User’s Manual For Rental Property
Want to avoid common mistakes made by new property owners?
There’s now a user’s guide! Introducing a new Online Property Management Course for New Real Estate Investors
When you buy a washing machine or an air-conditioning unit, there’s always an instruction manual in the box or available online. Same goes for a new- or used car. When I want to know how to jump-start my car or change a tire, I take the user’s guide out of the glove box.
How many times have I wished that my buildings had a similar booklets!
Sadly, investment properties don’t come with a manual. That’s why I created my online course:
Affordable Online Real Estate Course
Few quality and affordable resources exist for small landlords to educate themselves. For years I wished that after helping a new investor acquire a property, I could refer them somewhere. I wanted a resource to help fledgling landlords know what to do with their new investment.
That’s why I created “Winning at Property Management in Quebec”. My course takes the guess-work out of property management especially in Quebec, where tenancy laws are some of the most tenant-friendly in the country. There’s now a user’s guide for new landlords in Quebec.
What Do I Need to Know as a New Landlord ?
My course aims to cover keys points in investment property in Quebec. My goal is to help you learn how to effectively set up your rental properties from top to bottom. I want you equip you to pursue the ultimate goal of real estate investing: solid, trouble-free cash flow.
You will learn how to:
- Maximize building revenues
- Understand and lower building expenses
- Effectively screen tenants to avoid problems before they happen
- Structure leases to your advantage
- Deal with typical problem-situations
- Create a renovation & maintenance game-plan to protect your investment
- Implement time-saving strategies that minimize headaches and risks
Finally, a bonus section will give you tips on Time Management in the real estate business.
Want to learn more?
Check out the course page here:
Charity does not decrease wealth
I’ve been managing properties in the Montreal district of Hochelaga-Maisonneuve for over fifteen years now. The district has been good both to me as an investor, and to my clients who own rental units in the area. Property values have appreciated and gentrification has raised our rents.
These changes are not without their consequences, especially for poorer residents in the area. Hochelaga has become more diverse as higher-income tenants have begun to move in, and the amount of affordable housing has decreased.
Many of Hochelaga’s low-income residents have not benefited over the same time-period. 32% of households were considered low-income by the latest Canadian census. Hochelaga-Maisonneuve is also one of the districts with the highest rate of elementary school students living in poverty.
A Complex Issue
I’ll be honest: I don’t have a magic-bullet solution to propose to these problems.
Real estate investors have done well in Hochelaga. The area is close to downtown. As rents in the downtown core have appreciated, the rental market has changed in HoMa. Foreign- and local students have moved in. So have young families and young professionals fleeing the now-expensive areas of the Plateau and Rosemont. Investors have been all to happy to accommodate them: renovating crumbling properties that were in need of some love and increasing the rent accordingly.
These profits haven’t been shared with many of the local residents. Gentrification has changed the types of stores that serve the area: fancy and expensive cafés and local fruit markets have replaced pawn- and discount shops. Low income tenants now have less places to shop. The number of affordable apartments is decreasing every year. Given the choice, landlords move out low-income residents when they can, raising their profits in the process and avoiding many social issues common with very low-income tenants.
It’s not easy to know what to do with this if you want to have a social conscience and make money in real estate.
Is the solution to somehow stop investing in Ho-Ma? To impose tighter rent control? This will discourage investors and perhaps gentrification, but it will have the same effect as rent control more generally in Quebec. The Regie’s policies for raising rent creates disincentive for property-owners to invest in maintaining their units. As a real estate professional working in Quebec, I can tell you this unintended consequence of rent-control is ubiquitous. No owner will invest to redo a unit to see a 10$ increase in rent. It makes no economic sense. The result is our buildings crumble, and low-income tenants live in ramshackle and decaying apartments that no landlord will invest to fix.
My gut instinct would be to say we need more social housing and perhaps higher municipal taxes to help finance them. This might increase the overall standard of housing available and benefit everyone – investors and lower-income families – alike. But I’m no sociologist.
Give Back to Ho-Ma’s Low-Income Families
Just because we don’t have a magic bullet doesn’t mean we should do nothing. That’s analysis-paralysis. Politics and large-scale, top-down solutions are important, but we don’t have to stand by while the politicians create them. There are simple and politically uncomplicated ways to make a difference. This holiday season, we’ve chosen to support CAP St-Barnabé, a charity organization that aims to fight poverty and increase the standard of living of theHo-Ma’s low-income residents. CAP St-Barnabé has a year-round food bank and special initiatives for the holiday season.
