Finding good tenants
When we’ve spoken to people in the past about their experiences with real estate investing we get one of 3 answers usually. First, they have no experience. Second, they have done a few smaller deals and currently have tenants. Third, they tried the rental thing and had a horrible experience with tenants and decided to get out of the game.
We’ve had our fair share of bad experiences with tenants - breeding of large Malamute dogs, tattoo shop running out of the basement, rat problems from uncleanliness, severe damage from carelessness (ruined flooring, drywall holes), kitchen fire, nuisance calls, flooding from misuse, bylaw notifications etc. If we haven’t scared you off yet and you’re still interested in owning rental properties we’ve got a few tips to share!
We have had 8 rental properties which made up 12 rental units over the span of 5 years. During this time we have learned a few things about renting. We mainly use kijiji but recently have started using Facebook marketplace to advertise our rentals. We’ve never felt the need to pay for advertising our listings and have never had a rental sit empty.
The main things to keep in mind when getting ready to find a tenant include the following:
You HAVE to use the standard Ontario lease agreement. You cannot create your own lease or make up you’re own rules. For example, you cannot refuse to rent to someone because they have pets. You cannot ask for first and last months rent or a security deposit on top of last months rent. Legally, you can only ask for last months rent up front.
DO ask for and follow up on past landlords and current employers. When speaking with past landlords ask about payment history/reliability, damage accrued, “would you rent to them again”. It is illegal for the landlord to lie to you so this can be a good opportunity to get information. When speaking with their employer you want to find out whether they’re currently employed and how much they make.
A lot of landlords ask for credit checks. We do as well but we don’t place extreme importance on this. We’ve had A++ tenants who had poor credit scores so this is not always a great indicator. In fact our top two tenants both had bad credit history but we would rent to them again happily.
One of our favourite ways to scope out a tenant is to meet them at their current home to review the lease agreement. This way you can see what kind of condition they keep their home in and if they’ll take good care of your property.
Meeting in person a few times can be helpful. Try and get into conversation with them to learn about them, what is important to them, and what their lifestyle is like. This is where we ask about pets, smoking, how many people will be living in the home, how many vehicles they have, and how they make money. When inquiring about pets we clarify that any damage caused by the animal will be the responsibility and cost of the tenant.
Even when taking all of this into consideration there is no guarantee you will get tenants who will take good care of your property. This is a part of renting and if you want to see it through it is best to accept that at some point you will have to deal with a problem tenant. This part of the investment is the most important as a bad tenant can significantly reduce your ROI and strain your patience. On the flip side, having an A+ tenant in a newly flipped rental property can provide a great ROI and make you feel like a genius.
Want a quick cheat sheet for your tenant screening? Click Here
See you on the flip side,
