Attracting The Best Tenants
This Guide Will Help You To Know How To Fill Your Toronto Investment Condo Or Suite In A House With High Quality Tenants And Avoid Problems With Non-Payment Of Rent, Property Damage and Tenants Skipping Before The End Of Their Lease
Getting the right tenant for your rental property is the single difference between a profitable income property and an expensive headache of bounced cheques, illegal activities and property damage.
This doesn’t mean that by choosing to become a landlord you are taking a huge risk. If you do your research into potential tenants properly, you’ll find that renting out your property can be a very rewarding experience. As your property appreciates in value, someone else is paying your mortgage for you!
We’ve compiled a comprehensive how-to guide on finding that perfect tenant so your income property endeavors are as smooth and profitable as possible. If you are considering being a landlord, read on!
Why Do I Need To Find A “Good” Tenant? Can’t I Just Evict The Bad Ones?
In Ontario, the Residential Tenancies Act offers little protection for landlords as it mostly exists to protect the tenant. This means that even if a tenant is not paying their rent on time (or at all), it will be time consuming and costly to have them evicted, all while they’re living in your home or condo and potentially causing property damage.
Even the most obvious reasons that a tenant should be evicted (misrepresenting their income/work situation, conducting illegal activities in the unit and not paying rent) can result in an expensive legal situation that is time-consuming, all the while costing you several months in lost rent.
Even though you are renting out part of your own home, or an investment condo, you will have less say in what’s going on than you may realize. For example, if you stipulate in your lease agreement that no pets are allowed, Ontario laws overrule this and you cannot evict someone for having a pet unless your condominium has specific restrictive pet rules.
This is why it is so important to find that perfect tenant – and they are the rule, not the exception – because solving any problems that come your way in a landlord/tenant relationship can be particularly difficult, expensive, and time-consuming for the landlord.
Put the effort in before you choose your tenant, and your time as a landlord will be smooth sailing.
Part 1: How to Advertise Your Rental Listing
Where to advertise
There are all kinds of places to list your rental for free, and you can also pay for listing space in rental magazines, put up flyers in your neighbourhood or tell your friends and co-workers to get the word out on Facebook.
Don’t be skittish about using online classifieds like Craigslist or Kijiji, but remember that you are in charge of your rental listing and don’t hesitate to delete any inquiries that feel sketchy or throw up red flags for you.
What to say
The process of weeding out bad tenants begins with how you word your listing in the first place. Be sure to mention in your listing that you will be running a credit check on any potential tenants. Anyone who has shaky credit or who has run into problems before will likely not bother to respond to your ad.
When describing your listing, be sure to answer any potential questions such as its location, the rental price and availability date, room sizes, what the view is, the amenities if it’s in a condo building, estimated cost for any extra utilities and whether pets or smoking are allowed, etc. This will help you avoid an avalanche of phone calls or emails asking these same questions over and over.
Finally, be as descriptive as possible about your rental property! Discuss the condition of the property, the laundry and parking situations, which appliances are included in the rental, the parking and public transit situation, nearby neighbourhood features and anything else you can think of.
Don’t hesitate to imply your rental might be snatched up quickly – that will get the response ball rolling!
Don’t forget photos!
Photos will get your listing the kind of attention you want, but make sure the photos are good ones – ideally shot with a wide-angle lens from various positions inside and out! The rental space should be tidy, well-lit and clean.
When using your phone or a normal camera, take the pics horizontally (landscape) so the tenant can have a wide view of each scene.
A sunny day with all of the lights on will help achieve the right kind of photos - try to take pictures of as many areas of the space as you can: the kitchen, bathroom, living area, bedrooms, exterior and backyard, balcony or patio if there is one.
Part 2: The First Tenant Interview
The first impression of any prospective tenant is vital. Does it seem that they’ve put in the effort to appear well-dressed and tidy? Or do they seem messy and unkempt? This can say a lot about what their apartment or living space looks like.
