Renting Out Your House: How to Live for Cheap (er)

counting coins

Looking for a way to buy a home to live in without having to carry a giant mortgage on your own income? Buy a multi-unit property like a duplex, triplex or fourplex and move into one of the units. A well chosen property can find you living in a much better area than you could have afforded otherwise and paying a lot less “rent” than you would have otherwise done.

We did this in Toronto for a few years. We moved into a three-unit property that we owned. Our friends moved into the top floor; we lived on the main floor; and we rented out the basement to some university students.

The key benefits:

  • We did live for cheap. Our “rent” was substantially lower than it would have been if we had rented the same property;
  • Parts of our home expenses were a tax write–off, thanks to the rental income;
  • We got to live in the very desirable Little Italy area of Toronto, only minutes from a subway stop. We were also right across the street from a large off-leash dog park (which our dog Bram would stare at longingly as he sat in front of the window.)

The money we saved went towards some of our other investments, paying down student loans, and renovating this property to increase it’s value and generate more rent in the future.

It’s a great way to get into the rental market business, build your wealth and reduce your personal living costs. You’re also able to keep a really close eye on your rental and take better care of any issues that may arise.

The major drawback of living in your multiple unit rental is that the burden of managing the property and dealing with the tenants. Tenant selection is just as critical when you, the owner and landlord, are going to be living on site.

When we first moved in, we didn’t select our tenants so carefully in the tri-plex and the lessons we learned the hard way became one of the founding reasons we started Rev N You and I wrote More than Cashflow. We created a lot of problems for ourselves that were preventable!

While we were living in this property, our tenants in the basement were constantly fighting. We were often being called in to play referee until one morning at 3 a.m. it all came to a climax when one of the basement tenants pulled out a butter knife and threatened her roommate with it. The tenant without the knife was terrified, called the police, and moved out in the morning.

The knife wielding tenant stayed in our basement for two months after this but stopped paying rent. Imagine the joy we felt living above an unstable tenant who also wasn’t paying rent.

And worse for us was the fact that we could have avoided all of this by making better tenant choices.

The point here is to let you know that there are tremendous advantages and disadvantages to living in your investment property while renting out the other units to tenants. It is a great way to live for less and possibly enjoy a better home or area than you can otherwise afford. Nevertheless, as noted in the above, small residential properties with two, three or four units are a great option to consider.

Canadians – word of caution for your taxes when you use this strategy:

If you do decide to live in a property that has been a rental or will be a rental for you and you decide to call it your primary residence to avoid paying capital gains taxes on the value increase that takes place while you live there, you cannot depreciate it when it’s a rental only. If you do depreciate it, you can’t claim it to be capital gains exempt, even for the period that it was your primary residence. Plus you want to get clear on what you can and should write off, and how you can determine values for when it’s your own home versus a rental. A few hundred dollars spent on good advice could save you thousands in taxes.



What to Bring to a Tenant Showing

Rev N You Man

What to Bring to a Tenant Showing as a Landlord

On the weekend we began showing our latest rent to own home to prospective tenant buyers. Dave’s been sick for over a week now, and I’ve been a bit overloaded trying to do some of his work and and keep up with mine (at least that is my excuse for what I am about to tell you).

I dragged him out to the showing even though he wasn’t feeling well. It’s difficult to do a busy showing solo – especially when you have to be on your toes enough to get a sense of someones income and financial situation to do a preliminary screening.


We showed up 40 minutes early because we’ve learned that REALLY keen rent to own tenants show up 15 to 20 minutes early. When we walked in we both realized that many of the light fixtures weren’t back up after the painting and the downstairs bathroom was still missing face plates, toilet paper rolls and towel bars after the reno.


The bad part? I had walked through the property two days before and didn’t notice these things. When I had walked through I was checking on renovation garbage removal, kitchen cleaning and the carpet cleaning. I totally missed the light fixtures and little odds and ends in the one bathroom.


So there we were … 20 to 40 minutes before the tenants are to show up and the place is not in what we consider to be show-ready condition.


Well, this is why we show up early, bring tools, cleaning supplies and a get ‘er done attitude.

