Tag Archive for: real estate

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Covid-19 for Landlords: Property Management in the 2020 Corona Virus Crisis

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Why Corona Virus Doesn’t Have to Rhyme with Rental Crisis

If you haven’t read the Spencer Johnson’s famous book Who Moved My Cheese, now may be a good time. It’s short. Don’t worry, I’ll wait.

Go read it and then come back here 🙂

In one line, Johnson’s point is this. We have a tendency to become over-reliant on using the same strategies for getting our “cheese” (whatever that might mean, metaphorically, think gangtser rap $$$$). When someone or something moves our “cheese”, we panic, become angry, depressed, despondent, hungry, stressed, confused, you name it! When the most effective reaction might be to zoom out (using ZOOM right now maybe), and reconsider our habits in light of new circumstances.

I invite landlords, real estate professionals or anyone else, to zoom out and consider what might be happening to our cheese.

 

The New Normal

Situations in Quebec and across the globe are evolving rapidly. Depending on what sources you listen to – the IMF, our politicians, economists proclaiming the start of the next Great Depression – it’s hard to know which way the economic ball is going to bounce. Will Canada be insulated by early curve-flattening and smart financial stimulus packages, or are we really the tip of the tail of a very large macro-economic dog?

There is no shortage of opinions, and so it’s hard to come up with mental- and economic models that can guide our behavior.

This is perhaps the biggest challenge right now. We have no proper models on which to base our decisions.

 

Mindful Landlording Right Now

If there’s a lot of uncertainty around, let’s look at some of the things we do know. Perhaps if we focus on concrete, local and immediate problems (where is my cheese today), we can navigate our way, and make sure that at least we remain poised for the next few months.

That’s what I tried to do in this interview with the Real Estate Investor’s Club last week. My goal was to offer some concrete and practical ways of addressing the current situation with respect to issue that face landlords, property managers and investors right now.

 

Concrete Problems, Concrete Solutions: Covid-19 for Landlords

So, what are some of the issues landlords and Real Estate Investors are facing right now?

Rent Payment

Lay-offs, confinement, and business closures have posed serious financial problems for many residential tenants, many of who live paycheck-to-paycheck. In April, around 25% of the residential- and commercial tenants managed by my agency reached out to discuss some kind of rent relief.

Our approach was the following:

  • First, to sympathize (in the case where the tenant has always been responsible with payment in the past) and to turn things around. Many tenants called in asking: “What is your policy for rent this month?” To this, we answered : “How would you like to pay your rent this month…?” What resulted, in all but 5% of cases, were payment plans. Many tenants are now receiving government assistance. If a large lump-sum up front is difficult, we allowed them to design their own payment plans (paying by the week for example, instead of monthly), with the proviso that the total rent due needs to be in before the 21st (the magical Regie non-payment date). With this strategy, we’ve reduced out default rate to about 8%, when pre-crisis we were at 5%.

Help ! The Regie du Logement is Closed

Closure of the Regie and a halt to evictions, while understandable, has been trumpeted from the rooftops very loudly by both our provincial and federal politicians (thanks Justin and Francois!). This is a serious problem, because effectively there is no more stick with which to create consequences for non-payments, even as we may have doubts about whether tenants are using the crisis as an excuse.

What to do?

  •  For those tenants who have not reached out to make payment plans, we’re on a “business as usual” policy. The rental board might have halted hearings and evictions, but the Regie’s online services to open non-payment files are working. So are the bailiffs, so is Canada Post, and so are the email services that allow you to serve official notices. (Ever hear of Pronotif ? It’s an online service that allows you to serve notice by email). In effect, we’ve explained to our defaulting tenants that they’re just delaying the inevitable. When the rental board does reopen, judges (I predict) will not look kindly on those who simply stopped paying their rent with no explanations, and who refused to open a dialogue with their landlords.
  • Consequences, I predict, will be delayed rather than erased. Unless banks and the federal and provincials governments begin talking about mortgage forgiveness instead of delays, I don’t see how missing rent will simply be “forgiven” as we return to whatever the new normal becomes.

What About July 1st?

