There are many expenses that will pop up for landlords, even when you rent to good tenants. This is simply because having somebody living on a rental property comes with expenses: the dishwasher will break, the washing machine won’t work properly, etc. As such, you have to make sure that your rent properly matches the expenses and maintenance fees that are going to pop-up. As with everything in this world, that price is constantly increasing. So, that means that your rent should be as well.
Good Landlords Still Raise Rent
There are a lot of landlords out there who don’t want to raise the rent at all. It makes sense, seeing as many landlords feel that raising the rent is going to push away their loyal tenants, leaving terrible ones in their place. It’s an understandable fear, but you have to remember that the tenants who live in your building are humans, too. They understand that you’re raising the rent specifically for the purpose of making sure that the property is kept up-to-date for their benefit. Furthermore, there is a way to increase the rent in such a way so you won’t be that jerk landlord who randomly raises rent just because.
A major part of making sure that you are good landlord comes with following the law and the contract that both you and the tenant signed when the tenants moved in. A landlord is required in most situations to get 90 days notice when the rent is going to increase. As long as the landlord follows this, they are legally covered, but they’re also showing the tenant that they care about the people living on the rental property enough to notify them properly. It shows the tenant that the landlord is a good person and is simply raising the rent for practical reasons.
Additionally, the landlord is required to only raise rent a certain amount per year, usually somewhere around the line of 2%. So, while a landlord is not required to raise the rent every calendar year, it’s a good idea to consider it seriously, especially if you’re noticing more upkeep costs.
Good Living Means Mutual Respect
The price of living and enjoying life is climbing higher and higher every year, and the tenants that are living in your building understand that. As long as you follow the rules, you’re going to notice that nobody’s going to have a major problem. The good tenants – the ones who respect you as a person and a professional – are also comfortable coming to you if they have any concerns about the rent increase, and will also understand the reasons as to why (as mentioned already).
If you’re going into business for the first time as a landlord, and you’re looking for tips as to how to set the rent price, a lot of it comes down to simply how it appears to the prospective tenant that is touring the place. Since you’re limited by the laws in terms of how much you can increase, making sure that your first rental price is accurate and comfortable for you is extremely important.
If you’re leaning more towards the high market customers, which tend to be the ones that take better care of the property, make sure that you make the unit presentable to them in pictures, description, and presentation. Showing up to your meeting with them in a professional outfit shows them that you take your role seriously.
Make sure you come prepared to give them any information they need on the apartment in writing (much like real estate agents do with expenses, utilities, etc.). And make sure that the rental property itself is in perfect condition so that the tenant can see just how seriously you take the upkeep of the rental.
Some first-time landlords make the mistake charging too low for rent in order to compete with all the other options out there. While it might make sense to be competitive, you have to make sure that you take that starting price very seriously. The price will determine how you do as a landlord, and how the tenant views your place. So make sure that the rent that you set covers enough for the upkeep of the rental property, plus extra. That way you will be paying for your business expenses from your business income, and won’t be paying out of your own pocket when it comes to maintenance.
As the years go by, it’s a good idea to increase the rent on regular basis, simply because the building/property is going to require much more maintenance as time goes on due to aging.
As you can see, a lot goes into making the financial decisions about your rental property. Always make sure you keep your competition in mind, and make sure that you’re matching them, but don’t try to outbid them, otherwise you’re only end up hurting yourself in the long run.
The realistic tenant understands that you have obligations to meet as well. And while they compare your price against the competition, they will also be looking for a good landlord who handles themselves professionally and does what is necessary to take care of the property and those living on it. How a landlord approaches the situation really does mean a lot to the tenant, so make sure you do things right for the start.
Don’t be afraid to increase the rent whenever you feel like expenses are climbing too high for the amount of money that you’re receiving from your loyal tenants. The good ones will stay, and the bad ones will leave.
