Maximize Your Rental Unit

These days, I'm running into two different kinds of buyers. One type of buyer, whether we're talking about a couple or a single person, wants to buy a house, but they are finding affordable houses in the neighbourhoods they would like to live a challenge to find. So, they would like to rent out a portion of their house, whether it's the basement or another part of the property. That way, they can help pay down the mortgage or pay for some of the renovations that may be required on the house in the years to come. I also come across the condo buyer who either wants to buy a condo as a real estate investment to rent out or as a buyer who has bought a condo but is going to be moving to Vancouver or Europe or Asia for a few years and needs to rent it out while away. Whether it's a condo or a part of your house, there is a lot of rental questions coming my way as a real estate agent and as someone who owns rental properties. Any one with a computer will know prices have gone up a lot in the last 10 years in Toronto, but rents have gone up too. And the vacancy rate in Toronto still makes renting fairly easy if you are priced right and are in a decent location. So here are some tips for those looking for renters: 1.THE SITES WITH MIGHT: Probably the best new web site to find renters would be pad mapper. (www.padmapper.com). The layout allows you to search a map of the city to see what rentals pop up in different neighbourhoods. It's like a GPS for rentals. If you are using a real estate salesperson, the MLS is still a great way to draw in renters, particularly for condos. If not, standbys like Craigslist and Kajiji do a pretty good job as well. And if you are feeling adventurous, and have the money to furnish your rental unit for short term use, then give air bnb for Toronto a shot. It's incredible just how much travellers use this service all over the city right now. You do have the potential to make more money, but you have to put in more work. 2. TENANT REVIEW. Depending on the price point of your rental, your potential tenants may carry some valuable information when they come to see the unit. They may bring their own credit reports, employment letters and references. I often have an application form ready for potential tenants to fill out. At the very least, I would ask for the past landlord who you can call and an employer to make sure they can pay the rent. If you are going through a real estate salesperson and the MLS, they will require credit checks, references, letters of employment and past landlords. It will cost you the equivalent of one month's rent, but the the prep work and the advertising will be done for you. 3. SPEND MONEY ON THE RIGHT STUFF. Sometimes, when you obtain a property, beit a condo or a unit in a house, things could look a little dated or scrappy. If you are going to do a reno, focus on the kitchen. That's the place the renters are going to judge the most. If you can swing it, make sure you have storage, and good appliances. Stainless steel is always a good option, and can be a lot more affordable than they used to be. White gets dirty fast. If you are renting a basement, make sure there is no musty smell. Buy a dehumidifier for your tenant, if you must. They will be happy, and it will keep your basement healthy too. Finally, use good paint. Cheap paint needs too many coats. Good paint will cost more, but really save you time and you'll need less of it. 4. BE NICE BUT FIRM. Most tenants are decent people. If you treat them with a little respect, they will usually return it. Salt the walkways in the winter. Keep the thermostat at a decent level, and attend to problems promptly. If tenants try to break the terms of the tenancy, be firm and let them know that there are some things that are not negotiable. 5. DO YOUR RESEARCH. Check out with other units in your area to see the price point you should rent. Your unit won't budge if it's overpriced and you could miss a month or two of rental income if no one comes knocking. Also, keep in mind that January and February are not the best moving months. If you can swing it, wait until the spring, summer or fall to rent out your unit. If you follow most of these suggestions, there is a good chance you will find quality tenants and make the most for your apartment. Yes, rental units can be tough to manage sometimes. Pipes will burst on Christmas Day. Your tenant will get a cat stuck behind the radiator or the heating system will break down on the coldest day of the year. All of these things happened to me! Problems will pop up, but most of time, it's fairly easy and you make money with minimal amount of work. And that money can be put to good use: You and your mortgage!

Hardcore Renters

Recently, I have learned that renting an apartment can be as tough as buying a place in this city.   As a landlord,  I did minimal advertising for my main floor, recently renovated, one bedroom apartment in a house with no tenant parking in a west end neighbourhood. The response to my ad was the best I have ever had in my 10 years of being a landlord. Usually around 10 - 20 % of the folks who go through to see a given apartment express an interest. I had everyone who came through fill out an application form. I think the rent was set near market value, but I had folks offer me more than I was asking. No doubt it appears that the rental market can be competitive in this city. I had to pick from some pretty magnificent renters to the point where I felt bad telling certain people they cannot live in my available apartment. 