In Quebec, we have a fairly serious up-coming issue. The Guardian estimates that about 10% of Montrealers move every July 1st. (The rate is still high, but probably not quite as high in the rest of the province). In April, landlords and property managers in the province are usually renting their soon-to-be-vacant units, just as tenants are out visiting looking for their new homes. The covid crisis has thrown a serious wrench into things. Tenants (rightly) are leary of allowing strangers into their homes. The Real Estate Board (OACIQ) has officially ordered brokers to halt visits. Do rental visits constitute an essential service? Francois Legault has decided for the moment that no, they don’t.

What to do?

  • First, we contacted our non-renewing tenants to propose they extend their leases until September 1st. Basically, this takes the pressure off. We don’t have to show units and they don’t have to visit. Problem displaced if not solved.
  • Some landlords have begun renting with virtual visits. Personally I don’t like doing this. I’ve had problems with a high percentage (over 50%) of units rented this way in the past. Our agency has rented to international students and arriving immigrants based on Skype visits before. Very often, something about the unit displeases them very quickly and they agitate to break their leases.
  • Wait. For now, there may not be a need to panic. As our politicians eye re-opening segments of the economy in the coming weeks, we will have to see what edicts will come down for the 10% of Quebeccers who usually move in July. My guess is that Legault and co. are waiting to see if we can all go back to business as usual in the next month, which would moot the issue of freezing all moves in July.

Imperfect Action is Better than Perfect Inaction

So said Harry Truman. I’m inclined to agree. As time moves on, those who will weather this storm best are those who will act.  Better to be pro-active about where the cheese is now, rather than sitting around like a doe in the headlights watching the news.

My advice: read about past financial crises. Understand the dynamics of pandemics (click the link to see my favorite book on the topic, Spillover). Learn about past Real Estate- and stock cycles. Plan your actions carefully as a function of the data you have now. No one will make 100% perfect decisions at the moment. There is still too much we don’t know, and our mental- and economic models need to catch up. This will take time and more data.

A crisis is no time for perfectionism. It is time for considered action.

It is time to be our best selves right now, on a dark and uncertain day, because the day is dark and uncertain.

Quebec moves on July 1stPhoto by Matthew Hamilton on Unsplash

Why Quebec Moves on July 1st

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Factoid : Most Quebec leases end on June 30th, making July 1st “Moving Day” for the whole the province.

Read more

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Thinking of Investing? Learn How to Landlord Like A Pro

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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:

Winning at Property Management in Quebec

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:

https://www.clubimmobilier.ca/en/activites/real-estate-training/winning-at-property-management-in-quebec/

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Want to Invest in Real Estate? Not Sure How? Get Started in 5 Easy Steps

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An Antidote to Confusion About Where to Start

Lao Tzu wrote: “The journey of 1000 miles begins with a single step.”

Ah, but which step? There’s the rub! Start with the wrong one, and you may travel 1000 miles in the wrong direction!

It’s precisely this fear that kills dreams in their infancy. Don’t let this confusion end your real estate dreams!

Here are some really simple steps you can take to begin your journey.

Educate Yourself

This doesn’t mean talking about your project to Uncle So-and-So who once owned a duplex, or Aunt Thingamajig who wrote her Real Estate exam, unless they were successful at what they did in a way you’d want to repeat. Seek out resources who have a proven track record. Before launching a networking offensive, either read some books, watch some videos, or take a cheap online course. With a base level of knowledge about Real Estate Investment strategies you’ll have more useful conversations.

As you branch out and start shaking hands and making calls, you’ll be happy that you took the time to understand some basic concepts and terminology.

One caveat : expensive Real Estate courses, while often of some value, sell information and coaching at a very, very high mark-up. If you’re willing to apply a little discipline and do some work on your own, you can easily educate yourself without signing five-figure cheques or paying thousands of dollars for mentorship or classes. Why spend your down-payment money on Real Estate classes when the information is available at a very low cost? Try these resources first.

Where to seek affordable education?

  • You can check out the Recommended Readings on my website. Pay particular attention to the “Real Estate Investing” section, where you will find good “starter” books.
  • Consult online education platforms like Teachable or Udemy. Both have Real Estate sections. Online courses sell for a either tens- or a few hundreds of dollars. They’re easy to follow and are usually consumed on demand. You can go through the material at your own pace, in the comfort of home, and even follow a few different subjects that outline the major strategies for making money in Real Estate (Flipping, Buy-and-Hold etc.)
  • Organizations like the Real Estate Investors Club sell in-person/classroom or webinar training for a few hundred dollars.