You can send cash donations here: https://www.canadahelps.org/fr/organismesdebienfaisance/carrefour-dalimentation-et-de-partage-st-barnabe-inc/
This holiday season we’ve set up donation-points for non-perishable food items that will go to their food bank. You can find the drop-off boxes at our two locations before December 13th :
3835, Wellington Street (Verdun) & 3965, Saint-Catherine Est (Hochelaga-Maisonneuve) during office hours.
Just find these boxes & drop off your donations.
Hire a professional to rent or manage your properties?
Read what Terrie had to say to the French-language newspaper La Presse
Terrie Schauer is a real estate coach, speaker and author. Her domain of expertise: rental properties. She’s also a real estate broker and the owner of a property management agency. MyRoom Gestion manages around one hundred units in Montreal.
Most of the work associated with renting units is done by an administrative assistant. The person posts Ads, screens tenants on the phone and coordinates visits. “I only sign leases,” says the owner of the agency.
It’s possible to advertise on a variety of sites, but in Montreal, Kijiji works best, says Terrie Schauer.
“An Ad posted on Kijiji in the morning ends up on page 24 by lunch. It’s enough to make you want to pull your hair out if you don’t know what you’re doing.”
Answering the calls and emails generated an Ad is also demanding. First you have to make sure the caller actually read the whole advertisement, and that the unit matches their needs. Next, you have to question prospective tenants about their employment- and living situations.
Knowing the rental market helps maximize the price you’ll get for your units. “We track the stats of all the units we advertise,” explains Terrie Schauer. “If one unit is getting less clicks, we can reduce the price or take better photos. Sometimes a price adjustment of 15$ – 20$ makes a difference between no calls and twenty leads.”
Once someone applies, the agency does a full background check: credit score, criminal history, references from the current landlord and employer, and lastly, priors at the rental board (Régie du logement). In some cases, the company also runs similar checks on co-signers, if the prospective tenant is a student or a new immigrant with no credit history.
This service costs one month’s rent, whether the tenant stays in the unit for a year or more. MyRoom Gestion can also offer a full management service for a fee of 7 % of gross rent.
Is this advantageous for the landlord? If he or she lives outside the country or absolutely doesn’t want to deal with bad tenants, certainly it is.
It can even make financial sense. With her knowledge of the rental market, Terrie Schauer often manages to rent units for more money than if the owner handled the rental him- or herself. “If I can get you 10 % more on your gross rent and my services cost 7 %, you win without lifting a finger!”
Read the original article:
Good tenants are the best way to protect your investment! Choose wisely
Picking good tenants is almost as important as getting a good deal on a building. Quality tenants will help keep your rental building profitable. They protect your investment and determine the quality of your life as a landlord. All the more reason to choose carefully!
Here are some best practices for stream-lining your tenant selection process.
Without a doubt, the most common question I get asked from students and newbie investors is: “How do I deal with problem-tenants?”
It’s a question I usually answer with a question.
The real conundrum should be: “Why did you rent to problem tenants?”
To avoid renting to problem-people, you need a steam-lined and thorough tenant screening. Your tenants determine the quality of your life as a landlord. So listen carefully! And don’t leave things to chance. This article is the first in a series of 4 that will show you how to run an effective tenant-selection operation.
Advertise in the Right Place
The best way to set up a winning tenant-selection process is to have the biggest possible pool of candidates to choose from. You do this with effective advertising. Onlineis the way to go these days. Forget about newspaper Ads!
Pick the Right Platform
The first thing to do is to determine which platform works best in your area. In Montreal, we use www.kijiji.ca : 98% of our rental are concluded this way. Other platforms are Craigslist (which also attracts a lot of scammers) and MLS (www.realtor.com). Usually we only use them because a client asks us to. They’re anyway redundant with kijiji.ca in our area.
For MLS, you need an agent to list a property. A professional rental service will cost you one-month’s rent, so you may want to think twice before doing this. In my experience, MLS works best for unique- or very high-end properties.
Facebook posts can yield some leads, but in my experience not very good ones.
A good way to test which platform works is to ask a few people who’ve recently been in the rental market. They’ll know which platforms yield the best results.