We set to work … and with the exception of a few light fixtures that were too high to reach without a ladder, we had the place ready. And I got to thinking that we should create a checklist for ourselves and for you, of everything to bring to a tenant showing just in case your walk through before misses something (or somethingS!).
    1. Multi-head screwdriver
    2. Hammer
    3. Lysol wipes or nice smelling cleaner & rags (I like Method Grapefruit cleaner personally)
    4. Pens
    5. Tenant rental applications
    6. The property inspection report (this is more important for Rent To Own homes than a regular rental)
    7. Receipt book (although we don’t normally take a deposit without screening our tenants if there are multiple people that want it that is what we’ll do to set up a first come first serve type of arrangement)
    8. Black plastic garbage bag (for last minute trash pick up)
    9. Extra lightbulbs (there ALWAYS seems to be a bulb out that wasn’t out before!)
tenant showingOther people recommend things like fresh flowers, a bowl of candies and air freshener. I could add them to the list but truthfully we never have them. We do have a box in our car that has a stapler, scissors, tape, black felt markers, paper clips, business cards and some other office materials which comes in handy … but we don’t bring it in. We also usually have a drill, garbage bags, doggie bags and two dogs in our car! :)


When you arrive for the showing: open some windows to get fresh air in, turn heat or air conditioner on to make the home comfortable. Turn on lights in every room, open blinds and curtains, and put on a smile!


We generally show our homes vacant so we do everything we can to make the home look and smell fresh, clean and well maintained. And ever since we ONLY showed homes like this we’ve found it MUCH easier to attract great tenants that pay us the rent we want to get for a home.


By Dave Peniuk

Tenant Screening Checklist

Tenant Screening Checklist

Most of the real estate investors we’ve met that are selling all their property are usually doing it because they are tired of dealing with tenants. It’s the same reason a lot of people we know are scared of becoming real estate investors. They have heard horrible stories of bad tenants. And we totally understand. When we had bad tenants we had many conversations about selling everything we owned and getting out of the real estate business.

Most of the people that contact us with hard to rent properties or bad tenant stories have made one of two mistakes. They’ve bought a property that doesn’t easily attract good quality tenants (or bought a property with bad tenants in place) or they made an exception to their tenant selection process and let someone move in that should never have been approved.

We’ve had all of these problems happen to us. We eventually just sold the properties that never attracted the good tenants  and started following very strict tenant selection criteria. No matter how anxious we are to get cash coming in on a property we won’t deviate from our criteria. We know how badly that can go so we’ll happily wait another month to get the right tenant in a property.

And you know what? It’s working really well! Our tenants aren’t perfect but most of our tenants are pretty awesome! They care about the home, take care of it, pay their rent on time and respond to us when we need them.

So what do you need to do to select the best tenants from your pool of applicants? Here’s a checklist to help you.

Tenant Screening Checklist

1.Tenant Application with Signed Consent permitting you to do a credit check and reference checks (you may also want to have a separate letter signed by the prospective tenant authorizing you to verify their income from their employer).

Most states and provinces have application forms that are ok to use for that area or a local landlord association will usually have one you can use that is legal for use in your area. We also recommend you have each person over 18 that is going to live in the home complete this form and provide you with their consent. And make sure all children and pets that will be living in the property are named on the application and in the lease (with their birth dates).

2. Confirm their identity by asking for their Provincial or State Issued Drivers License. We usually snap a photo of it so we have a copy for our records. The big thing we look at is that their license confirms they are who they say they are and that the address on the license matches the address they’ve given us and shows up on their credit report!

3. Credit History: The score matters but it’s really not just about their credit score. You want to use the credit report to see if they are generally responsible with their use of credit, if they have a bunch of people after them for payments, and if there are any gaps in their credit history which could be an indication of a bigger issue like incarceration. If someone has filed bankruptcy in the past that doesn’t mean we wouldn’t take them as a tenant. What’s more important to us is what they are doing with their credit and their finances AFTER they’ve filed for bankruptcy. If they have filed bankruptcy in the past and again are in financial trouble then that is a giant red flag for us.

4. Income and Employment Verification: This one is tricky because an employment letter is easily forged, and many of the larger companies or government affiliated companies will not tell you anything about an employee. Even with the written consent of their employee they still will not tell you anything except to verify that person works at the company. So this one is not always straightforward but here are a few of the things we do to get as much information as possible.