 

You really shouldn’t pay any more that this.

Book An Appointment With a Banker or Mortgage Broker

Your mortgage banker or broker is a bit like a general practitioner in medicine. He or she will be able to give you a general bill of your financial health. Is your credit any good? What’s your borrowing capacity based on your current revenues? Very few of us know the answers to these questions, especially when we start out in the real estate game. Before defining your project, it may be a good idea to have a professional analyze your file.

Even if you’re sure you won’t qualify right now, it’s best to know what you need to do in the future in order to obtain financing. This will allow you to build a plan to get there. There are a million strategies! But, like that fateful visit to the doctor, if you don’t know where you stand, it’s very hard to move forward. Don’t let fear of bad news stop you! You need to know your starting position in order to plan your journey.

Bad credit? No down-payment money or insufficient revenues for conventional financing?

Okay. In this case, AFTER you’ve spoken to a conventional financing person and they’ve told you what you need to do to become creditworthy, go back to Step 1. There are a ton of resources out there to learn what’s called “Creative Finance”.

Network With Other Investors & Professionals

Remember what I said about Uncle So-and-So and Aunt Thingamajig?

Talking to them about their Real Estate debacles is NOT networking. If you want to succeed at something, learn from someone who is where you want to be.

I’ll repeat myself because this is really important: Take advice only from people who stand where you want to be! If you don’t yet know such people, no problem! It’s time to leave the house and start building your network.

You can join my Meet-Up to attend networking events in the Montreal area. The Real Estate Investors Club also hosts monthly networking events.

If you want to learn more about how to network effectively, check out my blog article on How to network effectively.

You could also check out anything by author Ivan Misner, founder of BNI (Buisness Networking International).

Find A Mentor

A few months ago, a woman approached me at one of my workshops. She offered to take me to lunch.

“I want to learn from you,” she told me. Naturally I was flattered and I accepted. We went to lunch, and as we were chatting, she had another interesting offer.

“Let me work for you for free for some months,” she proposed. “I’ll do anything, I just want to learn the business.”

What do you think I said?

This situation is now a total win-win. Instead of paying thousands of dollars for private mentorship, my new intern has access to me 24/7. Her boots are on the ground meeting tenants, seeing construction problems, talking to every real estate professional around: contractors, notaries, mortgage people – everyone who is involved in my business.

Do you think I’ll give her free advice on her own investment decisions now? Of course!

Not only is she learning for free and building her own network in an organized way, she works maybe two evenings a week and an hour or two on the weekend. If she was taking a (paid) class, she’d have to devote the same time and IN ADDITION pay.

You’d be surprised how accessible successful- and knowledgeable people are when approached with a little flattery. An offer for lunch or a coffee might be all it takes. Try it!

 

Fail Forward

Above all – don’t be afraid to look silly or make a few mistakes. Everyone who’s built success over many years remembers how little they knew at the beginning.

I tell my clients this, when they’re shy to ask what they think is a silly, basic question.

“We all start in the same place! With a dream and no bloody idea of how to make it happen.”

Anyone successful who’s acting puffed-up is doing so just because they want to feel big, NOT because you’re somehow unworthy or stupid. Don’t feel ashamed to be where you are.

“The journey of 1000 miles begins with a single step.”

hand writing on blackboard

What’s The Number One Reason People Invest in Real Estate?

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Or how is wanting properties like wanting a six-pack?

“I really want to make more money!”

This is often where conversations about investing start. Is this really the true reason why we want to invest?

Think about it this way. How many gym memberships are bought with the words: “I want a six pack for summer…” ?

Do we really want the six pack? Or are we after something else? Wouldn’t it be better to feel fit, healthy and confident when you wear that bikini or pair of board shorts to the beach?

My guess is it’s more about how we want to feel and less about the six pack itself. Maybe the six-pack is just shorthand, because we’re a bit too lazy to think about what will really make us content and confident in our skins.

Perhaps the gym membership is only part of the solution.

Why Invest in Real Estate?

Real estate investing isn’t that different.

Most of us start out thinking it’s all about the money. But what do we want more money for? When we really look at our motivations, we may find that we’re really after something else… something that will be better than a big bank balance.

