Choosing the Right Tenant

So many people buy homes and decide to rent out their places to make extra income. It seems like the perfect plan. Buy a home, rent it out, have your tenants pay for your mortgage then repeat this strategy. But man oh man is this difficult to accomplish properly.

In the world we live in today landlords are seen as evil, money hungry, selfish human beings. I’ve read so many stories of crazy, unreasonable landlords making their tenants lives miserable. I vowed to myself I would not be like this. I would be fair and kind, I would be understanding of difficult situations, and I would give second chances. I’ve been a landlord for 2 years now, if I have learned anything from my experiences it is how dumb and naive my way of thinking was.

You come into this wanting to give everyone the benefit of the doubt, but people are broke and desperate, they’re manipulative, and step all over you if you’re kind to them. I truly believe high school should make business 101 a mandatory course for everyone to take before graduating. I never took any business classes, I didn’t have anyone teach or guide me on how to deal with tenants, and I had zero experience coming into this. Here’s an obvious tip when running your own business; do not make any decisions based on your feelings. Making the right decision for yourself won’t make everyone happy, it may seem selfish, but how is setting rules and expectations and expecting them to be followed and met selfish?

Do Your Research

When choosing the right tenant(s), even if you’re using a real estate company, and the tenant has an agent, do your due diligence. That means ask for recent pay stubs, ask for a job history (you wouldn’t want someone whose working a contract job), ask for references from past landlords, check if the tenants have a single income or dual income, and do a background check. It may seem a like a lot of work to put in just to find a tenant, but trust me it will be worth it in the long run.

In Ontario, the laws favor tenants. You can have a tenant consistently be late for rent or miss rent altogether, and still struggle evicting them. It takes on average of 4-5 months to get a hearing in court, and your case can be dismissed if you make a mistake filling out the L3 form (application to end tenancy and evict a tenant). In Ontario, eviction is the last resort, the LTB (landlord and tenant board) like to see a peaceful resolution to ending a tenancy. They want proof the landlord was not malicious, and worked with the tenant if they were late or not paying rent. For example, changing the day rent is due from the 1st of each month to the last of each month. In the end, there is no easy way to get rid of a bad tenant. Each option is a lose-lose if you’re a landlord. The best case is to pick the right tenant from the beginning.

In this economy, rentals have skyrocketed. Here in Ontario, it is not uncommon to find 2 bedroom homes being rented out for $2500 a month. It is risky business charging rent for $2500 to a family with 1 working income, I recommend looking for dual income families to rent your home out to, just for peace of mind. Do a credit check as well because on paper a tenant can provide pay stubs showing they make enough month from their job to cover rent and utilities, but if they’re walking around with a credit score of 500 that means they have a lot of debt, and are possibly living paycheck to paycheck. Ask for references, this can be a little tricky because it is easy to give fake references, but the key is asking clever questions to elicit genuine responses. Ask for multiple references as well to make sure past landlords are consistent in their answers about your future tenant. In your tenancy agreement, include clauses about late rent, and early eviction if rent is missed or late more than 2 times. This legally binding agreement can help speed up an eviction if your tenant signed it prior to tenancy.

Support

When you’re first becoming a landlord you can only watch so many YouTube videos and Google so many articles. Your friends and family are always going to support you and advise you to the best of their ability, but what you need is a mentor, someone who is also a landlord and has experience to share and help you with. For 2 years, I have been a landlord doing everything alone. Stumbling over every obstacle and shooting myself in the foot multiple times. If I could have a redo I would change so many things. But the one thing I know I wish I did from the beginning is ask for help. I wish I had asked someone experienced for advice on how to find the right tenant, what to put in my tenancy agreement, how to respond to my tenant if they’re always sending me excuses. Things would have been much smoother and stress free if I went this route.

2 years of mistakes has led me to today. I have rented out my homes 3 times, 2 of which have required evictions. I am more knowledgeable and understand what to do when renting my home out. I fully understand why landlords should be strict and firm, anything less than that will result in manipulation. I am happy to give advice, and help anyone who wants to become a landlord, I have a plethora of mistakes I can help you avoid making. Some parting advice, do not pick a tenant because you feel bad for them, you’ll only grow to hate them in the end.