to ignore at your peril).
Photo courtesy of ryarwood