Market Your Unit Properly
Unit marketing basics are: awesome photos, the right price, and a clear, truthful description. These are the keys to effective online marketing for rental units. They’re also really straight-forward.
My advice on photos: pay the 100$ it costs to get a professional to photograph the unit when it is clean and presentable. These photos will serve as a marketing tool for the next 5 to 10 years. They can also easily add 50$-100$ on the value of the rent you can demand. In our high-traffic, saturated media environment, you really can’t attract decent attention without awesome pics.
Rent is a very price-sensitive. 50$ up or down can make an huge difference. Most tenants shop on a budget.
A tip: start your advertising early. This lets you be optimistic and a bit greedy 🙂 Always post a higher rent amount that you think your unit is worth. If after a week or two you’re not satisfied with the number of responses, lower the price. It’s the best way to make sure you’re not leaving money on the table.
Another tip: if your unit isn’t renting, consider dropping the price by 50$-100$. When you weigh the alternatives with your calculator: major renovations, or having the unit empty for a month, you’ll see how cost-effective it is to adjust your rent downwards. (50$ x 12 months = 600$). Depending on your unit price, dropping the rent by 50$ will probably make more sense than having the unit empty.
Phone Screening Script
Don’t waste time on useless visits. Don’t get into silly conflicts or interminable discussions with bad candidates.
I don’t get off my ass to open a unit unless I’m convinced the people can:
- afford the place
- speak to me in a courteous and efficient way
- tell me a coherent story about who they are and why they want to rent the place
I don’t want to waste my time running back and forth to open doors. And – perhaps more importantly – I don’t want to have fights when I refuse unqualified potential tenants because I let them see a place they fell in love with.
The gate-keeper to useless door-opening is a good phone-screening script. You want to find out:
- who will live in the unit (how many people | are all adults on the lease) ? is the number of occupants appropriate to the size of the place ?)
- do they have good credit ? a history at the rental board ? references from a previous landlord ?
- what type of income do they have (does everyone work? | are Mum & Dad paying the rent? | are they on social assistance?)
- why are they moving (relocation | divorce | new baby | unhappy with their last place) ?
If any of these answers make you uncomfortable, take down their number and tell them you’ll return a call at a later time. In my experience, it’s a better alternative than the shouting match that can ensure from refusing an application live on the phone 🙂
Set Up A Winning Visit
Sounds self-evident, right? Here are a few things to watch out for. When you’re planning on showing a unit, be aware of what things can turn candidates off a place.
- bad smells (buy a candle | show up 5 minutes early and open the windows)
- messy tenants (schedule visits with lots of notice & explain to the tenants that the faster they clean up, the faster you’ll stop your visits)
- existing tenants who’ve caused problems and who may run off their mouths to new candidates (plan visits when the tenants are not home)
- big dogs (some people don’t like dogs & they can have a bad visiting experience if one lives in the unit. Ask the tenants to go for a walk while you show the place)
Have a Thorough Application Form
- request social insurance number & bank account info; if the tenant defaults, you won’t have to hire a detective to get this info
- get a signed authorization to run a credit check
- request contact info of the previous landlord
- ask for a guarantor if the candidate has questionable credit, is from out of town, or doesn’t pay the rent him/herself
- request employment information
- take a small deposit while you do your background check. (You can deduct this from the first rent cheque, or else refund it if you refuse). A small amount of money makes the candidates more likely to commit and not waste your time running a check while they decide to rent elsewhere.
Do check all these points thoroughly!! Don’t forgo a credit check because it’s costly or complicated to obtain one. In my experience, credit history is the single best predictor of what kind of person you’re dealing with.
- let the candidates leave out information
- not give you the deposit
- get away with anything you wouldn’t want to accept later on in your relationship; the application process is your time to set the tone
Trust Your Gut
As a candidate jumps through different hoops and you have multiple interactions, pay attention to what your gut says.
- Are your requests handled in a courteous and timely manner?
- Is this the kind of person you want to deal with regularly for the next few years?
- Do they quickly return phone calls or force you to make multiple requests for simple things?
Your tenants are your quality of life. If there are behavioral red-flags at the beginning, think twice. Do you really want someone harassing you every 5 minutes with silly requests? Not returning your calls when you have urgent requests? Being unpleasant or incoherent on the phone?
