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How to Determine the Rent Rate for Your Rental Property

April 17, 2020July 22, 2014 by Julie Broad

What the heck should you charge for your monthly rent?

Charge too much and you’ll struggle to find great tenants.

Charge too little and you’re leaving money on the table AND you’re probably going to have to sift through a ton of applications.

There’s a lot of work that has to go into figuring out what a fair rent rate is … and at the end of the day you won’t really know what you can charge until you start advertising it and evaluate the response (Want more on my process around renting out your property? Check out this article on troubleshooting a vacant property).

But, there is a lot of research you can do so that when you first post a rent rate, you’re in the ball park. Plus, figuring out rent rates for your area and what is happening with the rental market is always going to be a critical skill as an investor – not just when you’re renting out a property but also when you’re evaluating a property to buy! So, let’s spend a bit of time discussing this important piece of the puzzle.

Questions you want to try and answer when you are researching rental rate trends include:

• The specific rent rates for different bedroom sizes. What is the average two-bedroom unit renting for in my area, for example? What is the range being offered for 2 bedrooms? Can you identify why there’s a difference (whole house versus basement suite, apartment versus carriage home)?
• What is the average rental rate for the area and where is it trending? What was that rate last year? What about 6 months ago? Is it more, less or the same?
• What government controls exist on rents? Some areas have rent control, and that poses artificial controls on the market rents; so when you’re evaluating the numbers, you’ll want to know if that is the case.

Website resources to use (for Canadians):

• Rentometer (http://www.rentometer.com/)
• Craigslist (http://www.craigslist.org/)
• MapsKrieg (http://www.mapskrieg.com)
• Kijiji (http://www.kijiji.com/)
• Local newspapers
• Search for landlord/tenant legislation for your area to find out about rent controls.
• CMHC (http://www.cmhc-schl.gc.ca/).

A caveat about using CMHC: Please note that if you buy single family homes that CMHC is not the ideal source of information for you. They survey properties with at least 3 units. They ask for market rent, available and vacant units. They do this via phone and site visits. It’s always done in April and October so reflects that time of year as well as properties that are not the same as single family homes. Generally they will get more data on the larger buildings than any other property. This is why you’ll almost always find the rent rates they say apply to a 3 bedroom are much lower than what you can get for your properties. It’s useful for trend analysis but our rents are always higher than what they report. The one bedrooms are only a little higher but as the unit sizes increase the difference between what an apartmnet gets versus what we get for rent grows dramatically. For example, their 3 bedroom apartment was reporting a $1,011 a rent rate in their Spring 2014 report. The lowest we’re getting for a 3 bedroom suite is $1,300 and most are getting $1,400. If it’s an entire house we’re getting $1,550 or more.

Website resources to use (for Americans):

• Rent.com
• Craigslist (http://www.craigslist.org/ )
• Local newspapers
• Search for landlord/tenant legislation for your area to find out about rent controls – many states do have very strict landlord legislation to be aware of.
• http://www.letstalkpm.com/ – a great resource to find just about anything you need to know about rentals in the U.S.
• Bigger Pockets Forums (http://www.biggerpockets.com/).

Offline rent rate research:

Drive around your chosen area, and call the numbers on the FOR RENT signs that are not those of professional property managers (you know – the homemade ones or the signs bought at Staples). Get a sense of what’s available, what they are asking, and what amenities or features they emphasize (if any). We don’t need to call the professionally managed properties because a quick look on their website usually provides us with all the details we need.

Also, take a look at housing starts and how many of them are condos, apartments, or other properties that may impact the current rent stock and rental rates.

In 2009, we bought a couple of properties in Kelowna, BC. Prices were down and we saw a few opportunities to buy in fabulous areas with growth potential. The single-family home we purchased as a rent to own did fabulously and we sold it to the tenants a year later. The two-suited home near the lake, however, has been a struggle for us. While it’s in a stellar location and in good condition, the challenge has been the large number of condos that have been built in Kelowna. Because the condos didn’t sell, the builders rented them out, dramatically increasing the rental stock in the area. We’re only just now able to raise rent rates. We really underestimated the impact of the extra supply on the rent rates.

It’s economics 101 to know that when supply goes up without an increase in demand, it puts downward pressure on rents. Our rents dropped several hundred dollars a unit – killing our cash flow.

The good news is that rents pop up almost as fast as you feel them go down. And, in every market across Canada, we’re hearing reports of rents going up. We’re raising most of our rents by $50 – $100 per unit when the tenants vacate. But first, we always do some refresher research to see what else is on the market that we’ll be competing with today and in the near future.

If you have a favourite resource for researching rent rates in your area send me a Tweet by clicking right here! I will update this post with your Twitter ID and suggestion!

Rental Rate Resource Recommendations From Other Investors:

>> From Debbie in Alberta: Another website I’ve been using a lot is Padmapper.com. I’m not sure how it works in other areas of the country, but it’s been great in Calgary so far. In terms of time efficiency, I like it because it combines ads from Kijiji, Craigslist and a couple of others into one site. One note of caution though, it also lists B & B rates which skew the numbers a little. You just have to read each listing carefully to weed these out.

>> From Wade Graham in Alberta: Rentfaster.ca has amazing stats for Alberta. Helps me every time.

Why Can’t I Find Good Tenants? Troubleshooting Your Vacant Rental

April 17, 2020June 10, 2014 by Julie Broad

Over the last thirteen years we have worked with many different property managers. Whenever we’ve had a property that was slow to fill the property manager would tell us “It’s just the market – it’s slow.”