  • Google the name of the person in quotes. For example“Dave Peniuk”. If hundreds of results come in, specify a city. Type in“Dave Peniuk” Burnaby. Sometimes you’ll find a reference to the person on a company website, a LinkedIn Profile, a Facebook Profile or some other online page that can give you more information and possibly verify the information you’ve been given.
  • Find a number for the company they work for using the phone book or an online search.We never bother to call the number the person gives usto call because there is no way for us to know that it’s not just a friend’s cell phone. At least if we track down the company number ourselves and get to the person who can verify that the tenant works there we feel pretty confident that part of the application is true.
  • Ask for a pay stub to verify the income if you’re concerned. Keep in mind that painters, servers, and other service professionals may actually collect a lot of their income in cash so their pay stubs may not be a real indicator of their income.

5. Rental History: Basically you want to see how often they move. If they have moved a lot then, unless there is a good reason the moving will stop, you can expect a short term tenant. You also want to make sure that all the information you have checks out with where they say they’ve lived. Finally, look for gaps. If you discover an address is missing or there is a time period where they don’t have an address listed you’ll definitely want to find out why they didn’t disclose it. Was there a dispute with the landlord? Were they out of country? Or were they somewhere that they didn’t want you to know about?

6. Do they have a story? This is a BIG one. The most troublesome tenants we’ve ever had have been the ones that had big stories right from the beginning. If you have a tenant with a story listen carefully to the story. Are they blaming other people for their situation? Are they giving you a big story about their last landlord being evil? If you’ve asked about gaps in their employment, missing addresses in their history, or a credit issue and the answer has been a story that sounds a lot like it’s all someone else’s fault then you probably want to run quickly in the other direction.

7. Do they do what they say they are going to do? The best tenants show integrity and accountability from the start. Do they show up to see the property on schedule or maybe even a little early? Do they deliver the application and deposit when they say they will? Do they return your calls or emails promptly? Tenants that do not do these things in the beginning will never do these things later on.  And tenants who ask for a bunch of exceptions and make you work super hard to convince them to rent from you are usually the first ones to complain, first ones to ask for exceptions when they make a late rent payment and the first ones to cause you a ton of grief. Look at how the tenant is behaving and ask yourself if this is someone with integrity, accountability and respect for others? If they do what they say they are going to do you’re off to an excellent start!

You may be wondering where references are on this list. It’s not that we’re saying you shouldn’t check references but we don’t put much weight in references. If someone asked you for references are you going to give them a nice cross section of people to call or are you going to give them the best people? And landlord references aren’t usually worth much either. Right or wrong, we only half-heartedly check landlord references. Mostly we just ask for landlord references to see what the tenants will say. The reality is we’ve found that current landlords never say anything to deter you from renting to someone so we rarely bother to call.

Even if the tenant is bad the current landlord is not likely to say so – after all they want them to move out! We will call past landlords (that is, the landlords before the current one) because they may be more up front given that the tenant is not trying to leave their premises right now but we usually do this as a final check, after we’ve gone through everything else. By this time we’re pretty confident that the person will make a great tenant, and the past landlord usually just verifies that fact.

Hopefully by using this checklist you’ll have an easier time screening your next tenants. And with better tenants we’re pretty sure you’ll be a much happier investor!

Published November 4th, 2010

How to Deal With Tenants


How to Deal with Tenants

I hate it! I absolutely hate it. I just don’t know why he would do it that way. Now when my garage door is open I have to make sure my child doesn’t wander into the alley and get hit by a car. It’s just not safe now. I feel so exposed. I don’t know why you didn’t consult with me about it. I have no privacy now. It’s totally ruined my back yard.”

I wish that were the entire diatribe but it wasn’t. It went on and on. I tried to patiently let her finish but I eventually felt my frustration rise and interrupted with “I thought you were only going to use it to store a boat – I didn’t realize your daughter would be playing in the garage every day.

Which just caused the above sentiments to be repeated with more detail as to what the garage would now be used for in addition to storing the boat.

I realized I was letting my emotions get in the way of this conversation and forced myself to shut up and take a deep breath.