A final word: tenant selection is like dating. If it’s complicated from the start, maybe it’s not meant to be 🙂
Not All Credit Checks Are Created Equal! Protect Your Credit Score
Here’s How to Check Your Credit Without Hurting It
Did you know that too many credit checks can lower your overall credit score? If you’re applying for a phone, a mortgage or an apartment, there are a few things you can do to protect your credit in the process.
Hard & Soft Credit Checks
The first thing to understand is that not all credit checks are created equal. There are “hard” and “soft” credit checks. A “hard” credit check affects your score negatively, docking somewhere around 5 points from your overall score (with Equifax, for example). The more “hard” credit checks you do in a small time-window, the bigger the amount of penalty points. The idea is that someone who does lots of credit applications in a short time is desperate for credit. As a result, you are penalized for too many hits to your credit in a short time. The credit rating agencies do not care that you may be shopping around for a mortgage. Because they don’t take this into consideration, you need to avoid to many “hard” hits to your credit score.
“Soft” credit checks, on the other hand, do not affect your score.
How can you know the difference?
Most third-party credit checks are “hard”. This means, when a landlord pulls your credit it will affect your score. Same thing for a credit card-, cellphone-, or mortgage application. If you sign a consent form for a third-party to check your credit, most likely it will have a negative impact on your score.
Some third-party systems are able to do “soft” credit checks, but the information provided in these checks is less thorough. This is why most companies prefer “hard” checks. Also, most lenders, landlords and phone company employees have no idea how the credit checking system actually works. They simply don’t know what their checking up on you is having a negative effect on your rating.
So, how can you be sure what type of check is being run?
How Can You Protect Yourself & Your Credit?
- Make sure you ask the third-party to provide some kind of documentation or guarantee as to what type of check they’re running (hard or soft). If they’re running a hard check, they should be able to tell you how many points you’ll lose as a result.
- If you’re shopping around for a mortgage, loan or apartment, make sure you get the landlord, banker or broker to tell you at what point they will hit your credit. Lenders can give you a quote without running a credit check. As you’re shopping around, make sure you do comparison shopping without a credit hit each time.
- Check your own credit and disclose it to the interested party. In Canada, a person is allowed to check their own credit without affecting their overall score. TransUnion and Equifax are the two credit rating agencies and they will provide you access to your own credit report for a fee. This helps when you want to check your credit rating for your own information. Most lenders, however, won’t accept a report you pulled yourself. (Photoshop anyone?)
- This is where third-party sites like http://www.backcheck.net come it. They allow a prospective tenant to request (and pay for) their own credit report, and then share it with a landlord. See the subtlety here? You’re requesting your score, so there’s no negative impact. The great thing about this is that both parties benefit: the landlord gets a third-part copy of your credit report (and so doesn’t have to worry that you doctored it with Photoshop), and you get to protect your score. The downside: it’ll cost you about 70$.
Landlords, Brokers & Investors
Landlords, as a courtesy to your tenants, make sure you know what kind of credit check you’re running and inform the applicant. At my firm, we now give our tenants a choice of which type of check they want. We can run our standard “hard” check for free as part of our application process.
If the tenant wishes to use a “soft” check instead, we refer them to http://www.backcheck.net/tenant-screening/residential/tenant-share.html and require them to assume the cost. Third-party sites like www.backcheck.net are available across the US and Canada. All a landlord needs to do is fill in his or her email, and then send the application to the prospective tenant. He or she then receives a copy of the report in their email inbox.
Tenants & Borrowers
Be warned: lenders and landlords are pretty ignorant about the kinds of credit checks they run.
I was! This issue came to my attention because an investor-client of mine did too many simultaneous mortgage applications and almost wasn’t able to qualify for financing because his credit score tanked! I did some research to understand how credit checking works and figured out how to help others avoid this situation in the future.
As a result, my property management company started offering a third-party “soft” credit check option very recently. Just because a lender or a landlord is a professional, doesn’t mean they understand the ins and outs of the credit checks they are running!
So, investor, tenant and buyer: as you go through various application processes, make sure whoever is handling your credit knows what they are doing. If they sound shaky, refer them to this article 🙂
Maybe they’ll learn something!
Want to invest in rental property in Montreal in 2018? Don’t miss this Meet-Up!
This workshop will show basic financial guidelines for identifying profitable investments. Terrie will share her insider’s market analysis of which areas are profitable, as well as price-points for making profitable investments (condos, small plexes).
Join us! Don’t forget to bring business cards and your notebook.