The property managers weren’t lying when they have said that to us. Vacancy rates were high and properties were taking quite awhile to fill on average. However, after investigation, a slow market was not really why our property was vacant. In one case, the property was run down and really needed some money spent to give it a good cleaning and updating. In another case, the ad was placed in the section for apartment units when it was the top half of a house. Fixing these issues resulted in finding good tenants fast.

But maybe you’re not sure what the issue is? Here’s how I troubleshoot my vacant rental properties to uncover the reason it’s not filling … whether we’re managing them or we work with a property manager.

1. Is the phone ringing with interested tenants?

We direct all interested tenants to CALL US to set up a viewing. I have three main reasons for this. The first is that I have wasted a ton of time in my life going back and forth over email answering questions from people who get an answer to a question only to have two more questions. Second, close to half of the people who set up appointments via email do not show up to their appointments. This wasn’t just one experiment where I tested this … I have periodically tested this over the last five years and this is consistently the case. Finally, not getting to speak with them on the phone means missing an important step in my tenant screening process.

If a tenant is interested enough to call about the property I find we’re well on our way to finding the right person for the property. And with this process firmly in place, I can now properly judge how many truly interested people are contacting us about the ad.

If the ad has been up for a week and I have had less than 5-10 calls (that’s my typical number but this number does depend on the target tenant type, price range, condition of the rental market and the time of year), I will go back to the ad.

Is Your Rental Ad Working For You?

How does the ad compare to the others on the market right now? Is the ad interesting and appealing? Do the pictures look great?

If everything is ok, the next thing to do is to change your ad headline and change the lead picture. The first picture people see when they are scrolling through ads can make or break your ad response so make it the best image of the exterior of the house, the kitchen or some other outstanding feature of the home.

Maybe It’s The Rent Rate?

If you think your ad is great then it’s time to reduce the rent. Typically we’ll drop it $50 to see if that gets the phone ringing. We’ll also look around to see what we’re currently competing with. Maybe there’s a bigger issue we need to pay attention to like lots of new product on the market or everyone else has a garage or some other feature we don’t have.

2. The Phone is Ringing … But People Aren’t Showing Up to the Showing

If you’re getting calls but people aren’t showing up—review your process. If you set up appointments by email or text message – stop. Only set up appointments via the phone (See above). Next, review other things you’re doing.

How long are you taking to return calls? If you take too long there’s a good chance they will be far along the process with another landlord by the time you set up your appointment. Your place becomes the back up property.

How much time passes from the time you talk and the time you show the property? We find that if people have to wait two or three days to see the property they often find another place to live before we can show it to them. Same day or next day showings are ideal if it’s possible.

When you’re on the phone with the person ask them to commit to coming to the showing and require them to take down your phone number. Have them confirm that they will call you if they can’t make it.

TIP: If a tenant doesn’t do what they say they are going to do at the beginning of the relationship—they never will. In other words if they don’t show up or they don’t call when they say they will—that is not going to change just because you have a lease. We give people one chance to redeem themselves but if they consistently don’t do what they say they will then they aren’t going to be a good tenant.

Our best tenants have always arrived for showings 5—15 minutes early. That doesn’t mean if they show up late we don’t rent to them but 99% of the time the indicators you get when you’re first speaking with someone and showing them the property show you what to expect throughout your relationship.

3. Tenants Are Viewing the Property But Not Applying

If you are showing the property but not getting applications—take a look at your unit and your rent rate again.

We’ve had to face the harsh reality a few times – sometimes a place doesn’t look as nice as you want to believe it does. Usually a good professional cleaning will do the trick to make a property show well but other times you just HAVE to do a little work to replace the stained carpet or paint the room that you tried to just touch up.

If you’re getting calls, the rent rate seems competitive, and people are showing up to see the property but nobody is interested take a hard look at the property. The other thing … and this is a big one for us now … if the unit is currently occupied and just doesn’t show that well you may have to wait until it’s vacant. It sucks to guarantee yourself missed rent but if it isn’t looking good, you are wasting your time showing it and you could be attracting the wrong kind of tenant showing a rougher looking property.

Finally, check your suite décor and features against other suites. Is yours outdated? Simple changes like upgrading the hardware on cupboards, changing light fixtures and paint can often update a unit cheaply and quickly and make it appealing.

Making sure the inside looks good is important, but curb appeal is critical. If there is junk in the yard or the yard is not maintained, this can make potential renters walk away before they even look inside. A lot of renters find their new homes by walking or driving around an area they want to live and looking for signs. If they see a run down exterior they probably aren’t going to be too anxious to check out what’s inside!

We’ve been through some really slow rental markets in the last 13 years. We’ve suffered from several vacant rental properties and these steps have always helped fill our properties within a few weeks of making adjustments. Sometimes it does mean putting in some time, effort or cash to make your property look better but it’s always worth it to get a great tenant in there paying rent again! If you have a place that has always attracted good tenants in the past or it’s in a great area, these simple steps will solve most of your rental challenges. In slow markets you do have to be a little more patient and you have to take special pains to make your property shine compared to the competition but again, it’s possible to keep your places rented most of the time.

We have plenty of videos and articles to help you manage your properties well. Here are a few others you might like to check out:

>> How to prep for your rental property showing

>> 5 Steps to Rent Out Your Property

>> Tenant Move Out Inspections – Things Tenants Never Remember to Clean Out

Tips for Better Landlording: The Property Management Toolbox Book

April 12, 2014April 12, 2014 by Julie Broad

If you’ve ever had a late night call from a tenant or you’ve felt frazzled because you have wasted an hour trying to find a document for the insurance on your property or your tenant’s lease? These are the systems good landlords have in place to manage their properties and not lose their minds. And, these are the kinds of systems that allowed Quentin D’Souza to build a beautifully cashflowing real estate portfolio and start and develop a hugely successful real estate club in Durham, ON, all while working a full time job and spending time with his family.

