5 Steps to Rent Out Your Property
Money is tight, and you’ve got to rent out your vacant basement unit. You live above the unit and you need the rent money to make the mortgage payment. What do you do? Rent it out to the only person who is willing to move in right away. And you allow yourself to justify why that person won’t let you speak to their current landlord or why the collection agency is after them.
What could go wrong? This lovely tenant could be unstable and pull a knife on her roommate. Yes – it happened to us at 3am on a Wednesday night about 4 years ago. We had to call the police and have them separate the two tenants. The victim moved out the next morning and we were left with the knife wielding tenant who then stopped paying rent but refused to move out. It took us three months to evict her. We had to live above her the whole time. Once we FINALLY got her family to come to town and move her out (we were still a few weeks away from legally being able to throw out her stuff and change the locks), we had to send a collection agency after her for the rent money. We never received a dime.
As you can imagine we’ve taken great pains to find good tenants ever since. Here’s the overall process:
- Step 1: Prepare the unit for showing
- Step 2: Get your paperwork in order
- Step 3: Research the market rents and place your ad
- Step 4: Show your space
- Step 5: Choose your new tenant.
Step 1: Prepare the unit for showing
The better it looks the more likely you’ll find a good tenant for the space. Make it easy for someone to visualize themselves living happily in that space.
Some suggestions to prepare the unit:
- Fill any holes and put a fresh coat of paint over the walls.
- Check all of the doors, locks, plug ins, appliances and light bulbs to ensure they are in working order.
- While you are doing this, create a checklist to use when the tenant moves in or out. Include all of the rooms, doors, windows, drapes/blinds/shutters, plugs and light switches, shelving, appliances etc.). When your tenant moves in you both need to sign off on this sheet – it’s required by law in B.C. If you’re not sure how to start this sheet check out docstoc for examples.
- Air the unit out before showing it – open up the doors and windows to let fresh clean air in.
Step 2: Get your paperwork in order
To attract a good tenant, you will need to be a professional landlord and have the right paperwork on hand. Contact your local residential housing branch of your government or go online and do a search for landlord forms to find the following:
- Tenant application forms
- Rental/Lease Agreement forms
- Eviction notices or other forms you might need later – sometimes you have to order the forms so it’s better to just have them on hand.
Each provincial government has different requirements and rules for what must and what can be in each of the above documents so be careful what you download. Ensure you’ve got documents that are legal in the same province as your rental unit.
Step 3: Research the rent rates and place your ad
Make sure the Price is Right!
Research like units online to make sure you’re not asking too much for your unit. We check Rentometer for a ballpark range and then research in detail on Craigslist and Viewit to understand what the competition has their units priced at.
Don’t get too greedy- it’s better to price just below the market. You will rent your unit faster, have a larger tenant base to pick from, and you will have a better chance of retaining a tenant for a longer period of time. When you find yourself thinking “but I could make $50/month more easily!”, counter that thought with “but it will cost me even more if this unit goes vacant for a month or if I have to re-paint or fix up this unit in 12 months when the current tenant leaves in search of a better deal”. I’m not saying leave a stack of money on the table, I am just saying, that it’s better to be slightly below market and have a great tenant in there quickly then to get a few more dollars every month.
Get the word out! We’ve found tenants through all of these methods:
- Word of mouth- we email all of our friends and let them know we’ve got space for rent. As a result, we have rented several units out to friends over the years. We also let our good tenants know about other units that are available and sometimes they move into the units and we keep them as tenants for longer, or they have friends they can recommend to us.
- Advertise online! We love the viewit.ca and craigslist combination in Toronto. Viewit.ca takes pictures of your rentals. You can place a free ad in Craigslist with a link to the Viewit.ca ad so your prospective tenants can see the unit.
- Craigslist on its own is also very effective and it’s free!
- Put a sign up on your lawn or in the window of the unit with a phone number. Viewit gives you a sign to put up which is another benefit of advertising with them.
