Landlord 101: No such thing as Easy Street
What you need to consider before becoming a landlord in B.C., including policies and procedures, fair market rents, and how to find the right situation for you.
So you want to become a landlord: do you know what you’re getting yourself into?
“It’s a lot of work: showings, screening tenants, calling references, doing credit checks, coordinating move-ins, booking elevators (in condo and apartment buildings), dealing with complaints or fines from stratas,” explains David Hutchinson, a veteran realtor, landlord and property manager. “Then there’s keeping up with paperwork and repairs and maintenance – there’s no such thing as ‘set it and forget it’ for being a landlord.”
As with many endeavours, the difficulty may lie in the details. There are rules that govern what terms can be put in a lease, how often a landlord can inspect a property, and when rent increases, if any, are allowed. Reading the British Columbia Residential Tenancy Act (RTA) will give you a good foundation for these details to ensure that you, as a landlord, are following the law and current policies. Check the government’s website for policy changes. Read up again before signing a lease. Read up again before extending or changing the terms of a lease, issuing a notice of rent increase or issuing a notice of eviction. If you need to apply for dispute resolution, read everything again.
Hutchinson has spent 15 years as a realtor and 25 years as a landlord for his own properties. Five years ago, he began managing properties for others. (He is not currently taking any new property management clients.) Over the years, he’s figured out what works best to find the right tenants.
It begins with doing your research on what amount of rent to charge for your property. Craigslist is a good starting point to get a sense of what others are asking for similar homes, but the figures there do not necessarily reflect what people are actually getting. It may be that you start with one figure, and then drop it slightly if you’re not getting the right level of interest. Hutchinson says it’s actually also a good idea to rent at slightly below market levels; you tend to get longer-term tenants who take better care of the homes.
He does not tend to do furnished rentals – that market can run hot or cold – and hasn’t done any Airbnb rentals. He also budgets for up to four months of vacancy per year. That means funds are available for repairs as needed; doing repairs properly and quickly will keep a home in better shape in the long run, and keep a good tenant around. Budgeting for vacancy also makes it possible to wait a little for the best tenant, instead of just signing a lease with the first person ready to put down a deposit.
Hutchinson says picking the right tenant is crucial, and first impressions absolutely count.
“That first point of contact, whether it’s a phone call or an email, that’s an important way to get a sense of what someone is like,” he says. “If they’re being pushy already – trying to get you to give them the place right away even before seeing it, that can mean they’ll be difficult to deal with as tenants.”
Hutchinson likes to treat property rentals the same way as he would the sale of a home; he runs showings or open houses in a way that lets him chat with each person, and to answer questions about the property. It’s important to know details about the home and neighbourhood amenities.
For applications, he’ll ask for proof of capacity to pay rent, a last known address, and three references. Many landlords like to do a credit check in order to move ahead with the process of renting out a home. However, if they are considering several applicants, it can get expensive. Conversely, if a tenant is applying for several different places, it can affect his or her credit score negatively to have a credit check run repeatedly on the file.
Hutchinson has come up with a solution that is more efficient for everyone. He suggests to a tenant that he or she get their own credit check done, and if that person is the successful applicant, he will reimburse the fee involved. The tenant also then has the current credit check available for any other applications he or she may be pursuing.
When it comes time to prepare a lease, it’s useful to use the official forms available through a government website as a starting point. You can put in more terms in an addendum – Hutchinson includes making a tenant responsible for paying any fines or penalties levied by a strata for poor behaviour – but you have to make sure the addendum terms still work within the confines of the RTA. Pets and cannabis can be points of contention, especially since the rules around growing cannabis at home can affect the ability of a landlord to get home insurance. A landlord should also consider what type of home is being rented (e.g., a single-family home or a laneway versus an apartment) in order to incorporate terms around repairs and maintenance, and who (landlord or tenant) bears responsibility for what.
If all of this sounds too much for you, but you’re still interested in becoming a landlord, consider the possibility of outsourcing. Some companies will find tenants for you for a fee, while others will manage the property for you. A standard property-management contract costs one-half month’s rent and five per cent per month for a year, although terms can vary based on the level of service.
“You don’t have the tenant calling you when there’s a burnt-out light bulb, or neighbours calling about noise – it gives you a little distance,” says Hutchinson. “It’s a business expense that will pay off, because a good property manager will get you a better tenant and probably get you a better rent because they know the market.”
Hiring a property manager does also involve first impressions, including how quickly they respond to inquiries and how much they know about the industry.