Today, I’m excited to share a couple of excerpts from his new book, The Property Management Toolbox, to help you.

Property Management Tip # 1: Phone System

A well set up phone system is a major key to your ability to be able to manage your time well and set boundaries between your business and personal life.

1. Use evoice.com or grasshopper.com to create a phone system with prompts that filter tenant requests to different phone lines. Press 1 for one type of problem, press 2 for another etc.

Educating your tenants on the difference between types of requests is an important component in getting your filters to work for you. The tenant binder, which will be explained later on, and move-in are wonderful opportunities to do this.

2. Create a 2nd phone line to deal specifically with maintenance issues.

Set this line up so you’re not notified directly on your cell phone. Check these messages regularly and respond promptly, but not immediately. However, ensure that you manage tenants’ expectations reasonably when it comes to maintenance response times. Once the expectation is set, always respond within the expected response time. I generally provide a response within 24 hours.

3. Create a 3rd phone line to deal with vacancies.

As with the maintenance line, you should not answer this line immediately. Deal with it systematically, but not with emergency priority.

4. Create a 4th phone line to deal with emergencies.

Have these calls forwarded directly to your cell phone. If tenants contact you on this number, it means there is an issue that has to be dealt with immediately, not in a day or two.

5. Do not have tenants contact you directly by cell phone or text message.

Tenant requests can be overwhelming over time, and you don’t want to give the appearance that you are buddies with the tenant. Keep a professional relationship at all times. Keeping this boundary firm can be the difference between successful landlording and wanting to throw in the towel. If you are going to use a cell phone to communicate with tenants have a separate phone number that you use for your rental properties.

6. Put phone numbers on magnets with the name of your company and place it on the fridge when the property is rented out.

This allows easy access for tenants to the necessary information and insures they don’t forget the correct numbers. Remember to educate them about the proper use of each number and what does and does not constitute an emergency.

Property Management Tip #2: Create a Property Binder

Each unit should have its own binder that contains key information regarding the property. This is referred to as the tenant binder in other parts of the book. Here are the policies that govern the property/tenant binders:

1. Use a white one-inch 3-ring binder.

2. These binders remain in the property at all times.

3. Educate the tenant about everything in the tenant binder at the end of the move-in inspection.

Use this as an opportunity to create a relationship with the tenant and show how proactive you are as a landlord. Explain that the tenant binder is a friend of both tenant and landlord because it has the answer to many problems. If used properly, the binder can save much time for all involved, so being knowledgeable about it is imperative.

See www.theontariolandlordtoolbox.ca for a Sample Property Binder.

The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords by Quentin D’Souza is now available. Grab your copy today for simple solutions to managing your property.

The Passive Income Myth

November 4, 2013 by Julie Broad

“Beware of little expenses. A small leak will sink a great ship.” – Benjamin Franklin

Looking back at our early years as real estate investors, it’s astonishing how much money we paid that we shouldn’t have; how much income we should have made but didn’t; and how many problems we could have extinguished when there was smoke, instead of when the fire had consumed a large portion of our profits.

Our belief in passive income had us believing that we could work hard to buy a property, hire property managers and then kick back and let the money roll in. It only took a couple of years before this strategy blew up in our faces with terrible tenants, property managers robbing from us and even being charged with fire code violations. Then it took several more years to right the ship, but once we did it made a big difference. I’ve talked about my belief that passive income is a myth many times … today I want to talk about what you can do about.

First, let me give you one big example of how active involvement – even when you have property management in place – can save you thousands of dollars.

Every month Dave does a review of the expense and income statements for each of our properties. Because he does this every month, anomalies are easier for him to spot. In this one property, Dave noticed the water bill was double what it usually was.

He immediately contacted our property manager and asked that it be checked out. The property manager said it was because the billing frequency had decreased. We were now being billed fewer times, so it was expected that our bills would be double when we were billed.

Because we owned properties in four different cities at that time, Dave wasn’t sure if that was the case, but he seemed to remember that change had occurred over a year ago. He pulled up our property expense tracking spreadsheet – and sure enough – we’d moved to bi-monthly billing over a year ago.

He called our property manager back and insisted that he investigate.

Turns out we had a water leak. The leak was quickly fixed and the next water bill was back to normal. This home is a split level with a one-bedroom basement suite, and because the tenants aren’t on separate water meters we pay those bills. Dave’s swift action saved us hundreds of dollars that year, not just from wasted water but also because he minimized the damage to the home by catching the leak sooner!

It wouldn’t take too many little leaks like this to completely remove all the cash flow from this property.

So besides just monitoring the water bills … what else should you watch for with your rental property?

Rent payments: If you’re managing the property yourself, you’ll typically notice when you haven’t been paid; but when you have a property manager handling your rent collection, you might forget about it. You also might assume your property manager will let you know if rent has not been paid, but that is not always the case. Stay on it. If the rent wasn’t paid, find out why and what’s been done to address the matter. Never assume things are being handled. In every case, a non-payment-of-rent notice (or the equivalent type of notice for your state or province) should be issued, in case you eventually have to take steps to evict the tenant.

Utility bills: Whether you pay the utilities or not, you should keep an eye on the bills because increased utilities could indicate other issues, as in the case of the water leak. It could also indicate a broken seal on a window or a door if your heating or cooling costs have gone up … or just inconsiderate energy usage. When our tenants usage of electricity goes up more than 25%, we always let them know and remind them to turn lights off, turn the heat down, turn off the TV when not in use, and so on. It’s not just better for our bottom line; it’s better for the environment.