Picking the right tenant for your rental property can be as difficult as picking out the perfect chocolate from a box of all kinds that look the same, but taste very different. After all, you could be getting one that looks great on the surface, but is bitter on the inside. Or, you could be looking around the box and skip over one that looks kind of weird, but it’s actually the best chocolate you would ever have had in your life. Tenants are the same way. They can look great on the outside and be friendly to impress you, but they may be the most horrible tenants in reality. It’s tricky business to differentiate the good applicants from the bad ones so we’ve provided you with some pointers below to help you avoid the stress of having difficult tenants.
Construct a Comprehensive Rental Application Form
If you take the time to put together a professional and straightforward application form, you’re going to be able to separate the good applicants from the bad applicants pretty quickly. The application form should ask for the applicant’s legal name, their driver’s license or other government ID number, and their current home address as well as 2 previous home addresses. Here are other items you must have on your application form
A major part of making sure that your tenant is somebody that you can rely on is by verifying all work references that they give you. Checking in with a work reference will allow you to ensure that the prospective tenant is responsible, whether they may be leaving the position shortly, whether they are still working there, and you can also get a feel of how the employer feels about that person. As an added security measure, we suggest you Google the business and call the reference’s business number vs. a cell phone number given by the tenant so that you can ensure that the business is real and the reference really does work there or if it’s just a “friend” of the prospective tenant.
In addition to work references, ask to see a recent pay stub. You can then avoid the awkward question of asking the reference what the current salary of the applicant is (as they probably won’t/can’t tell you), and you will know if they can afford the rent along with paying for other common monthly expenses.
One of the most important checks that you can do to see if your prospective tenant is responsible is to call previous landlords. Yes, it’s also important to interview the current landlord, but by checking in with past landlords, be it from a couple years ago, or longer, they will be able to speak honestly about their past tenant and tell you of any issues if you ask them about it. Always ask if they would rent to this tenant again and why the tenancy ended, and listen for any pauses, which may be an indication of a red flag.
With the applicant’s current landlord, they may say good things about their tenant simply because they want to get rid of them if they are trouble tenants. So, while checking in with the current landlord is necessary, it’s pertinent to call always talk to past landlords.
In addition to viewing the applicant’s pay stub to see if they can afford the rent, always make sure that your application form has a section that the applicant has to sign to give consent to a credit check. In doing a credit history check, you can verify any other personal information that they give you but most importantly you can see if the person pays their bills on time. If they have extremely bad credit, you will know to pass on this applicant. There is a small cost to conduct a credit check, but it’s a necessary expense to potentially avoid a bad tenant who may have good references. If your investment property is in Canada, whether you’re in BC or Toronto, you can get a credit check with a company called Rent Check for $44.00. www.rentcheckcorp.com.
Having a comprehensive tenant application form will screen out people who aren’t really interested in your property as they won’t bother filling it out, which means you save yourself time in verifying someone who’s not going to rent from you.
And lastly, no matter how good your gut feeling may be about a prospective tenant, just remember that tenants on the surface are like a chocolate in a box that we spoke of earlier, and by doing the necessary steps above, you get to taste the inside of the chocolate to determine if it’s right for you : )
I’ve been a landlord for over 15 years, and I’m very fortunate to have had great tenants all throughout that time. Other landlords haven’t been so lucky. Over the years, I’ve heard from fellow real estate investors and have read stories in the news about tenants who trashed property, were consistently late on rent, or skipped paying rent completely. When I hear these stories, I consider myself pretty lucky that I’ve never had to deal with these tenant issues in any of my investment properties.
But is it really luck? From my observations, there seem to be two types of landlords: he ones who treat their investment like a business, and the ones who are scared of losing out on a month’s rent. The ones who treat their investment like a business conduct the necessary tenant background, reference, and credit checks. But the ones who are scared of losing out on rent will impulsively rent their property to the first person who is interested and might forego a thorough and proper screening. It’s the latter type of landlord that seems to end up with more horror stories.
Being a landlord is not an easy task. It requires dedication, an understanding of residential tenancy laws, and a fair bit of ‘people skills’ when dealing with tenants. But the upside is that when it’s done right, being a landlord can be a great way to earn passive income.