To find out more, watch the first video in my five-part series on the basics of real estate investing…

 

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Why Should You Stop Selling Your Time & Build Passive Income through Real Estate

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We all know real estate investing is a good way to create wealth… but why exactly?

The answer: passive income. Real estate is such a powerful tool, because when we invest, we use capital to generate passive income. Maybe you’ve heard the word “leverage”?

Do you really get how it really works? How is investing different from working a job?

Let’s find out!

Active Income

Do you have a J.O.B. ?

We first need to distinguish between passive and active income.

If you have a job, your income can be calculated with the following equation:

Number of hours worked    x    Hourly rate     =      Income

See the problem here?

There are only two ways to increase your wealth.

  1. Work more hours. For obvious reasons this isn’t a good idea, especially if your quality of life matters to you. Even if you overwork yourself, you only have a finite number of hours. Your time is the upper limit on how much you can make.
  2. Increase your hourly rate. This strategy may work if you put time into educating yourself or running after promotions, but sooner of later your industry will place a cap on the value of your time. Promotions aren’t a silver bullet either. They often come with more responsibility, more stress, and more hours, and there may come a time when getting promoted becomes a law of diminishing returns.

You need to find a way to unhook your income from your time and your hourly rate.

Professionals & Salespeople

Listen Up!

So, you’re a professional – an accountant or lawyer maybe – and you think I’m not talking to you.

Think again!

You don’t escape this problem just because you have a high hourly rate and no boss. Your income is still limited by the number of billable hours you have to sell.

Want more money?

You have the same options as an employee: raise your rate or work more. Either your clients will eventually balk at your fees or you’ll get too tired and overworked. It’s the same issue served with a different sauce.

Real estate agents, independent brokers and salespeople of all kinds – you’re in trouble too! While the money you make for an individual transaction may be high, your income still depends on the man-hours you have to create money.

Your income will be limited by the hours you have to put into generating business.

 

Passive Income

What is it? Why is it so good?

Passive income happens when you own a system that doesn’t obey the equation of hours x hourly rate = income. Think business ownership, stocks or real estate investments.

Passive income systems generate money whether you get out of bed or not. This is why creating or buying a system for producing passive income is the key to building wealth and to gaining control of your time.

Passive income is the means to escape the trap of selling your hours.

 

Leverage

How do we create passive income?

We create passive income with leverage.

In real estate investing, you use capital (a down-payment) to set up a system that generates income with other people’s money and the market. Tenants pay the rent. You property appreciates. All this happens without you having to get out of bed.

Real estate investors also – perhaps without knowing it – leverage knowledge and social capital. Investors have networks that help find deals. The professionals, advisors, and contractors they work with help make good decisions, which end up making them more money. Knowledge about the property- and rental markets, tenancy laws, and so on can be leveraged to increase the profitability by making smarter and smarter moves.

This is another kind of leverage.

Of course leverage isn’t only to be found in the real estate sector. It’s a property of how businesses work. Business owners leverage specialized knowledge and human resources (other people’s time) to create income generation systems.

You’ll probably do this too when you become a landlord. Think of the concierge’s hourly rate versus yours. If his hours cost less than yours, you’re leveraging human capital to make more money.

Leverage is a powerful tool, because it allows you to move away from selling your time.

You can learn to use different kinds of capital – social, financial, and cultural – to create systems that provide return on investment in a way that is basically not tied to the amount of time you work.

This is how leverage and passive income fit together.

 

Should I Quit My Job?

“I understand passive income, should I tell the boss to take a hike?”

Not so fast!

Building passive income systems takes time. If you start investing today, it’ll likely be years before your passive income begins to exceed what you earn at your job. Real estate – like investing in stocks or starting a business – is a long game.

So, should you tell the boss to bite it today?

Probably not yet!

Should you start building a passive income system that will free you from selling your time?

Absolutely! Start right now!

And if you’re not sure how, pick a passive income vehicle (real estate, stocks, business) and educate yourself until you know how. Otherwise, you’ll be trapped selling your time for the rest of your productive life.

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Article in La Presse: Renting Using an Agent? Terrie’s Advice

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Hire a professional to rent or manage your properties?