Repairs and maintenance: Your property managers should be getting three quotes for any major work. If it’s going to cost you more than $500 to do something, you need options. And you need to insist on this.

You also need to monitor what is going on. Unfortunately, we have many examples of where our property managers have mismanaged repairs and maintenance, not gotten more than one quote, or allowed the repair budget to go well over what was agreed upon. Even with diligent management, we still have these issues on a regular basis; and sometimes we don’t have enough time to deal with it ourselves so we spend money that we could have saved.

So listen to the warnings of Ben Franklin and watch out for those small “leaks.” Spend a few hours every month reviewing your monthly expenses and cash flow. Ideally, enter them into a tracking program or a spreadsheet so the discrepancies are easy to spot.

So what about financial freedom and buying enough property so you never have to worry about money again?

Let’s say you do the math … you figure out that if you own 30 properties that make you $300/month positive income, you will be able to quit your job. And if you can quit your job, you will have financial freedom! Finally!

What a romantic load of crap that is!

What is financial freedom? Most people try to convince me that it’s never worrying about money again. If that is financial freedom, you aren’t going to get there with real estate. “More properties” does not equal more freedom … more properties equals more roofs that leak, more appliances that break, more hot water tanks that flood, and a whole lot more tenants to deal with. Even if you have the best team, these things will still require your attention – and I assure you that it will be during the week when you’re trying to finally relax that you will have a tenant move out on short notice – leaving you with a property to fix up, a hot water tank split open, and a plumber that seems to have vanished off the face of the earth. And things don’t space themselves out nicely – they all happen at once. The expression “When it rains it pours” was not created because of the weather!

Let’s be clear on one thing: “Financial freedom” is bogus. It doesn’t really mean anything. It’s a fluffy phrase that sounds wonderful but doesn’t translate into any kind of reality.

And real estate is not the way to go if you never want to worry about money again. More properties is just that … more properties.

– – –

Like this article? You’ll LOVE More Than Cashflow: The Real Risks & Rewards of Profitable Real Estate Investing. This is just a tiny excerpt from the Amazon #1 Best Selling Book.

“Finally, an honest, real-life guide to Real Estate Investing! There are many Real Estate books available that talk about one aspect of real estate investing or another, but very few are as honest and concise as ‘More Than Cashflow’. I have a small library of Real Estate books and this one will definitely be the first on my list of recommended books to read.” ~ From Rick on Amazon.ca

 First Image Credit: © Photographerlondon | Dreamstime.com

– – –

And from the Rev N You Video Archives … some additional tips to help you make more money when you’re working with a property manager:

Tenant Move Out Inspections: 5 Things Tenants Never Remember to Clean When They Move Out

October 16, 2013October 16, 2013 by Julie Broad

My Mom will be so proud to learn what a clean freak I’ve become. Running a motel and then a Bed and Breakfast for a total of 34 years made her very particular when it comes to cleanliness and working for her for 5 years cleaning motel rooms as a teenager did force me to pay attention to details.

But being a property owner for over 12 years has really taught me the importance of clean houses. We’ve talked over and over about how a clean property attracts MUCH better tenants. If you’re having trouble renting out a place – a professional cleaning just might be the answer.

There is a big difference between a property that seems clean and one that actually is clean. Surface clean is actually easy to attain and you’ll get away with it when the rental market is hot or it’s been a short tenancy. When you’ve had long term tenants or you’ve had several move outs where the property has only been surface cleaned you’ll soon find the property just “feels” dirty. Good tenants will walk away and not apply.

Guys (aka my husband Dave) may walk in and think it’s clean at first glance but discerning guys will even notice it’s not sparkling clean. Gals (aka me) will walk in and think – eeewww feels gross in here. Floors are clean and counter tops are wiped so why does it feel dirty? Likely it comes down to these 5 things that no tenant remembers to clean (unless you remind them) and most landlords forget to check.

When you do your tenant move out inspections make sure these 5 things are getting the attention they deserve:

How fun was that? I never knew cleaning could make you smile but I think it just did.

Now let me hear from you … pop on over to YouTube … give this video a thumbs up if you like it (and why wouldn’t you like it – we had some fun with it!) and let me know what your top tips are for clean up after your tenants leave!

Image Credit: © Okssi68 | Dreamstime.com

Succeed as a Landlord

October 26, 2012February 10, 2010 by Julie Broad

It’s not much of a secret that I am not a fan of managing my own properties. I tried it, learned a lot and then decided to leave it to the professionals. I wouldn’t say I failed miserably but I would say that I discovered that it’s not something I enjoy.

There are few things I love more than accomplishing my objectives.

When I plan my day and it goes as planned then it’s an awesome day for me. When you’re dealing with tenants you can forget about that plan! And you better believe the tenants won’t care about your final exam, your child’s soccer game or your family dinner. If their toilet is overflowing or the pilot light on the furnace went out in the freezing cold of winter then you must deal with that over everything else in your life.

That’s where I failed miserably. I wasn’t prepared for such calls and I certainly struggled with being flexible with my schedule.

Today we look for landlords like me. The tired and cranky landlord presents an enormous opportunity for a real estate investor. If you are prepared to handle the potential problems a property can have and you can spot someone who can’t then you’re quite likely to be able to pick up properties at a discount and be saving someone from an early trip to the grave.

But if you’re going to be taking over other people’s problems, and fixing them then you need to know how to succeed where the other landlord has been failing. You need to be prepared. You need to be relaxed and ready to roll with what is thrown at you.