Besides proper tenant screening, the second most important task as a landlord is to write a proper rental contract. A well-written contract lists exactly what is included and what is not included with the rent, how long the tenancy is for, how much the rent is, when it is due, and how much is paid as damage deposit. You can also add an addendum to the contract to include rules like no pets, no smoking, no loud noises after 10pm and any other terms and conditions you see fit. Having this contract avoids disputes as everything is laid out in black and white.
Even with my years of experience as a landlord, I recently discovered some valuable information that all landlords can benefit from that prompted me to write this blog post. In the July/August 2016 issue of the Real Estate Investment Network REIN Life Magazine, former employee of the BC Residential Tenancy Branch, Giuseppe Pino Frustaci, explained a way to better control the outcome of your tenancy with what’s called the “vacancy clause”. (Click here to view the residential tenancy agreement here http://bit.ly/2bKFnSg.)
The Vacancy Clause
On page two, under 2. Length of Tenancy, it states when the tenancy starts and whether it is on a month-to-month basis or a fixed length of time. Most Landlords who want a long-term tenant, myself included, would check off b) for a fixed length of time (usually one year), and then we usually check at the end of this fixed length of time, i. the tenancy may continue on a month-to-month basis or another fixed length of time.
According to Giuseppe Pino Frustaci, if you choose the option that the tenancy may continue on a month-to-month basis or another fixed length of time, you have essentially given up your right to have a say on how your contract will continue. However, if you choose the vacancy option ii, which states the tenant must move out of the residential unit (and have the tenants initial), then you have given yourself a voice in the negotiation. You will get to choose whether the contract will continue on the same terms, different terms, or end if it’s a problem tenant.
Why the Vacancy Clause Matters
This will be extremely important to you as a landlord if market rents have skyrocketed massively like 10-15% in the past year and you want to charge according to market rent. The answer is, you won’t be able to as under the BC Residential Tenancy Act. The BC government only allows you a small percentage of rent increase (usually under 3.5% per year). I’ve seen many people who are under-charging for a tenant who has lived in the unit for 5+ years because their tenants get to ‘continue on a month-to-month basis’ and the landlord has no say in the matter.
The key in using the vacancy clause is to educate your tenant about what this clause means. You can explain to your tenants this this doesn’t necessarily mean they need to move out at the end of the term. It’s more of an opportunity to discuss what worked and what didn’t work during the tenancy period, and to renegotiate the terms or continue with the same terms.
If used correctly, the vacancy clause creates a level playing field for both parties to have a constructive conversation and come to an agreement that everyone can be happy with.
So there you have it. The next time you rent out your investment property in BC, whether it’s in Vancouver, Burnaby, Surrey, Kelowna or even as far as Fort St John, don’t forget to give yourself an “out” with the vacancy clause.
Many of my investment properties are furnished short-term rentals in Vancouver’s Fraser Valley and Kelowna, BC. I like short-term rentals as an investment strategy because I can charge ‘per night’ as opposed to ‘per month.’
For example, when I charge $100.00 to $125.00 per night for a two-bedroom condo, I can average about $3300 in income each month. If I were to rent that same furnished condo to a long-term tenant, I would only be able to charge a maximum of $1600.00 each month. Even if I throw in a 10% vacancy rate, hydro, cable and WIFI at $200/month into the per night calculation, I’m still on top.
With short-term rentals, prospective tenants compare your unit with a hotel, so $125.00 per night for a two-bedroom unit with two bathrooms and full working kitchen would be considered ‘cheap’.
As the name suggests, short-term rental means that you are renting out a space for a set amount of time, usually less than six months. It can be as short as 1 day, 1 week, 1 month, 6 months, or anything in between. The space that you’re renting out can be a bedroom in your house, a condo, or even a little guest house, assuming you have the space to do so. The tenants you attract will depend on what you’re offering and how you market your unit.
If you treat your rental property like a business, you will make a business income. But if you treat it like a hobby, you’ll get a hobby income.