Read what Terrie had to say to the French-language newspaper La Presse

screenshot of article

 

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:

https://www.lapresse.ca/maison/immobilier/conseils/201810/22/01-5201163-un-courtier-pour-louer.php

 

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What You Can Learn About Investing by reading Conversations With God

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Book Review: Neale Walsh’s Conversations With God

Here’s why you should read Walsch’s so-called chat with God. Even if  it sounds hokey or blasphemous. Even if it has nothing to do with Real Estate.

The title Conversations With God is probably one of the least controversial things about this book. Walsch’s premise is that his writing is a sort of revelation. He claims that the ideas in the book come from a divine source, with him as a kind of channel.

It’s a bit hard to see why it makes sense to go there.

Blasphemy or Atheism: Take Your Pick

Claiming you’ve had a revelation means you’ll probably offend a lot of religious people. The whole channeling God thing’s got a bit of a blasphemous ring to it. Along the way, the atheists will check out because they don’t want to hear about God in the first place. It’s not really a winning proposition.

But, and it’s a big but, wait! I promise there’s baby and there’s bathwater.

If you’re interested in mindful living and how we create our lives – and our financial situation along with it – consider these few lines.

Start with this whopper:

“Every human thought, and every human action is based in either fear or love.”

Which one of these are you running on most of the time?

Or what about this: “Life is not a process of discovery, but a process of creation.”

and

“No prayer goes unanswered. Every prayer is creative.”

Wow! What if you applied some of this logic to how you practice real estate or your financial life more generally? Do you act like you’re creating all the time? Because you are. Are your actions and thoughts around finances motivated by worry, anger, Ego, competitiveness or anxiety? Or by creativity, joy and connection?

Conversation with God or not conversation with God, it’s worth thinking about. And it’s with a grain of suspension of (1) disbelief or (2) judgement for blasphemy that I suggest you read what Walsch has to say.

If you’re trying to make any kind of positive change in your life, or if you’re in the process of trying to wake up into a more mindful state of being, there’s some really interesting ideas in this book. The love and fear distinction was enough to make it worthwhile for me.

Offended? Keep Reading

Does it matter whether Walsch is talking to God?

I don’t think that is does.

I actually think it’s possible to make a wider comment on how we hear or read things in this increasingly polarized time. Just because part of what someone says or where they come from a triggers knee-jerk abhorrence in us doesn’t mean he or she has nothing good to say. It doesn’t mean we should tune out right away. To do so is our loss. There is baby and there is bathwater. Before we throw them both out, we may want to stick our hand in to see which is which! The quality of the baby might just merit getting your hands wet.

 

 

apartment building facadePhoto by Norbert Levajsics on Unsplash

How to Avoid Problem Tenants: Have a Good Apartment Screening Process

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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.

Photos

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.

Price

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:

  1. afford the place
  2. speak to me in a courteous and efficient way
  3. 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

Do

  • 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.

Don’t

  • 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 🙂

Meeting coffee tabletPhoto by Alejandro Escamilla on Unsplash

How to Shop for the Best Mortgage Offers in Canada in 2018

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Five Do’s and Don’ts of Shopping for a Mortgage

Want to get your mortgage financing under control? Read this!

Shopping for a mortgage is a very important part of turning your real estate investment into a winner. Your interest rate will probably follow you for five years, and working with a competent financing person can make the difference between doing and not doing a good deal. Most people don’t realize how much power and how many options they have when shopping for a mortgage.

Here’s a quick list of do’s and don’ts to make sure you get the best deal on your mortgage.

  • Do talk to multiple brokers / bankers

Mortgage markets are like markets for anything else: the more healthy competition you create, the better deal you’re likely to get. Not only will talking to multiple parties give you a sense for what’s a good rate, it will also allow you to say things like: “So-and-so offered me x, can you beat it?”

You want to handle this shopping mission before you start visiting properties. You don’t want to be scrambling to get your financing sorted out once the (sometimes) tight delays in a promise-to-purchase start running. Ideally you should know who’s getting your financing business before you start making offers.

Talk to a minimum of one conventional banker and one mortgage broker. These two types of specialists have access to different products, and have different ways of working. If you want to get the best rate and the most interesting conditions, it’s better to consult both.

 

  • Do get a pre-approval letter

Mortgage lenders can provide you with a pre-approval letter. This is a best-practice when shopping for a property, as in today’s competitive real estate markets the listing agent will want to protect his or her clients by seeing that a prospective buyer has the funds for a purchase.