What had happened was our tenant had moved into a home of ours that had a garage off the back lane way that was fenced off. When she moved in we acknowledged that if she wanted to use the garage for something other than just a workshop (which is what it had been used for to date) we would put a gate in the backyard for her.

Turns out creating a gate was not going to be as simple as we thought. The driveway was upward slanting toward the garage (making inward opening of a gate challenging), the fence was not a good size to be easily hinged and turned into a gate, and there were posts in all the wrong places. It was basically going to require a rebuild of the back fence to make it work and the purchase of a gate. If you’re going to go to all that trouble, to me, you should put in something that will be easy to use not something you have to get out of your car and drag open manually whenever you want to go in and out. And, we weren’t going to spend the thousands and thousands of dollars that it would cost to do that.

After looking at what other folks on the lane had done, I decided to simply move the fence to open up the garage.

The whole thing took our carpenter half a day to do and less than $100 in materials. And I thought it looked great.

Dealing with Tenant Complaints

Our tenant, however, did not.

But by the end of the conversation she had calmed down and was thanking me for getting her access to the garage so quickly and she apologized for freaking out.

So how did that happen?

How to Win Friends and Influence PeopleI have to thank some precious advice I took from Dale Carnegie’s book “How to Win Friends and Influence People“.

In his book he says “I have come to the conclusion that there is only one way under high heaven to get the best of an argument – and that is to avoid it.”

So how do you avoid an argument?

It’s not easy – believe me – every bone in my body was getting defensive, my temperature was rising and I was feeling myself change from a calm state to an agitated one. And, like I said, I actually did have an uncontrolled outburst but I quickly got myself under control and remembered the lessons I’ve been learning from Dale Carnegie, Brian Tracy and Robert B. Cialdini and others. I bit my tongue and let her speak.

In a calmer mindset I realized how shocking it probably was for her to come out to her yard and discover the fence had moved. It was not what she expected to happen. I also realized that I should have consulted her about what we were going to do even though I likely would have made the same decision.

When she was done I said in the calmest voice I could pull together, “I am so sorry. I made the decision to move the fence– not the carpenter. It turned out it was actually rather complicated to put a hinge on the fence when we thought that would be simple. It would have cost thousands and resulted in a big gate you’d have to lug open every time you wanted in and out of the garage. I thought this would be so much better and it was easy to do.”

She had more to say but she was nicer about it now. And she started to apologize for being so angry. She said “I just don’t know what I expected but it wasn’t this. I just wish you would have asked me. Maybe I could have helped solve the problem.”

After a few more minutes of discussion our tenant then said to me “You know, I am sure in five minutes I will be used to it. I just wasn’t used to it. Thank you for fixing my fence so fast.”

Carnegie also says:

“You will never get into trouble by admitting that you may be wrong. That will stop all argument and inspire your opponent to be just as fair and open and broadminded as you are. It will make him want to admit that he, too, may be wrong.”

And that is just what happened.

So next time you find yourself faced with an angry person- tenant, spouse, relative or neighbour give these tips a try and maybe the result will be better than you could imagine. So far it’s working for me!

  1. No matter how hard it is –do not get involved in an argument. Even when you know the other person is wrong, avoid saying so. Instead, ask yourself “What is to be gained by proving them wrong?”.Usually the answer is your own sense of pride – which really isn’t that important. What is almost always more important is that relationship.
  2. When you are wrong – even in the slightest way – admit it wholeheartedly and quickly. Any fool can try to defend his or her mistakes – and most fools do – but it raises one above the herd and gives one a feeling of nobility and exultation to admit one’s mistakes” (Dale Carnegie).
  3. Let the other person talk more than you do and listen. Really listen and try to see how you would feel in their shoes. Consider their view point, be sympathetic even, and you’ll usually have a much easier time staying calm and listening to the other person when you do this and the other person will feel truly heard – which 9 times out of 10 solves the problem anyway.

I never offered to fix the fence or do anything further. I simply listened. And when I was done listening, I acknowledged my responsibility in the situation, apologized for what I had done, and let her know that I could see where she is coming from.

I wonder how many times in the past I could have used this and saved myself energy arguing, time fighting with the tenant and money spent fixing things that didn’t have to be fixed only to make problems go away that could have been solved with some simple alterations to how I handled the initial conversation?

Published August 25th, 2010

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