If you’re like me and prefer a minimum 30-day rental period, you should use the BC Residential Tenancy Agreement that you can find online. Everything is stated on the contract including what is included with the rent, what is not, and most importantly, what the damage deposit is.
If you are renting for a shorter period than 30 days, it’s still a good idea to make sure that you have a professional contract similar to the BC Tenancy Agreement. Make sure you take a damage deposit, and list what is included with the rent and the dates of the tenancy.
With so much competition from others trying to capitalize on the phenomenon of short-term rentals in Vancouver and surrounding areas, having a well-written ad is essential. If you’re not a great writer, borrow bits and pieces from marketing brochures of new construction projects in the area or go online to find MLS listings.
Be sure to highlight things like area attractions, building amenities, proximity to transit, the Walkscore of the area (www.walkscore.com), and shopping centres, as well as what is included.
“You will find quality construction and high end finishing here including:
– Top quality stainless steel Frigidaire kitchen appliances
– In-suite stacking washer and dryer
– Modern bathroom with soaker tub, marble countertop, and rain shower head
– Smart TV & sound bar
– Luxurious hotel-quality bedding and linens”
Place your ad on Vancouver Craigslist, AirBnB, and/or VRBO (Vacation Rentals by Owner). If advertising on Craigslist, remember to renew your ad every few days or at least once a week.
Photos and Staging
As the saying goes, “a picture is worth a thousand words” and for any rental property, posting beautiful photos are a must. Whether if it’s short or long-term, decorate the unit tastefully and then take professional photos with good lighting. Oftentimes, people decide whether or not they want to rent from you within seconds of looking at the photos of the unit.
Ensure that your photos are realistic and represent what you are actually offering. Have you ever seen those cheap hotel photos that look amazing but when you arrive it’s actually a run-down property that smells just as bad? You don’t want to have your tenants disappointed.
Research what hotels and other short-term rentals in the area are charging per night. If you are close to a convention centre or stadium, see what conferences and events are going on, and price accordingly. You don’t want to charge too little or too much for your area.
If you follow what the hotels charge AND know what events are going on in your area, that’s where the big bucks can be made. You don’t want to be charging $100 per night when all the hotels are fully booked and charging $400 per night.
The short-term rental business can be seasonal and it’s common to charge higher nightly rates during Spring Break and Summer. You can also charge higher in the Winter if your investment property is close to the ski mountains. It’s important to capitalize on charging higher rents during high tourist seasons to cover vacancies during the low season.
If done correctly, short-term rentals can be quite lucrative with only a minimal amount of work. Once you get the property up and running, you will have enough experience under your belt to know how to market the property, write the contracts and recognize good tenants from the bad ones. Before you know it you have yourself a part-time business!
Good landlord-tenant relations are important for social media ‘reviews & testimonials’ and for referrals. This means that you have to be available for your current tenants by phone in case they have questions or issues with the suite. A partner of mine takes orders for a free case of cold beverage or fresh fruit platter upon the tenant’s check-in, and goes into the suite 15 minutes early to turn up the heat/air conditioning and have soft music playing in the background. It’s those unexpected special touches that will make you memorable.
My advice is to hire a professional (and thorough) cleaning company to help turn over the unit after each tenancy, or clean every other week for longer tenancy periods. Having cleaners in the suite every other week is a good way to make sure your tenants are not doing something they shouldn’t, like smoking, or damaging the unit, so you can address problems quickly. You can charge the tenants a cleaning fee in most cases or write off the expense against your rental income. So why bust your butt trying to do everything yourself to save a buck?
If you are planning to purchase a condo or strata property as your investment, be sure to read the property’s by-laws first for any rental restrictions. If you skip this step and the building does not allow short-term rentals (or even long-term rentals) then it’s not a good investment property. Hiring an investment-focused realtor will eliminate this issue as their job will be to ensure your business strategy is in-line with the types of properties they show you.
With the tips above as your guide, you’ll be able to achieve higher profits while avoiding costly mistakes in the highly competitive short-term rental market.
To your success! Teresa Leung