What’s Stopping You?

If you have thought about owning an income property, but haven’t pursued it-what is it that is stopping you?

Please share your fears, concerns and questions…

Did You Know…

Did you know that rent control guidelines only apply to properties built before 1991?  Newer rentals are not regulated by the Landlord and Tenant Board and Landlords are not restricted in their rent increases.  Still, it is wise for Landlords to be reasonable with their Tenants in order to maintain a good relationship and good Tenants!

In or Out-How should Landlords handle utilities?

Is it better to have utilities included in the lease or paid separately by the Tenant?  Both ways are legal and each have their own advantages and disadvantages.

If the Tenant is responsible for his/her own utilities, the Landlord does not need to concern herself with these costs when calculating ROI and Cash Flow.  The amounts of power, electric, water etc… are billed directly to and paid directly by the Tenant.  Over-usage is not a concern for the Landlord.  However, many Tenants prefer to have 1 monthly bill and tend towards all-inclusive leases.

Many new Landlords are very concerned with ‘all-inclusive’ leases because the costs of the utilities can increase and the usage cannot be regulated by the Landlord.

First of all, it is wise when purchasing the property, to ask the Seller for the typical costs for running the property.  This information will help you to make accurate calculations and price your rental well.

I talk about the utility usage upfront with my new Tenants, making them aware that if they are not wasteful with the utilities, I will be able to keep the rent increases to a minimum (reflecting their responsible choices).

It is unlikely that ALL of the utilities will have major increases during the rent term. If a particular utility does have a substantial jump, landlords can adjust for it with a justified rent increase (unexpected increases don’t impact the Landlord’s bottom line very much if dealt with in a timely manner)

The most important consideration to note when deciding whether to have utilities in or out is that the utilities run with the house.  This means that ultimately, if they go unpaid for several months by the Tenant (which the Landlord would be unaware of until too late) and then the Tenant moves out and cannot be found,  the utility company will come after the owner for payment.

For this reason (and for the allure of ‘one bill’ living), I choose to rent my homes ‘all inclusive’.  It is a little more work upfront, but I have an easy system of handling all of my monthly bills and I can rest assured that there will be no unpaid leftovers!

Practice Makes Perfect!

Are you one of those people who goes to all the Open Houses in the neighbourhood?

What a great way to practice finding great income properties!

A pretty accurate rule of thumb in finding income properties is look at 100, short-list 10 and buy 1.  You can use your open house visits as practice at scoping out properties with upgrading potential and for becoming familiar with the Return on Investment(ROI)/Cash Flow (CF) calculations.

When looking at prospective properties remember that if you can increase the value of your investment, you can change your ROI/CF numbers drastically.  Keep your eyes open for homes with great bones and respectable features and finishes, but ones that can be improved upon (now or in future, depending on the circumstances).  Upgrading flooring, countertops, lighting, bathroom fixtures, trim and hardware and neutral decor are great ways to make your investment profit.  Adding new useable spaces is another money making solution: a garage addition or a finished basement (always with a 3pc. bath please!) add great value for Tenants and/or Buyers.

Have some fun with this idea.  Remember to take a feature sheet from each open house visit so you can use them to compare your properties and find one that might be your first investment endeavour!

There are so many more in-depth insights on this topic.  If you are interested in finding out more great info, sign up for emails where we can share more detailed information…

5 Requirements for Legal Second Suites

Building and/or fire code requirements for legalizing second suites (creating a registerable, separate apartment within a home) can vary somewhat from township to township, but there are some requirements that must be met across the board:

SEPARATE ENTRANCE

• The second suite must have it’s own entrance accessible  directly from outside.  Contrary to popular belief, a separate entrance through the garage does NOT meet with the code.
• Any entrance doors sharing a common hallway must have automatic closures and be fire rated as per the code requirements (this information is available from the township’s Building Department)

SMOKE DETECTORS

• Hard-wired, interconnected smoke detectors must be installed in each unit (and common spaces) as per the code guidelines.  This means that the detectors are permanently wired directly to the hydro panel and when one goes off in one unit, it will also sound in the second unit, keeping everyone in the premises safe.

PRIVATE KITCHEN AND BATHROOM

• Second Suites MUST have a separate and exclusive kitchen and bathroom from the primary residence.

FIRE SEPARATION

• Adequate fire/smoke retardant insulation and drywall must separate the units.  The Furnace room may have special fire separation requirements (depending on where it is located in the home), making it part of one unit or the other.

MEANS OF EGRESS

• Besides the main entrance to a second suite, there must be an alternate means of escape in case of fire.  Building/fire code requirements for window sizes (and distances from main exit) must be researched and implemented.  Many municipalities require a certain percentage of the second suite NOT to be in the basement.