The top five things you need to do to succeed as a landlord:

1.Be Prepared: Your tenants will call you with toilet troubles, furnace issues and other maintenance requests. Unless you want to be rushing out to the property to handle every little issue it’s a good idea to find a good handyman that you can rely on. We found a great guy that lived just around the corner from the Toronto triplex I tried to manage myself. He was able to pop over in the evenings or on the weekends and check out the little issues. One time the shower was spraying everywhere. Another time the door was sticking. For a small fee he would go over and check it out, and he was almost always able to fix the problem right then and there. Without him I truly would have lost my mind. First of all, at the time the only problems I could deal with were related to toilets. I grew up in a motel and would follow Dad around as he repaired and dealt with toilet troubles in the motel rooms. But beyond basic toilet troubles, I could barely change a lightbulb at the time. Second of all, sometimes I wasn’t even in Toronto when the tenants would call so having someone nearby that could handle the call for me was critical.

If you aren’t sure how to find a good handyman, ask your neighbours. Go to the local real estate investors club meetings and ask them. Or fire up your computer and check online. We found our handyman by asking around. One of my classmates at the time had a handyman cousin the area … and that is who we ended up using.

2. Remember – your customer is your tenant. It’s so easy to forget that your tenant is your customer when they are calling you on Saturday night in the middle of a romantic dinner with your spouse requesting you to fix the pilot light on the furnace (this happened!).

If you owned a restaurant and someone complained about your service, if you care about your business at all, you’d listen carefully to their concerns and try to fix the issue. As a landlord you should treat your tenants with the same courtesy. Remember they probably have options and can move somewhere else. If you always remember that the tenant is your customer and that it’s your tenant paying your bills then I think that everything will be a lot easier to handle as a landlord.

3. The keys to success are in the systems you implement. Find simple systems for managing the emails, voicemails, paperwork and even the keys to the properties. A simple system for the regular things you handle as a landlord will save you time, money and stress.

Let’s take keys for example. The keys to enter each property need to be labeled and stored in an easy to use way.

I can’t take credit for this idea (I got it from Robert Elder ofQuick Start Landlord), but I can tell you that even with just a handful of properties you are going to want to pay close attention to this little trick. It will save you time and money. The trick is to label every key with some sort of code that allows you to identify the address as well as to indicate the date.

Why? As someone who has a key to my aunt’s place, my home, my parking garage, and a friend’s place I can tell you that I already forget which key is which. If I also had to figure out which key opened which rental property I would be standing in front of a house for an hour trying to find the right key. When you add to that the fact that you’ll find yourself changing the locks on the home every few years, you could end up with dozens of keys that don’t even open any doors anymore!

And, while you’re at it, why don’t you go to your local hardware store and buy a little container that is normally used for organizing nails and screws and use it to store the keys for each of your properties? Ahhhh simplicity.

4. Master the art of marketing. I’ve written about this over and over. In fact, in the February 2010 issue ofCanadian Real Estate Magazineyou’ll find an article I wrote on “Attracting the Best Tenants”. That article is all about marketing secrets to make your business successful at finding tenants to rent to. The bottom line is that you need to understand what the tenants in your area want. What are the features and what are the benefits of your property as they relate to the wants and needs of your tenants? This is often things like proximity to a good school, ease of access to public transportation or market specific needs like air conditioning or covered parking with plug ins for vehicles. When you understand what your tenants want you will have no problem composing compelling advertising that fills your inbox and voicemail with messages from prospective tenants.

5. Do whatever you can to reduce tenant turnover– it’s your biggest ongoing expense! Cutting corners will eventually cut your profits. If you try to show a unit without first getting it ready to be viewed, you’ll struggle to attract good tenants. In the end you’ll end up with lower rent rates and a more troublesome tenant renting from you. But the biggest thing you’ll find hurting you in the long run is tenant turnover. It’s almost always better to charge slightly lower than market rent to keep a tenant in there longer than it is to squeeze every dollar of possible rent out of the property but have tenants leaving annually. It’s also better to address tenant requests and concerns as quickly as possible. Keeping your tenants happy in their home and comfortable with you can result in loyal residents. Plus, we’ve found, our tenants are often the best source of other high quality renters. Because they are happy renting from us they tell their friends and we often get emails asking if we have any places available for rent because our current or former tenants have recommended us as landlords.

Many worn-out landlords look at their tenants as a pain in the butt. They weren’t prepared for the calls. They forget that their tenants are in fact the ones paying their bills and should be treated like the valuable customers that they are. They also don’t realize that simple systems like the one I mentioned for keys will make all the difference in streamlining and simplifying your business to make it easy. And finally, inexperienced or tired landlords probably have never taken the time to master the art of marketing to attract new tenants nor have they taken the time to try and keep the good tenants happy in their home.

If you tackle these five success secrets I am confident you’ll find yourself succeeding where other landlords have failed.

Published on February 10th, 2010

Property Management Isn’t for Everyone

December 10, 2012November 5, 2009 by Julie Broad

If you’re going to buy and hold rental properties – you’re going to have to deal with property management issues.

You’re either going to be a property manager yourself or you’re going to have to hire one.

Either way, this is a critical piece of the real estate investing puzzle. And it’s also an area where we’ve really made some mistakes, felt some pain and learned some lessons. In our latest group coaching call with our 12 Months to $1 Million members we took a bit of time to talk about Property Management.

In this 12 minute podcast, we talk about why Julie isn’t interested in being a property manager, why you should think long and hard about managing your own properties, and why it is a good idea to self manage your first investment for a little while.

Have a listen:

2012 Update: We no longer have our 12 Months to $1 Million Coaching Program. We’ve changed how we help. If you’d like to learn more about how we can kick start your investing or help you step into real estate investing as a full time gig check out our WORK WITH DAVE AND JULIE PAGE.

