Being a first time landlord has been a big learning curve. We have another property to look after, additional paperwork to complete and occasionally we need to deal with any issues with the rental as they come up.
Although it has worked out well so far for us, we didn’t originally plan on becoming landlords.
Becoming a Landlord – By Default
When we originally bought our condo in 2007, we planned on living in it for 3-4 years and then moving on to a house. At that time we figured property values were steadily increasing and we could likely sell it for about the same price as we purchased it. We never planned on making money on it – we only wanted to break even.
Then the financial crisis of 2008 happened and our plans changed.
Our condo decreased in value to the point that we would be faced with a loss if we sold.
We had two options: rent out the condo and keep it for the long term, or sell for a loss. We decided to rent it out for the long term to avoid taking a loss.
This now meant we had become landlords by default. Since renting out our property we have learnt a few things (and are still learning).
The biggest adjustment for us was the business side of things. Usually when we meet another couple we don’t automatically try to determine what their income levels are and whether they pay their bills on time.
But that’s exactly what we did when we chose tenants. We checked references for our current tenants and they all checked out.
Be sure to do your research on your tenants – your goal should be to establish a long term, healthy business relationship with them.
It’s also important to be strict on your requirements. If your condo building doesn’t allow pets, don’t make an exception for your tenants.
A security deposit and first month’s rent should be required up front. If this is an issue, try to figure out why – it could be leading to a bigger issue and potentially a red flag.
Get Everything in Writing
It’s also important to get everything in writing. There is much more paperwork involved than I thought but it’s valuable because it clarifies expectations, helps to avoid misunderstandings and protects both parties.
Inspection at possession, the original lease agreement, security deposit receipt and receipt of keys should all be signed in writing to avoid misunderstanding.
Know Your Strengths & Weaknesses
You should have a good idea of your own strengths and weaknesses as a landlord.
Personally I am not very handy when it comes to major repairs. I know that about myself, so when something needs repairing in our condo I quickly assess whether I’d be able to fix it and if not – I call a professional for help.
My strengths are more on the people end of things – meeting tenants, showing the property and assessing whether they would be a good fit.
By knowing my weaknesses and letting someone else handle the repairs I can spend more time on my strengths – finding the best tenants possible for our condo.
Charge Market Value (or slightly below)
Personally I believe it’s essential that you charge market value (or slightly below) for your property.
We did this for our condo and it worked out well.
We wanted a large pool of tenants to choose from so we could find the right fit. When we rented it out the local vacancy rate was low and it was priced well – we got over 200 responses in one day.
By having such a large pool of applicants to choose from we were able to find the right fit for our condo.
Conclusion: Being a landlord requires people skills. As long as you treat your tenants with respect and do your research, it’s safe to assume your tenants will treat your property the same. Sure, there are lots of bad apples out there like everything else. But I think picking quality tenants is key to having success as a landlord. Are there any other landlords out there? Any tips for people considering becoming a landlord?