Buying a home with a built-in income suite – or with the potential to build a suite – is becoming more common in the Toronto real estate market, as a way to help offset the immense cost of owning a home in the city. This guaranteed rental income can contribute to your mortgage payments every month, making homeownership more realistic for first-time buyers. The same can be said for Vancouver real estate, with its similarly expensive market.
But being a first-time landlord on top of a first-time homeowner can make an already stressful situation even worse. The last thing you want to do is end up with nightmare tenants who destroy your new home or even stop paying rent entirely. With that in mind, there are some tried and true rules to follow to ensure your new investment is occupied by the best possible tenants.
It all starts with the application
Asking as much as you can on the rental application will ensure you find a great tenant. In most cases, you are going to be sharing your home with this person, so you want to ensure that their lifestyle is similar enough to your own to ensure no conflict could arise. If you have a young family, having another family might be more appealing than renting to a young single person who might stay up late playing loud music. You might prefer renting to non-smokers or those without pets. The rental application is where you can weed out potential bad fits from the process.
Pay attention to their behavior at the viewing
Did they show up late? Are they making excuses? Are their kids running around wildly with complete disregard for the property? Are they talking negatively about previous landlords? These could all be red flags for a less than desirable tenant situation. Do you feel a positive connection with this person? They are going to be living in close proximity to you, so finding a tenant you enjoy interacting with will help create a strong landlord-tenant relationship.
Follow up with references
Before agreeing to rent the unit, ensure you call all the references listed on their application. Follow up with employers, former landlords, and anyone else they might have listed as a reference. Ensure they are actually working where they said they are (Google can tell you if their place of employment is real) and talk to their supervisor if you can. Talk to former landlords to get a sense of exactly what kind of tenant they will be, and if they can be trusted to pay on time every time. If there are significant time gaps in their rental history, find out where they were living at the time. It could mean they were living with parents or traveling, but it could also point to a bad rental situation in their past.
Complete a credit check
When all else looks great and you’re down to the final possible applicants, purchase a credit check to see which potential tenant has the strongest credit history. This will give you information on their financial situation that can be very helpful in ensuring their ability and likeliness to pay on time every time. It should be noted though that this is not a failsafe way to ensure you’re choosing the best tenant – some tenants, like students, have very little credit history but can still make for the perfect person to rent to – while others may have a less than excellent credit history because they made it their priority to always pay rent on time before anything else. Use the report responsibly, but take into account everything you learned from their application and references as well.
Ensure everything is laid out clearly in the lease agreement
Having a detailed lease is important should any conflict arise. The lease should specify what is and isn’t allowed in the unit, as well as what your duties are as a landlord and what your expectations are from the tenant. If a tenant claims you said the rental price was all-inclusive – but it actually doesn’t include hydro – having this stated clearly in the lease ensures you are protected. At the end of the day, a solid lease is the best safeguard for a landlord entering the Toronto real estate world.