Published on November 5th, 2009

Tenants, Toilets, and Other Rental Property Repairs

December 10, 2012April 17, 2009 by Dave Peniuk

Being a rental property owner means dealing with maintenance, repairs and tenant upgrade requests. Even if you’ve hired a property manager, you will still have decisions to make regarding the upkeep of your property.

In general, you should set a maintenance schedule that keeps your property and the unit(s) in your property in the best shape possible. There are several reasons for doing this, but the biggest one is that a property that is kept in good condition attracts and keeps good tenants. The second big reason for doing this is that regular maintenance is often a good way to keep costs down. If you leave things unfixed for long periods of time it can cause other issues. For example, a leaky sink left unfixed could be damaging the cupboards and even the floor underneath the sink.

If you have a property manager ask about their schedule for doing the following things. If you manager your own property, then here’s a suggested schedule for checking on things.

Monthly:
Walk the exterior of the property and pick up garbage from around the property. Make sure the lawn is mowed, weeds are pulled and everything is in good shape. If you have laundry facilities, check that the lint is being removed from the dryers and take out any money if they are coin operated.

Quarterly:
Check windows, doors, and exterior of the house for any leaks or damage. It’s also a good time to check on the furnace or air conditioner and change filters.

Semi-annually:
Change the batteries in the smoke detectors, check carbon monoxide detectors, clean gutters, check appliances, plumbing and electrical outlets in the house. Check for things that might be loose as well (door knobs, railings, or screws). You aren’t looking for things to fix but you want to be aware of things that may require maintenance when a tenant moves out or trying to find little things to repair cheaply as a way to prevent bigger problems later on.

When tenants move out:
Have the carpets and drapery cleaned. Paint the walls if necessary (and usually it is), and get the unit professionally cleaned (including the stove and fridge).

Planning for this regular maintenance on your rental property makes things fairly easy. You will have a good idea of when major expenses like a new roof, a dishwasher or a paint job will be required. You can set aside a little extra rent money to cover these costs. The trickier part can be knowing when to make improvements to a rental property when a tenant is asking you to spend money.

In our Toronto tri-plex we recently turned down our tenant’s request for blinds in the living room of one unit. But at the same time, we agreed to put in a new toilet in another unit. Our tenants can easily figure out that we’re bringing in nearly $4,000 in rent per month from this property, so they may think we’re being stingy by refusing their requests. But, you have to keep in mind that, while you want to keep your tenants happy the money your spending needs to either prevent or reduce an expense or it needs to generate revenue.

In the case of a renovation or upgrade requested by a tenant, we ask ourselves a few questions when we’re considering whether to do the work the tenant is asking for:

What are the costs of not doing it (is the tenant likely to leave and what will that cost if they do?)?
Is there another way to address the problem?
Are there any issues with delaying the expenditure?

After we consider these things, we use a final formula to calculate how long it will take to recover our costs.

Total Cost of the Upgrade or Repair / New Money Earned (or Money Saved) each Month = # of months to repay the expense.

On items under $1,000, as a general rule of thumb, if you can recover the cost in 12 to 18 months then the money is well spent.

In the case of the blinds, the tenants wouldn’t pay more rent just to have blinds. Instead we agreed to pay for dry cleaning the curtains which will be less than $100. There’s no direct return on this – but the tenants wanted the “dirty curtains” replaced so this will keep them happy and it’s not a large expense – especially given that the tenants have been long term.

For the toilet replacement request, we decided that getting rid of the grungy old toilet will not get us higher rent, but it will make it easier to attract and keep good tenants. And, if we replace it now, our tenant’s father (an experienced plumber) will install it for free. Finally, we’re replacing a water guzzler with a low flush model (est. water savings of $10/month) that will qualify for a $75 water conservation rebate from the City of Toronto. The formula of benefits looks like this:

$250 – $75 rebate = $175 Cost of the Toilet

$175 / $10/month water savings = 17 months to pay off (PLUS we save $80 on installation).

The cost savings plus the added benefits of saving installation costs made it a very appealing use of our cash. Just remember – real estate investing is a business and you need to get a return on any money you spent – even if that return is simply in cost savings!

If you are managing a property yourself there’s some great books out there to help you. Two books definitely worth checking out are:

Property Management Kit For Dummies

The CompleteLandlord.com Ultimate Landlord Handbook (and we’re pleased to be hosting William Lederer in a teleseminar in June – sign up for our real estate investing newsletter for details!)

Also, some websites worth checking out to learn how to do some of the basic maintenance things:

*http://www.thefunplace.com/house/home/
*http://allabouthome.com/
*http://www.ehow.com/videos.html
*http://www.expertvillage.com/video/51_fix-leaky-faucet.htm

Finally, here’s a blog post I wrote last year about the difference you can make with some cheap hardware changes, paint and a bit of elbow grease.

http://revnyou.wordpress.com/2008/10/16/real-estate-renovations/

I know that’s a lot of information to digest and a substantial list of resources, but your monthly cash flow is dependent on you maximizing your rental revenue and minimizing your expenses – so this is pretty important stuff to know!

Published April 17th, 2009

How to Deal with Late Paying Tenants

November 30, 2013March 2, 2009 by Julie Broad

My youngest brother is in the process of putting in a suite in his basement, and one of his biggest fears is getting a troublesome tenant. He’s not alone in having these fears … many of our newsletter readers are dealing with that exact problem right now. We received an assortment of questions about dealing with troublesome tenants in the past couple of weeks. Most of them specifically asked about what to do to get tenants to pay rent on time. A few weeks ago we also received a long email from a reader about property management, income producing property and tenants.