If you have any questions about these second Suite regulations, leave a comment below and I will get you the information you need!

If you find this information helpful and interesting, please sign up for more in-depth retrofitting tips that I only share via email!

Minimizing Risk of Non-Paying Tenants

There are several ways to lower your risk of having a non-paying tenants, from your choice of income property and its location to your due diligence to your property management.

Finding a respectable rental property in an area with a balance of owned and rented homes will attract a better class of tenant than an inexpensive area where the majority of homes are rented. A good way to judge a property is to ask yourself if you would be happy living there. If the answer is no, think about the tenant who might answer yes-is that who you want to attract?

You may want (or need) to start with a less expensive property at first. There are still ways to minimize your risk. If your property is in a high-rental area, make sure to upgrade the home to a respectable standard. Don’t forget the outside-you want to make a great first impression and attract tenants with an ‘owner mentality’. If your property will house multiple tenants, make sure the sound insulation between units is adequate and clear guidelines and boundaries are established prior to signing any lease. Another option would be to purchase a condo (less expensive than a home) in a better area that will attract the tenant you want.

Advertising your property is your first opportunity to appeal to the kind of tenant you desire. You may suggest who it is right in your ad- ‘perfect for AAA single or couple’ or ‘ looking for long-term tenant with owner mentality…’ You may also choose to hire a real estate agent (like me!) to advertise your property for you on MLS. Generally the prospects who use agents to find a new lease are pre-qualified responsible payers.

Your rental application is very important. It shows your potential tenants that you are a serious and professional landlord and it gives you insight into your prospect. Reviewing the prospect’s credit history, calling references and checking employment is critical to choosing a great tenant. Prospects who exhibit self-reliance and confidence will be less needy of your attention during the term of their lease. These types of tenant’s will attend to minor problems without involving you.

A clear and comprehensive lease agreement is a must! Landlords should endeavour to address every possible issue that may arise during the lease term. Establishing clear terms and responsibilities of both parties (and procedures if not met) is useful in avoiding misunderstandings later. Attaching an “Information for New Tenants'” package from the Landlord and Tenant Board as part of your lease (required in Ontario to make a lease binding) further reduces risk of miscommunication.

Excellent property management is the last step in ensuring that you maintain paying tenants. Mutual respect and consideration are key. As a landlord you are a business owner and should run your properties in a professional manner. Communicating with your tenants will help to build a good landlord/tenant relationship. Completing a ‘Move-in Inspection Sheet’ together with your new tenant will establish the condition of your rental at the commencement of the lease as well as your expectations at the end of the tenancy. Besides business related inspection visits and maintenance calls, establishing more personal communication is to a landlord’s advantage as well. Birthday cards, Christmas gifts and other non-business communications serve to show your tenant that you are a ‘real person’ and not just a impersonal entity.

Although it is impossible to guarantee that your tenants will pay, these simple steps greatly increase your chances of attracting and maintaining excellent tenants. The fact is that most tenants are responsible and upstanding individuals, but unfortunately they are not the ones we hear about!

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My Story

People who know me keep telling me that I should tell my own story to show other women the potential that they might have…

I was a 42 year old unemployed mother of 4 boys when I ended my marriage in late 2005.  I did still have my Interior Design business, but it hadn’t been active for 12yrs. at that point because my children were small and being ‘Mom’ was my priority.

We sold our trophy home (which we had done extensive renovations on) and divided our assets.  I ended up with $202K and 1/2 of a locked-in RRSP (which still remains locked until I’m 55).  What was I going to do?

It was December 16th when I moved my boys up to Aurora into a tiny townhouse.  Focused on their fragile emotions, we unearthed the Christmas tree from the mound of moving boxes and decorated it with our favourite trimmings before we unpacked a single other box.

The Townhouse was a 3 bedroom with a finished basement.  The only one I could find where you didn’t have to go through the rec room (which would serve as bedroom to my eldest) to get to the laundry room.  I put $198K of the money I had toward the down payment in order to make my monthly burden manageable.

Imagine my shock and terror when the woman at the bank offered me a homeowner’s line of credit to go with my new mortgage!  At this point I was checking to see if she had horns!  More credit?  Was this woman for real?  I couldn’t even fathom how I was going to keep up with my tiny mortgage payments and she wanted me to owe more?  Nuts!

She did however, go on to explain that I didn’t ever have to use the LOC and it wouldn’t cost a penny unless I did.  She also advised that would help me to build my own credit rating which would be important in the coming years.  I took the 60K LOC., but maintained my opinion of her and vowed to myself never to touch it!

Luckily, I got back in touch with an Architect that I had worked with 20 yrs prior and she hired me again.  I also received support, but knew that I’d have to become financially independent as quickly as possible. My Husband’s lifestyle was unhealthy and I didn’t want to count on his subsidy.

