Buying an investment property in Vaughan can be a very smart choice if you have the capital and the capacity to do so. Investing in real estate with the intention of renting it out is a long-term venture and can yield great financial returns.
Apart from the money invested, you’ll need to have the will and commitment to weather the ups and downs of being a landlord. Landlord/tenant relationships can be complicated, but with a good plan, open communication and a business approach, your rental can be a successful venture.
#1: Treat your rental like a business
Approach your property with a business mindset. Before you purchase, you should be aware of the potential cash flow. Consider your mortgage costs, property taxes, insurance and maintenance fees, then set those costs against the rent you can reasonably charge. Decide if you will include utilities or if your tenant will cover that separately. Choose a property based on its income potential, not only on the popularity and desirability of the neighbourhood. If you need help deciding on what Vaughan Neighbourhood to invest in, click here to learn more about neighbourhoods in Vaughan.
#2: Know the provincial rules
Landlords and tenants both have responsibilities, some which are bound by law. In Ontario, the Ontario Residential Tenancies Act (RTA) governs the relationship between a landlord and a tenant, outlining the tenant’s rights and the landlord’s rights. Amongst a host of issues, the legislation outlines in detail such things as maintenance, repairs, and evictions. The Landlord and Tenant Board is the body that settles any landlord and tenant disputes.
A lease needs to be signed at the start of tenancy, and it should outline the terms of the lease, the length of the lease, what the monthly payment is and any other conditions of the tenancy. It’s important to note tenants have a right to privacy. When a landlord requires entry to the premises, due notice must be given (sometimes in written form). Rules and guidelines for this notice are usually contained in the rental agreement.
#3: Screen potential tenants and cultivate the relationship
One of the biggest concerns for new landlords is finding the right tenant. Be prepared to spend some time (and possibly money) vetting your potential tenant. Your goal is to avoid unpaid rent, property damage and other complaints. Conduct credit checks (available through agencies like Equifax) and ask for references from employers and past landlords.
Once you’ve found great tenants, your goal is to hold on to them for as long as possible. Taking care of your wonderful tenants like they are employees of the month will build trust and loyalty. Some landlords send gift cards at the holidays or leave a move-in gift. Being responsive to maintenance issues and being aware of any special needs your tenants might have (as in seniors who need the driveway cleared for them) will go a long way to securing tenants for years.
#4: Terminating a tenancy and evictions
Telling a tenant they need to go is not an easy task. In Ontario, there are well-defined guidelines for terminating a residential tenancy. The Residential Tenancy Act outlines the conditions under which a landlord can evict a tenant. As with any proceeding, a landlord will need to be prepared to work through the red tape of the system and will require patience and perseverance.
A tenancy can be ended “for cause” under the following conditions:
- Not paying the rent in full
- Causing damage to the rental property
- Disturbing other tenants or the landlord, and
- Illegal activity in the rental unit or residential complex.
There are other reasons for ending a tenancy that are not related to what a tenant has done. These conditions are listed as “no fault” reasons:
- The landlord plans to do major repairs or renovations that require a building permit and the work cannot be done unless the rental unit is empty
- The landlord requires the rental unit because the landlord, a member of the landlord’s immediate family or their caregiver wish to move into the unit, and
As of April 2018, Ontario implemented a new form a landlord needs to have prepared. The Ontario Standard Lease Agreement is a comprehensive document that creates a contract between the landlord and tenant while covering the most common clauses and conditions.
#5: Security Deposits, other charges and raising the rent
Often called “last months’ rent”, landlords are within their rights to ask for a security deposit before a move in date. The deposit is kept by the landlord for the duration of the rental period and may be applied to pay the last month rent when due or to cover the costs of any damages to the rental.
Other scenarios where landlords can charge additional fees include:
- A deposit for keys or an access card (deposit must be returned).
- A penalty fee for rent cheques that come in as NSF (not sufficient funds).
However, landlords may not ask for other deposits, added charges, or advance payments of any kind. Tenants are not required to provide post-dated cheques (or auto payments) but may decide to do so.
With respect to raising residential tenant rent, landlords should know the rent increase guidelines for their jurisdiction. These guidelines are revised and updated on a regular basis. Rent increases are provincially regulated (usually around 2%), and rental rates can usually be increased one year after moving in, or one year after the last increase.
An investment property can be profitable, provided you follow the rules, treat your tenants well and take care of the property. As a landlord, you are required to declare all rental income to the CRA (Canada Revenue Agency). Expenses can also be declared, whether they are short term like maintenance and repairs, or capital expenses such as HVAC or windows replacement or installation.
Having all your questions answered before you invest in a rental property can help you be a successful landlord. I have my own investment story, which I shared in my blog. If you have any questions or need help determining the right Vaughan investment property for you, please reach out.