Why dealing with tenants is like dealing with a bad cold

Rather than share all the emails with you, let me just generally answer all of those questions and say that there isn’t a great cure for problem tenants once you’ve got them. I guess it’s kind of like a bad cold. There are things you can do to get better faster and there are pills to take to reduce the pain and suffering, but you still have a cold until you finally get rid of it. The best way to deal with colds is to avoid getting them in the first place. It’s the same for troublesome tenants – the best cure is prevention!

We’ve talked about this in the past, see 5 Steps to Rent out your Property, but let me add a few other points:

Set clear tenant selection criteria that comply with regulations in your area. Good criteria could be, for example, someone that is financially responsible, shows respect for the property, and is likely to renew the lease after a year.
Only show your property in good condition. Good tenants have options. Shabby looking units attract poor tenants. Sure, you may lose 2 weeks or a month of rent, but that may be MUCH LESS PAINFUL and MUCH CHEAPER than dealing with a troublesome tenant.
Know the market where your property is located (is it by a University or a certain large business). Think about your ideal tenant that would be attracted to living in that area and write an ad that will appeal to that specific person. If you have a nice bright unit near a University and you know it would attract students, write your ad to attract quiet and peaceful people that will be doing a lot of studying at home and will appreciate the peacefulness. Then, price your unit slightly under market rates to help attract a wider variety of applicants.
Hold an open house to show the property. An open house saves time, interrupts current residents less, and can increase the sense of demand for the property.
Run detailed background checks on any applicants that you’re seriously considering. Confirm their identity, call their previous landlords, verify their employment (we like to call the company they work for AND get copies of their recent pay stubs) and check their credit and criminal history. There are several agencies in North America that will do these checks for a nominal fee. A quick online search will help you narrow down one that is suitable for you. Or if you belong to a property managers/landlord organization like ROMS BC, you may get a discount on these checks.

Using the criteria you’ve established and all of the information you’ve collected, select your new tenant! Then, if you still experience issues with your tenants, be sure to act immediately, consistently and if you can’t solve the problem, move them out!

Published March 2nd, 2009

8 Ways to Know if You Should Hire a Property Manager

December 11, 2012January 27, 2009 by Dave Peniuk

When you first start shopping for a property manager you might be shocked to learn what many of them charge. We certainly were!

You’ll usually pay between 5 – 10% of your monthly rental income to a property manager plus tenant placement fees which can be as much as one months rent. The price may seem astronomical at first. It certainly eats into your positive cash flow!

When you learn the cost, the desire to manage the property yourself and save money will be powerful. Saving a few hundred dollars each month may not be worth taking on the property management yourself though! Besides the fact that a professional property manager has extensive knowledge of the local laws and regulations, they also have access to the resources required to easily manage a property.

When we first bought our Toronto tri-plex, Julie was doing her MBA and thought she could handle managing the property while she was in school (Julie is shown in the picture above painting that Toronto Tri-plex – you can tell she is loving it!). We wanted to save money, and Julie had a flexible schedule with some free time so it seemed perfect.

We went to the property and met with each tenant, introduced ourselves and made sure we had the proper signed leases in place. After that, we both figured Julie would only have to deal with minor issues as long as the property was occupied.

We were wrong! The tenant on the main floor proved to be high maintenance and called weekly about different things she wanted fixed. And then, two months into owning the property, the frequency of calls from the tenant on the main floor began to increase dramatically. She was upset because as the weather got colder, the tenant beneath her was smoking in the unit and she could smell it. Her son had asthma and this was impacting him.

Julie contacted the tenants in the basement and explained that their lease stated that there was to be no smoking in the unit and that we’d received complaints. They were polite to Julie. However, they didn’t like getting scolded and – according to the main floor tenant – started taunting her teenage son when he would come home from school. They called him a tattle tale and made him feel threatened.

It’s a long story. It dragged out for weeks, but the issues escalated. Soon the two tenants were at war and Julie was receiving 20–25 calls a day. The police were called to the scene twice by the tenants on the main floor. It was a disaster.

And as luck would have it, this was happening during Julie’s final exams! Julie was pretty close to breaking down and couldn’t just tell the tenants to wait a week until her tests were done–she had to deal with it!

Julie pretty much lost it. She’s really a no nonsense kind of person and she hated dealing with other people’s problems. Failing an exam would mean she’d have to repeat a course and that could mean an extension of her degree–which would be time consuming and expensive.

She was fit to be fried. And looking back, it should have been obvious to both of us that Julie was not well suited for the job. She is organized, efficient and focused. Sounds perfect for property management doesn’t it? Well, not exactly. Anything that throws her off what she is working on at the present moment is an annoyance for her. She also doesn’t like talking on the phone. She’d prefer never to pick up the phone at all if she could avoid it. She likes people and she likes problem solving, but she doesn’t really tolerate people who are lazy or rude. Really, she has a lot of traits that make her well suited to HIRE a property manager!

To tell if you could handle the pressures and challenges of property management you’ll want to do a little bit of a self assessment. We’ve created 8 simple questions to ask yourself to see if you think you could handle property management.

Are you a reasonably tolerant person? Be honest with yourself.
Do you have any knowledge and experience with doing minor maintenance and repairs?
Are you able to sell and negotiate? You will have to sell the unit to renters, you’ll have to sell the idea of paying rent on time, and you will have to have the problem solving and negotiation skills of a salesperson in order to handle some of the issues that will arise.
Can you visit the property on a regular basis? You should stop by at least monthly so make sure it’s convenient and possible to do so. Plus, if you do get a 3am call that requires you get there right away, are you going to be able to?
Are you comfortable and capable of keeping good records? We’re a little weak at this ourselves, and we likely miss out on tax write offs because of it. It also takes us several days to prepare our books to send to our accountants each year because we aren’t as organized with our unmanaged properties as we should be.
Are you able to diffuse angry individuals and ease any tensions between them? How do you handle difficult people? When dealing with a difficult person do you get angry and frustrated yourself?
Imagine the busiest possible day, and then imagine having to handle a call from one of your tenants about a frozen pipe or a broken door lock. Are you going to be able to handle that situation?
Do you have someone that can be your back up if you take a vacation or go out of town? If there’s an emergency at your property, your tenants need to be able to get in touch with someone that can make decisions about the property.