The design world had changed quite substantially in the years while I was away (technology took the place of creativity) and I was less than enthusiastic about it.  I realized too, that this was not my road to financial security and a great life for my children and myself.

I had always wanted to own income properties, so I started reading…everything!  Kim Kiyosaki’s book, ‘Rich Woman’ got me started.  From there I took courses and attended seminars until my fears were extinguished by knowledge and my dream was at hand.

The, once horned bank lady, was now looking like an angel!  I found my first income property; an upper/lower bungalow with separate entrance, in Newmarket.  It was gross!  I bought it for $195K using part of the 60K line of credit as down payment and renovated it using the rest.

The new acquisition needed everything!  So much so that when I think back on how I did it, I can hardly believe my own story.  It wasn’t a power of sale, but the bank had taken over responsibility for the sale.

With the deal set to close on the 10th of October 2008. I had my construction crew ready and plans and supplies in order.  How exciting!  My guys were on the roof at 7a.m. starting the outside work and waiting until we got the keys to move inside.

Then a call from my lawyer saying there was a problem on the other side and we couldn’t close!  I was freaking.  I was repairing someone else’s roof if this deal fell through!  Lucky-for-me we did close the next day and I put the for rent sign on the lawn while we worked on the renovation (which entailed totally new kitchen and kitchen layout, bathroom, laundry room, new trim throughout, new paint throughout, fire doors, refinished hardwood and new tiled floors etc…).  Two days later, based on my plans alone, I rented the house to a young couple for occupancy November 1st.  What was I thinking!  Two weeks to complete a full reno?  I must have been out of my mind.

Lo and behold, my awesome crew made it happen and my first Tenants moved in right on time.  They occupied the brand new, 3 bedroom upper for 1350/mo. inclusive. (The highest rent in the neighbourhood at the time).  We took the next month to finish the basement apartment, which needed far more extensive renovation because it was a completely unfinished basement.  In the end it looked great.  The last thing we did was lay the carpet and start booking showings.

That night at 11:30 I got a phone call from my upstairs Tenant.  She had gone down to the laundry room to do the washing and discovered 2 inches of water all over the brand new carpet!  I thought I was going to die.  I wanted to barf!  I wanted to sell the stupid thing!

The snow outside was melting and the water was running in through cracks in my foundation.  Regaining my wits, I quickly called a waterproofer and also moved the eaves trough downspouts away from the foundation (spending a little more than I had planned).  We soaked up the water and dried everything out and on December 1st rented the basement apartment for $975/mo. (again, higher than the average in the neighbourhood)  Quality renovations do pay off!

The best part of this story is that my mortgage (incl taxes) on that house was $1105/mo.  In the end, even after my unexpected (and then horrifying) setback, I still did very well.

In the years since I have become a real estate agent and continued building my portfolio (mostly refinancing the equity out of my current properties to do the next one).  I have also sold certain properties when the market was good, in order to use the gain to finance 1 or 2 more.  I sold that first little upper/lower in 2011 for $359K.

I wasn’t all a picnic and I had a lot to learn (and still do), but I can tell you one thing for sure, my income property portfolio (which I’m still growing) has already made me financially independent and has allowed me to provide security for my children.  Now, if something unexpected happens, I know that I can handle it and now I have an emergency fund to cover the costs.

If you dream of being independent and having time to spend with your family, I would love to mentor you in building your own portfolio.  Having a mentor allows you to progress quickly and avoid many of the mistakes that a novice (unaided) might make.  One thing’s for sure, “There is nothing like knowing that YOU CAN DO IT!”

New Stuff!

I’m so excited!  I’ve been working with some fabulous people who are going to contribute their expertise to the blog and make the content really comprehensive.

Stay tuned for financing info, tax benefits, fantastic events, videos and more…

It’s gonna be great!

Hourly Wage

It’s spring!

I have 2 Tenants moving out and 1 new property to lease.  I have been busy with advertising and due diligence.

A pain, you say?  I beg to differ!

Both of my Tenants who are leaving have been awesome and maybe needed my attention (mostly over the phone) twice in their entire stay.  I have already lined up some fabulous new Tenants to take their place and my new acquisition will be home to a new family on the first of April!

Yes, I have had to take some time to look after things, but when I look at the monthly profit I make and the potential capital gain in future, my hourly wage is looking pretty sweet!

If you are thinking about becoming an investor, talk to people who ARE investors to get a clear picture of how it really is.  Most people are afraid of being Landlords because they AREN’T landlords.  Those who are will give you an entirely different perspective!

Got questions? Please put them on the table so we can share how to deal with them…