If there are multiple offers, the listing agent will be inclined to deal with a buyer who has a pre-approval letter. It’s a listing agent’s way of minimizing surprises for his client-seller. Requesting a pre-approval from a prospective buyer also helps the seller avoid tying up his or her property without knowing whether the buyer has the funds. It’s not in the seller’s interest to allow his property to be “under contract” for two weeks while he or she waits for a response from the bank, especially when there’s no certainty as to the prospective buyer’s solveability.

As a buyer, a pre-approval makes your offer more attractive, and it makes you look serious. The added benefit to you, is that you can really know what your budget is before you start visiting properties. Pre-approval costs nothing.

I recommend my clients go through the process of qualifying before they begin their search. This way everyone is aware of the budget for the project being undertaken. You’ll also have the security that your offer, when you make one, is as strong as possible.

  • Do get every mortgage offer in writing

Make sure each broker you speak to gives you a written offer stating the rate, the terms (fixed/variable rate, the term, amortization period) and any bonuses they can include. Brokers and mortgage specialists can sometimes pay some or all or your notary fees if you ask. They can also sometimes give cash-back at signing or other incentives.

It’s important to get an offer in writing in case you need to comparison-shop. An email is a great tool for placing two parties in competition.

Tip: written confirmations also avoid any nasty surprises that can arise, should your broker forget what numbers he or she shot at you on the phone.

 

  • Do take the time to calculate your monthly payments

When you have an offer in writing, take the time to calculate what your monthly payments will be. If you’re not sure how to do this, there are many mortgage tools available online. Type “Canadian mortgage calculator” into Google. Before making an offer on a property, you need to know what your expenses will be. The right time to do this analysis is as you’re comparing mortgage options. Calculating your payments will give you a way of comparing the different propositions your mortgage specialists will be preparing.

For example, is it better to take a rate of 3.75% over 30 years or 3.5% over 25 years? How will this affect your cash flow? Or the amount of interest paid over the total amortization period? If you’re looking at an investment property, interest is a tax deductible expense, whereas on a principal residence it is not. You may make different decisions in either case. Without calculating your payments and your interest portion, you’ll be making these decisions in the dark.

Take the time to fiddle with mortgage calculations: you’ll see the major impact of +/-0.25% or an extra 5 years of amortization. You want to be aware the impact before signing your mortgage.

 

  • Do ask for extras & let the broker know there’s competition

Mortgage lenders know they operate in very competitive markets. It is common practice for a bank or a mortgage broker to offer to pay all or part of your notary fees. They won’t come out and offer this to you, so you need to ask.

The same goes for interest rates. Banks and brokers often have “stated” rates that are given to anyone who walks in off the street. The institution can always do better than the first rate they quote you. The best way to get them to come down is to let the person you’re dealing with know there’s competition. If you can quote a rate offered to you by another bank, even better! This way you can be sure they’ll ask head office for an exception.

The same goes for your amortization term. If you’d prefer a 30-year term, ask for it. Many bankers offer you the “standard issue” deal until you push for more. So, don’t be shy!

 

  • Don’t let every lender you talk to run a credit check

Mortgage brokers and bankers can be a bit cavalier with running credit checks. It costs them nothing and they have nothing to lose in the process. You do have something to lose! Each time your credit is consulted, your overall score is affected. If three or four institutions hit your credit in the mortgage application process, it can have a big impact on your overall score.

If you’re getting quotes from multiple parties (as you should!), make sure each party doesn’t run a credit check.

Competent brokers should know this. They can complete a pre-qualification with you and give you their rates without hitting your credit. When you speak with a banker or a broker, make sure you know at what point they will consult your credit file.

The best time for them to run a credit check is once you have chosen the deal that works best for you. This way you’ll only run your credit once in the process and not have a big negative impact on your credit score from too many credit checks.

 

  • Don’t wait until the last minute to shop for a mortgage

Okay – a word for the procrastinators: don’t leave your mortgage shopping to the last moment. Do your comparison-shopping before you make an offer. Don’t do your shopping when the time pressure is on you. In an offer, you’ll have a delay to produce financing approval. You don’t want this time pressure affecting your negotiating power by forcing you to go with the first offer a lender gives you. It’s stressful to risk losing the property to a time-delay. Make your decisions when the pressure is on the other guy!

 

Happy shopping!