If you answer “no” or “I don’t know” to three or more of these questions then you should seriously consider hiring help. Property management is a job that requires expertise, skills and resources. It’s possible to do it part time while working a full time job, but there will be days where it’s not easy.

These questions are not exhaustive. There are other things to consider when you make the decision whether to hire a professional or not, but spending a bit of time honestly answering these questions will really help you figure out if you want to be your own property manager. You may find the cost of a professional is worth every penny.

Five Ways to Protect Yourself from a Bad Property Manager

December 12, 2012April 5, 2008 by Julie Broad

We’re not too proud to say we made gigantic mistakes when we hired property managers for our Toronto and Niagara Falls properties. Our biggest errors happened before we even bought the properties, but we continued to make them until one day Dave was reading his name in the paper, calling him “an absentee landlord of a local crack house”, and we were making the discovery that our other property manager was robbing rent money from us.

When we realized what had happened in both situations we really felt stupid. And, financially both situations were painful. In fact, five years later, we’re still dealing with problems that arose because of the bad Niagara Falls property manager.

Mistake Number One: Dave bought (I take no responsibility for what he did with the two Niagara Falls properties) without making sure he could hire a reputable management company. Living two hours away, it was impossible for him to manage the property and he had to hire the only person that would take it on.

Avoid this mistake: Before you buy a property, make sure you are able to hire a good property management firm. There are some properties that good property managers will not manage. And if they won’t manage them, there’s a good chance they are more work then they are worth.

Mistake Number Two: When we hired the property manager for our Toronto property, we focused our research on finding the best priced manager. We glanced at references, made sure the company was registered with the better business bureau and that was about it. We were just anxious to not have to deal with the tenants that were fighting and calling us 20 times a day.

Avoid this mistake: Research your potential property manager obsessively. When you’ve found a firm that you think you’d like to hire, get references and find out what other properties they manage. Drive by those properties and see how well they are maintained. Take a walk around and hope to bump into a tenant. See if the tenant is happy with the property management company. And definitely call a few of the owners of these properties the company manages and find out if they would recommend the company.

Mistake Number Three: Once we hired the property manager in Toronto, we washed our hands of it. Grateful not to be dealing with the tenants fighting, we happily stopped thinking about it.

Avoid this mistake: To start with, frequently contact your property management company. And, once in awhile check in with your tenants. Let the property manager know you are keeping in touch with the tenants and checking the property yourself on occasion. Ensuring the property manager knows you’re involved and that he’s accountable will keep him on his toes.

Mistake Number Four: Ignoring a unit that is always vacant. In Niagara Falls there was one unit we never collected rent for. When Dave checked on it, it seemed someone was living there. Turns out the property manager was letting a buddy crash there for free. This buddy attracted working girls and drugs to the building with a greater frequency than the other tenants. So not only was he freeloading, he was bringing the property down with him.

Avoid this mistake: If there is one unit that always seems to be vacant, check on it. Visit the unit or have someone else visit for you. Confirm that it is vacant. If someone is living there, you want to find out why you aren’t getting rent for it. And if it is really vacant, you need to see it yourself to find out why and fix the problem.

Mistake Number Five: While we never did prove it, we’re certain that the same manager that robbed rent money from us (See our story on what happened) also charged us for repairs to the property that never were done. Anything to scam a few extra bucks from the unsuspecting owners.

Avoid this mistake: If you are being charged for snow removal, check the weather history and make sure it actually snowed that day. If you are being charged for repairs, get receipts or photographs of the repairs. One tip that David Lindahl had in his book “Emerging Real Estate Markets” was to have the management company take a picture of the repair with the local newspaper next to it. This way he has proof of the date, and he can see what the repair actually was. It prevents being charged for the same repair twice.

We’ve learned a healthy dose of paranoia goes a long ways. So trust your instincts, but check them too. A few extra phone calls and a few extra steps here and there can save you thousands of dollars a year.

Published April 5, 2008

April 21st, 2008 UPDATE

After we published this article, we received an email from our Nanaimo property manager. He had a great suggestion regarding our advice to check in with your tenants to ensure your property manager is doing what you hired them to do:

I caution all new clients not to contact their tenants direct under any circumstances! I have many tales of woe on this and not one where there was a benefit. The few that disregarded my advice were quick to ask me how to get out of the problems contacting the tenants had created.

The property manager is the middleman and frequently the “no” man. If the tenant has the owner’s contact info they will not take no for an answer. (Then it becomes a “he said, she said” game.) It is amazing what a tenant or an owner thinks the other promised and I have no way to guess the real story which may be somewhere in between. Why open up that can of worms?

I suggest making an appointment to view the home with the three parties in attendance. You get to know each other and the property but keep your comments to the weather. The meeting is warm and fuzzy.

When we received LW’s email, all of the memories of a disgruntled tenant that found Dave’s phone number through information came rushing back to us. Being in B.C. and three hours behind Ontario’s time zone where the tenant lived, we found ourselves getting really unpleasant 5am wake up calls on many mornings. We really like LW’s suggestion, and believe that a meeting with all three parties in attendance would keep the property manager in the middle, where they should be, while providing an owner with the necessary reassurance that the property manager is doing the job they’ve been hired to do.

So thank you LW for your great feedback. Keep it coming!