Questions to ask a potential tenant – what’s okay, what’s NOT okay
Landlords are bound by certain laws that dictate what you can ask to decide if you’ll rent to someone, as well as what you cannot ask.
For example, you can ask if someone smokes, why they’re moving, if they have pets, how long they intend to rent, their employment and income situation as well as who will be living in the apartment.
You cannot refuse to rent to someone based on race, disability, religion, marital status, sexual orientation, or the fact that they have children (including small, noisy children or teenagers).
When you choose to rent to someone (or choose not to) the information that leads to this decision needs to come from their income/employment information, credit information and background information (or information from previous landlords).
What to look out for
While your ability to ask all the questions you’d like is somewhat limited, you are free to observe the potential tenants for certain signs that can be major red flags.
These behaviours can indicate that the tenant may not be very respectful towards your property or may not be that perfect tenant:
• Tossing cigarette butts outside of the property
• Attempting to offer lots of cash upfront on the spot in exchange for skipping the credit check
• Not wiping their shoes (or taking them off) before entering the property
• Not having proof of their current address
• Being very eager to accept any rental property regardless of the size, price or availability
Part 3: Conducting A Credit And Background Check
After a successful tenant interview comes the most important step of choosing a tenant for your rental property: the credit and background check. This is a step that is vital to the success of your rental endeavors and should never, ever be skipped.
Obtain a complete rental application from the potential tenant, which should include their employment information as well as signed permission to run a credit check. If they aren’t comfortable giving you their SIN number for the credit check, you can ask them to obtain a credit report for themselves and provide that to you.
Contact the applicant’s employer and verify all of the information they’ve given you with regards to income and length of employment.
Ask for bank statements or paystubs for the last few months from the potential tenant to verify their paycheck, or tax returns to verify income if the applicant is self-employed.
Obtaining a credit check is simpler if you’re a large property management company, but you can hire a company to run it for you for $30 or less. There are also companies that specialize in tenant checks, which will take much of the stress off of you.
You may not be able to ask the tenant to cover the credit bureau cost as a non-refundable fee on your rental application.
Part 4: Questions For The Tenant’s Previous Landlord(s)
A tenant’s previous landlord is one of the best sources of information applicable to your situation. This is a very important reference check and will let you know how you can expect the tenant to behave in the rental and whether they’ll pay their rent on time. An even better one is the landlord BEFORE the current one… sometimes their current landlord is trying really hard to get them out !!
Questions to ask
You should be prepared to ask the landlord the following questions:
• Were there any problems with this tenant?
• Was the tenant unreasonable when it came to demanding repairs?
• Were you able to contact them easily when needed?
• Did they keep their living space clean and tidy?
• Was there any damage to their previous residence when they moved out?
Unfortunately, you may not always be getting the most honest answer out of the tenant’s current landlord – they might be happy to see the tenant go and will say positive things so you’ll rent to them.
Sometimes tenants leave on bad terms due to a shady landlord or other things have gone wrong during the lease that weren’t the tenant’s fault. In other cases, the tenant may not have given you the contact information of a real landlord. Be wary of consistently negative responses or overly enthusiastic and positive ones.
When in doubt, Google the landlord or property management company. Try Googling the tenants themselves – you never know what might come up online.
Check to see if they’re on Facebook – search by their name or their email address – and see what they’re like.
Part 5: Don’t Make These Mistakes!
The following are some of the most common mistakes made by first-time landlords when renting their home, condo or basement.
Being apologetic about strict policies
You’re welcome to set your own policies like charging a fee for late rent. These policies must be mentioned to any tenant upfront and included in your lease agreement, but if a potential tenant appears to be worried about these policies or balks at them, this may be a red flag.
Accepting first- and last-month’s rent in cash upfront
Some tenants may offer large amounts of cash upfront provided you skip a credit or a background check or give them the keys the ‘day after tomorrow’, but it’s just not worth the risk. You can take the cash as their deposit (giving them a receipt) but make your approval pending upon a satisfactory review of their rental application.
