1 Rental properties: Do it legally, or don't do it.
Just because you have space for a renter doesn't mean you're allowed to get one. Some municipalities don't issue permits for secondary suites. If you build one anyway (there's always a contractor out there who will do work without permits), and you're discovered, you can be forced to pay fines and even dismantle the rental property.
Besides zoning issues, "a prospective landlord must verify that a second unit meets the requirements of the fire code.
All the info you need to know It's just a phone call, and it could save you a lot of headache. Do your homework!
2 You probably won't pocket the entire rent—it's taxable and there are expenses.
You'll need to issue a receipt to your tenants for the rent they pay on their rental property, and they may use it to claim a deduction on their income tax. Even if they don't, you're expected to declare the rent as income and pay tax on it accordingly. Tax aside, landlords face other expenses. On average, plan to spend the equivalent of a couple months rent every year on home maintenance and upkeep of the rental property (painting and cleaning services when tenants move out, appliance repairs, and fixture upgrades or replacement).
3 The space you have might not attract the tenants you want.
Especially if you share common areas like a driveway, foyer or yard, you want to be extra careful about who you get in there. Make sure your electrical service can accommodate more people (you might have to upgrade from 100 amps to 200); consider a larger water tank so the tenant won't knock on your door because they can't shower when you do laundry. Don't spend lavishly on decor, but make sure the apartment is one you would want to live in—that way you're more likely to land a tenant. Prospective renters often try to negotiate the rent and extras, like new paint.
4 Once they're in, it's hard to get tenants out.
Rules vary across the country, but all renters are protected by provincial legislation and governing bodies, and the requirements for eviction are high for good reason: No one should feel their home could easily be taken away. "As a landlord, you should be knowledgeable of the Residential Tenancies Act," says Helene. "Tenants are very knowledgeable of their rights under this act."
Also, tenants can leave before a lease is up (usually by giving two months notice), so you want to ask questions to determine that they're staying a while. Why? The longer you keep a tenant, the cheaper it is for you in the long run: when tenants move out, you need to show the space, get repairs done and wait for the next appropriate candidate. This can take weeks during which you won't be collecting rent.
Remember, too, that you can't protect yourself from all risk. You can—and should—ask for first and last month's rent when your tenants move in, but a security deposit to cover holes in walls, broken appliances or ruined hardwood, is not allowed in some provinces. Familiarize yourself with the rules in your area or you could unwittingly break the law.
You should also know that not all clauses in a lease are binding. For example, if you write into the document that there are to be no pets or children in your building, and your tenant agrees by signing, but later gets a four-legged companion or a bundle of joy anyway, you can't evict them.
5 Showing your space and finding the right tenants is tough work.
A prospective landlord, especially a first-timer, should consider the services of a realtor.
You'll pay her the equivalent of a month's rent, but the agent will assess your space to determine a realistic price; she can draft a listings write-up and post it on realtor.ca and MLS, which is accessed by tens of thousands of real estate professionals, many with clients who'd like to see your space. We try to screen all the inquiries about your home and applications.That means credit checks, getting an employment letter and contacting prior landlords to see if there is a history of NSF cheques, too. If you decide not to use a realtor, be prepared to do that rigorous investigating on your own. And since time is money, you should factor that legwork into your balance sheet.
6 A rental unit won't necessarily add to the value of your home.
Some home renovations are almost always worth the investment: an updated kitchen or bathroom, for example, or new paint and floors. But some aren't: swimming pools or saunas, usually. So if you love and use them, go ahead and install them for your own enjoyment, but don't think of them as an investment. Same goes for a rental unit.
If you do construction without permits, future owners of your home will have to contend with that. If they can't rent the space out, or don't want the risk since it's not legal. They might use that as a negotiating tool to get your asking price down.
7 Landlords should be handy.
If you can't deal with a blown fuse or a clogged toilet, if standing on a ladder or bending under a sink freaks you out, you could have problems.
Here's why: if tenants confront even a small a problem (a leaky faucet, say, or a light that won't go on), they don't have to solve it, they just have to call the landlord. If you can't handle the work yourself, you need to find someone who can. If you're buying new appliances, pay for the extended warranties. It's one thing to manage your own space and problems, but add someone else's washing machine to the mix and it can get to be too much. Extended warranties, besides being a tax write-off against rental income, mean fewer headaches for you.
8 Being a landlord is a part-time job.
But work can be rewarding, so if you do it right, it can pay off—and not just with the extra cash (although that's the main reason, let's be honest). Finding the right tenant is key!
3 worthy resources for prospective landlords
Check out the Provincial and Territorial Fact Sheet for rental authorities in your province, covering guidelines for eviction, as well as rights and responsibilities of landlords and tenants.
2 Landlord's Self Help Centre
Membership allows you to access copies of rental applications and tenancy agreement forms.
3 Rent Check Credit Bureau
If you're not using a realtor, you may need to pay to access the information you need on prospective tenants. This is a good place to start.