The Landlord and Tenant Board Ontario plays a major role in the relationship between landlords and tenants.
With the rise in house prices and cost of living, many home owners are turning to additional sources of income. One of the most popular trends we are seeing is becoming a landlord. But, it’s important to know rules around becoming a landlord. Many home owners are converting a portion of their home into an apartment. Learn more about this by reading our House Hacking blog.
However, many of these home owners have never been a landlord before and have no idea how to go about it. Below we will go through some things you need to consider before becoming a landlord.
#1 Know Provincial/Municipal Rental Rule (Landlord and Tenant Board Ontario)
Each province has different rules when it comes to rental properties. Locally it’s best to consult the Landlord and Tenant Board Ontario. One example is that in Ontario landlords are unable to demand a damage deposit however landlords in Alberta are. In Ontario, the Landlord and Tenant Board is the best source of information for rules and regulations. The Ontario government has also introduced a standard lease all landlords must use. It is also a great source of information on wide variety of topics. Many municipalities also have rules landlords must follow.
#2 Check With Your Insurance Provider
It is a good idea to let your insurance provider know you plan to rent out a portion of your home. You may or may not be covered with your current policy. Another good thing to know is your insurance policy does not cover your tenants personal property.
Tenant have the option of purchasing tenant insurance which would cover their belongings. While it is not legal to mandate your tenant has insurance, it is good practice to recommend it.
This is also important if you are creating a legal apartment within your own home (also known as an accessory apartment or duplex). There are different insurance policies around these setups and the last thing you want is a nullified insurance policy.
#3 Know your Finances, including the term “cashflow”
While renting a portion of your house for a monthly rate is pretty straight forward, the rental should be treated as a business. You can deduct certain related expenses from your gross rental income.
These include mortgage interest, property taxes, insurance, maintenance costs, property management fees and utility bills (unless the utilities are your tenant’s responsibility).
If your expenses end up exceeding your rental income in a given year, you may be able to deduct this loss from any other sources of income you have, provided you have a reasonable expectation of profit. However, you should discuss this with your accountant.
Also remember, as a rental property you’re required to put 20% downpayment on it. Many landlords and investors forget this and then find themselves in trouble when it comes time to get a mortgage. Read: what’s the difference between a deposit and a downpayment?
As a landlord in Ontario, the goal is that the rent you bring in covers the cost of all the expenses. This is known as cashflow. If your property does not cashflow, it’s known as “cashflow negative”.
Landlords sometimes think they can just increase rent as required to make cashflow. However, there are very strict guidelines determined by the Landlord and Tenant Board Ontario about this.
#4 Choosing the Right Tenant
Everyone knows stories of nightmare tenants who generate endless noise complaints, damage property and even stop paying rent. However, there are a couple things a landlord can do to try to reduce the chances of having one of these tenants move into their home.
- Advertise in rental listing credit and reference check
- By doing this, it will help weed out applicants not willing to consent to a credit check and/or they know their references will not help. Also, helps deter applicants that lie on their application.
- Credit Check
- By checking the potential tenants credit you are able to get a bit of an understanding of their pay habits. You are also able to compare the personal information of your applicant from the tenant credit check to the personal information provided on the rental application.
- Ask for employee and past landlord references
- This allows you to get their bosses perspective of the applicant and verify income. Additionally, you are able to ask the previous landlord how the applicant was as a tenant. Did they pay on time, did they damage anything, etc.
#5 Prepare for the Unexpected
You never know when something unexpected is going to happen with your house, like needing a sump pump. By having a list of trusted trades people (plumbers, electrician, handyman) it always you to react to the issues more efficiently. This will also help reduce the amount of time you inconvenience the tenant.
Beth and Ryan always recommend to put money into your home and proactively. By increasing equity through top home improvement projects, you’re going to get more for the home when you sell it.
Build a Good Landlord-Tenant Relationship
It’s not always about strictly following rules from the Landlord and Tenant Board Ontario. Once you find a good tenant, you will want to hold onto them for as long as possible. One way to help with this is periodically checking in with your tenant.
By simply seeing if everything is ok in the rental unit it demonstrates to the tenant that you care. Another way is by being responsive. When they bring an issue to you attention, be sure to look into it as soon as possible. This is where having a list of trusted trades people comes in handy.
Know basic handy things
Being a landlord doesn’t mean you have to excel in trades. But it does mean that you will need to know (or learn!) a few basic things. Knowing these things will save you money in the long run:
How much does it cost to rekey a lock?
This is a very common question when a new tenant moves into a property. It’s very difficult to give an exact answer as all scenarios are different. However, we’d say it’s about $250- $300 in a typical situation. It depends on whether a locksmith is required, whether you cut your own keys. It also depends on whether it’s just a new key or a whole new lock mechanism.
How much does bath fitter cost?
A bath fitter acrylic liner looks exactly the same as installing a new tub with demolition renovation. In some cases, it’s installed right over existing tiling in just one big piece. The cost varies given your situation but a cost of $3000-$5000 should be sufficient.
Buying a house with mould in attic?
This is more common than you’d think. Part of the issue with mould in attics come from bathroom shower moisture. If there is no bathroom fan, or it’s not working you’ll get attic mould. Check to ensure your attic has proper venting. There are a number of solutions, including adding fans and vents. Alternatively you could have a mould remediation company come and deal with the issue.
This is not a complete list of everything you will need to know about becoming a landlord however it does touch on some of the more common topics. If you have any questions about being a landlord or finding a tenant, feel free to ask! Beth and Ryan, best Guelph real estate agents can be reached here.
This is part of a series called 23 Most Common Real Estate Terms (2022)