Not doing proper checks
Yes, credit checks and background checks can take time and it may take a couple of tries to connect with the person you’re looking for, but this is a vital step that cannot be skipped in the tenant screening process.
Collect your first and last month’s rent in full before turning over the keys. And don’t accept personal cheques! Get it in cash or certified cheque / bank draft form.
I’ve had tenants give the first month’s rent, get their keys and not pay a penny afterwards !!
Remember, it takes several months to evict a tenant plus you’ve lost rent and spent money to hire a professional to represent you at the eviction hearing.
Not making 100% sure that a tenant is leaving when they say they are
I’ve had tenants give notice (sometimes just verbally and sometimes in writing) that they were vacating at the end of their lease. I’ve then gone to the time and expense of advertising the suite and showing it for rent.
Then, just a week before their stated move-out date, they contacted me to say they had decided to stay. Now I’ve got two sets of tenants for one property… NOT a good situation!
The solution… once a tenant has given their notice, have them sign the N11 – Agreement To Terminate Tenancy form whereby they irrevocable agree to vacate on the proper date.
They may still try to stay but the Rental Tribunal will very quickly give you approval for an eviction. Without that form being signed, you may be subjected to several months of hassle getting the tenant out.
Part 6: Creating A Rental Lease Agreement
Your rental lease agreement is the lifeblood of your rental income. It sets all of the terms for the lease with the tenant and will serve to protect you should the need arise.
What is allowed AND what is NOT allowed in the unit must be explicitly stated in the rental agreement, including:
Smoking. Is it allowed in the rental, outside on the patio, or not at all?
Pets. Do you allow cats and dogs? Just cats? What about hamsters or reptiles? Ontario laws will override this anyway if pets are not prohibited in certain condo buildings, but most pet-owning tenants will want a pet-friendly environment and don’t want to cause problems with you.
Due dates. When is rent due each month? Include information about late rent fee policies if you have them.
Visitors. Is there a maximum number of visitors you’ll allow, and what happens if a visitor decides to move in?
How much notice do you expect when your tenant decides to leave (the Ontario minimum is 60 days) and are there penalties for leaving early?
Do you want the tenant to be responsible for getting a replacement for themselves when they leave – with your approval of course?
What appliances are included in the lease, if any?
What utilities are the landlord responsible for, and what utilities are the tenant responsible for?
If the lease is not renewed, what happens? Most times in Ontario the tenant reverts to a month-to-month lease. Will there be a rental increase at that time?
How much notice will you have to give when entering the rental if you want to sell the property OR if you’re getting a new tenant? Also mention that you are allowed to enter without notice in case of emergency.
If you are concerned about water damage, you can forbid items like large fish tanks and water beds in the lease agreement.
What alterations are allowed? Can the tenant change the locks, paint the unit or hang pictures?
It’s a good idea to mandate that the tenant obtain property loss and liability insurance in order to rent from you… AND supply you with a copy of that tenant insurance policy.
A Final Thought – Outsourcing As A Landlord
Being a landlord and finding that perfect tenant is definitely a “hands-on” experience. It will require a little money, a lot of time and a significant amount of due diligence.
Landlords need to know everything there is to know about the Residential Tenancies Act and will save quite a bit of money if they’re generally handy and can deal with problems as they arise without having to call a contractor, electrician or plumber.
In many cases, landlords find that hiring a property management company and outsourcing their responsibilities can be a huge weight off their shoulders, and it’s something that you may want to consider if you’re a first-time landlord or busy working in your own profession.
But did you know you could also outsource your search for the perfect tenant?
Toronto’s Real Estate Team and our Find-A-Tenant Program can complete background, reference and credit checks, arrange for showings of your rental space and use their expertise (and experience with tenants good and bad) to bring the perfect tenant right to your (rental) door!