As a real estate salesperson, I'm overwhelmingly associated with buying a property, but there are some circumstances where it may be smarter to rent than to buy. If, for example, you are not sure if you will be staying in Toronto for a longer period of time, then you should probably rent. Maybe you are arriving in Toronto for the first time and you want to get to know the city neighbourhoods a little before buying. Then by all means, rent.  And it's possible that you don't like the stress of home maintenance or maintenance fees. Then you should be a renter.

Still, those are not the renters I usually come across. I come across the hardcore renter. Those who have the means to buy but who just don't want to pull the trigger. Some are concerned the market will crash. Many will say that they can find more space in a better location if they rent than if they get a mortgage. And to a certain extent, they're correct. However, over a ten year period, your rent will likely increase, and the principal on your mortgage will decrease. In other words, the unit that cost $1800 now to rent, may cost $2500 in 10 years. There's a very good chance it will cost more than your mortgage.

And then there are those who argue that they make more money by investing with a financial advisor in stocks or bonds instead of real estate. And though the returns have been weak for those investments over the past twenty years on average, I suppose there are still some out there who can rent and invest their money wisely. Not all equity is built in real estate. There are other options out there.

But let's be honest. Most renters are not avid savers.  When buyers purchase a property, they do pay a lot of their mortgage payment to interest, but a portion of their payment builds equity in their property. So, you are building equity instead of giving your landlord the money. And I'm a landlord. So, thank you renters.

Also, most renters who have been renting for forever and have the money to buy a property have some anxiety around commitment. Not to their significant others, but to committing to stay in the same place for five or more years. They may have rented the same place for 20 years, but they still don't want to have the responsibility.

My point with all this: Sometimes you have to rent. You don't have the money yet. You're retiring to make your life easier. You're not ready to commit to a long term plan or you are not planning on staying in Toronto. But if you do have money and you can get started, buy. If I could have bought earlier than I did, I would have. Sure, your place may feel smaller or further away than when you were a renter, but with enough time, you will have a nest egg and you'll be astonished at what some people pay in rent in future Toronto.

The Rise of the Landlord

I own a fourplex. That's four apartments in one house. For the most part, I don't mind being a landlord. I'm not particularly handy, but I have learned a few things from youtube, my handyman books, and simple trial and error. I can change a toilet, fix a pipe, some basic electrical, and I can paint!  For a long time, I found, most people didn't want to join my ranks. Many think the role of a landlord is too stressful or requires a certain handyman-esque quality.

But lately, I've noticed a lot more people who want to be landlords. And the timing is pretty much perfect. For the most part, it's rewarding. You do get an injection of cash each month to pay off your mortgage and build equity. Of course, from time to time, there are those surprises - the broken toilet that leaks to the apartments below, the furnace that dies on the coldest day. I even had a tenant whose cat was stuck behind the radiator and couldn't get out.  (Ultimately rescued and saved!)

Regardless of how easy or difficult it is, there are more people jumping in. Why you ask? Yes, as previously mentioned, it makes money and builds equity, and its a great income stream. But also, many people can look around them now and see there are a lot of ways to be a landlord. You don't have to walk around all the time with a wrench in your pocket.

The types of landlords emerging vary widely enough. Some of them would like to buy a big house with two or more units in them. Some buy a condos as investments too. Condos rent well in key areas, and they are great investment for those of us who are not very handy at all. There is really a lot less to worry about here.

There is some thing else happening in this city. Renting some thing out these days is a snap. Renters are shocked at how competitive it has become to rent a place around here.

Currently the rents in this city are fantastic, from a landlord's perspective. Vacancy rates are low and rents have increased quite a bit in the past few years.

Also, no one really builds rental buildings any more. It still happens. I can think of Jazz downtown that mimics a condo, but it's all rental. Still, this is rare. Fewer rental apartments are built, but more people arrive in the city. So, condos and apartments in houses take up the slack.

I know the news says over and over again that there are going to be a flood of condos on the Toronto market, and condo prices in some parts of Toronto have slipped, but there is still not enough rentals to go around.

It's a perfect storm really. Low vacancy rates. Quickly rising rents. And a lot more renters, especially after the Federal government sidelined a lot of would-be buyers by making it tougher to qualify for a mortgage and sending them back to Rentersville.