- Local Newspapers can be a fairly inexpensive way to advertise. Ask the classifieds agent what is the best day to advertise a rental unit on to get the most eyeballs seeing your ad. We don’t advertise in the paper anymore as we find online to be very effective, but in some areas your target renters may be best reached by the paper.
- University Housing Boards: We haven’t done this for awhile, but we have a tri-plex near the University of Toronto, and we used to advertise there. These days every university student seems to use Craigslist.
Step 4: Showing your space
The most efficient way to show your space is to have an open house. Pick a time to show the space for a two hour period one evening or during the weekend. Then have a back up time. When a tenant calls about seeing the unit, tell them that you will have a showing for all interested tenants at time slot one, and if it’s still available, there will be a second showing at the second selected time.
Prepare for the showing by having the unit as clean and fresh smelling as possible. Be dressed in business casual attire with tenant application forms on hand when you greet the prospective tenants.
You could show your unit to one tenant at a time. This is a great way to get to know the applicant a bit more, but it is very time consuming and inefficient, especially if you don’t live nearby. An open house environment creates an air of demand which helps get applications completed much quicker. When a prospective tenant sees the other interested parties, if they want your unit, they will act quickly to try and get it. Encourage the prospective tenants to complete the application before they leave. Then you will have the application in hand and can make notes on the application about who they were and what your initial impressions of them were. Alternatively, ask them to drop off the application the next day (especially if you’ve already received other applications – you can tell them you plan to make your decision in the next few days).
Step 5: I choo choo choose you! Choose your new tenant.
- Review the Application: Look for gaps where a place of residence is not indicated, or look for conflicting information. If you liked them but there are gaps or issues with their application, ask them about it. If you start to hear things like “well my previous landlord didn’t like me because of….”, or “there is a credit agency after me because of…” then it’s not a great start. Some reasons make complete sense, others are just elaborate stories. If you can’t be sure what the case is, keep looking. Or you could end up with a tenant that pulls a knife on another tenant like we did!
- Run a Credit Check:Once you’ve found one or two that you like and that has a good application, run a credit check. This is a critical piece. Many veteran landlords say they just trust their gut. Well, I trust my gut, and then verify it!
- Reference Checks: Call the reference and ask them simple questions like “how long have you known the applicant?”, “What’s your relationship with them?”, and “Would you rent to them?”. This is also a good gut check, but keep in mind that a current landlord might be anxious to get rid of the tenant so they might not tell you the truth.
- Final Gut Check: So they have decent credit, nothing came up on their application that makes you uncomfortable, and the references had nothing negative to say. What’s your gut telling you? Do you get a good feeling about them? Do they seem honest? Do you think they will be too messy? Or too picky? If you are happy with the gut check then you are ready to choose your new tenant.
For more on selecting your tenants - check out our tenant screening checklist.
WAIT! What if there is a tie? What if you can’t choose between two tenants? I go back to the prospective tenants with some additional questions to break the tie:
- How long do you plan to stay?
- What will you be doing for the next couple of years: work, school? what type of work or school?
- What do you like about my place versus others that you have looked at?
- Why are they moving out of their current place of residence?
- Will you sign a one year lease?
- Do you like to have people over on a regular basis?
After hearing the answers to these questions, you’ll usually find yourself leaning towards one tenant. Once you’ve selected your new tenant, have them complete rental agreement and collect the first months rent. Depending on what province your unit is in, you will also collect a security deposit or last months rent at this time.
Once you have a signed agreement with rent cheques in the bank, you will need to let your other prospective tenants know that the unit is rented. If a prospective tenant asks why they didn’t get it never tell them it was because of age, race, gender, or because they have or don’t have children. No matter what your reason was for choosing one tenant over another, you cannot be discriminating about the choice. It’s probably safest to say ” the other tenant had a very strong application”.
Published July 2008