Ontario Landlord Lawyer – evictions, mediation, buying or selling a property with tenants, Landlord Tenant Tribunal https://t.co/vdHLib9RTu
— Landlord Law Canada (@Landlord_Law_CA) December 22, 2015
Whenever I speak with a prospective client the question of how to select a tenant comes up. To be clear, tenant selection is the single most important aspect of property management. Once you find a good tenant you must provide good service to keep that good tenant. But, the first step is to find that good tenant. There are two distinct steps:
1. Locate a potential tenant
2. Screen the tenant.
You must learn how to screen a tenant.
Tenant selection is more of an art than a science. You must be flexible and aware. You will get better at this over time. You must recognize that finding a tenant in a small town in Northern Ontario is different from finding a tenant in downtown Toronto. So, after more than 30 years of finding and selecting tenants, here are some of my thoughts about how to select a tenant.
— Landlord Relief (@LandlordRelief) May 16, 2013
Remember: You will solve your problem of finding a good tenant only if you can solve the tenant’s problem of finding a good place to live! You can solve your problem only by solving the tenant’s problem.
Ten Principles of Successful Tenant Selection:
1. The property must make sense for the tenant!
If the property does make sense for the tenant, the tenant makes no sense for the landlord.
A. Does it make sense for this particular tenant to want to live in this particular property in this particular location? Where does the tenant work? How does the tenant get to work? Are there children involved? How would the children get to school? How many cars does the tenant have? Are there any potential parking issues (always a factor in downtown Toronto). If the property is too far from the “center of gravity of the person’s life, it will not work.
B. Is the rent an amount that the tenant can reasonably afford? Put yourself in the position of the tenant. How much “after tax income” is required to carry the property? Would you rent this property if you were that tenant?
C. Who is paying the rent? Is it situation where you are renting to a group of adults? If so, will each be paying a share of the rent? Are all of them actually working? Beware of a situation where one of the tenants is temporarily unemployed.
D. If you are renting to a group of adults – consider this question. Have those people ever lived together before? There is nothing that strains friendships more than living with another person.
2. You must give the tenant honest and full disclosure about anything and everything
At the initial stage you must observe and listen. You will be asked questions. Answer all questions to the best of your ability and as honestly as you can. If you are requiring the tenant to pay the utilities, do NOT minimize the cost of the utilities. Make sure that you know what the last year of utilities cost. Do NOT minimize the distance to grocery stores, subways, schools, etc.
3. Be a good listener! Pay careful attention to what the tenant says and the questions the tenant asks
When you are listening to the tenant’s questions and comments, look for clues that suggest what their attitude is toward the landlord. Some examples of possible red flags:
– saying negative things about a previous landlord or property
– making excessive references to the Residential Tenancies Act. Few people even know what is in the statute
– and more
4. The Problem of “Tenant Mix”
This can be an issue if you are renting a duplex, triplex, basement or any other situation where different tenant groups live in close proximity.
Here are examples of the problem:
If you have a young family with a baby in one unit, you cannot have a young adult who has loud parties and the like in the other unit. Same for smokers. Same for parking issues, etc.
The question you must ask is: will this tenant fit in with the other tenants in the small building? This is critical. You want tenants to have incentives to stay. Not incentives to leave.
5. The level of rent – how much should you try to charge?
There are differing views on this subject. My opinion is that you should NEVER charge a rent that is even slightly higher than the market level. Higher than market rents:
1. Give the tenant an incentive to leave; and
2. Give the tenant an incentive to call you for even the smallest thing.
You are safe renting a unit at the market level. You will get the longest term stability if your rents are slightly below the market level. But, you must remember that the level of rents does affect the economic value of small apartment buildings. Therefore, if you are the owner of a small apartment building you cannot allow the rents to fall below the market.
That said, as a general principle: Your best rent is not necessarily your highest rent.
6. Do your homework on the tenant
If you have decided that you would be willing to rent to this particular tenant, it’s now time to do some outside investigating. This means that you must:
– call previous landlords. Whatever the tenant did with the previous landlord, they will do with you. Do NOT rent to somebody who has “walked out on a lease”. There are certain times of the year where it can be very difficult to get replacement tenant. Obviously you are also concerned with with whether they pay their rent on time.
– call their employer. Make sure that they are giving you accurate information about their source of income. You will also get a sense of how the employer feels about them.
7. Credit Checks – Use only as a confirming mechanism
The reliability of the person’s income stream is more important than the credit check. That said, if you reach the point where everything else “checks” (no pun intended) out, most people want to do a credit check. That’s fine. But, it is only a negative result that would affect your decision to rent to the person. A positive result is to be presumed.
8. Where to advertise for tenants
If you have a property that is attractive because it is near a certain place of employment then advertise there. Examples: schools, hospitals, etc. Try to put an ad on their bulletin board. When you advertise the property, state that the property is near a certain landmark. Ask yourself:
For what kind of person does this property make sense? Who is the logical tenant?
Sick Children’s Hospital
These descriptions should be prominent in the ad. Remember the principle: the property must work for the tenant!
Craigslist, viewit.ca, etc. We are living in an “online world”.
I am finding that print advertising (newspapers, etc) is becoming less and less effective and more and more expensive.
Use small online ads (Craigslist and the like) that direct interested parties to a web page or blog. The ad should have minimal information: What (condo, detached), where (Ryerson, Square 1), rent (including whether it includes utilities), date available, www.theproperty.ca, phone
Example: Toronto, Ryerson, three bedroom townhouse, $2000 + hydro, Sept. 1, www.whatever.ca, phone
(Note on the phone: For the purposes of renting a property you should use a “disposable phone number”. You can get a prepaid wireless or alternate number added to your phone line. Some people do NOT want a phone number in the ad, preferring to provide the phone number on the web page. This is a matter of preference. Think carefully about this. Obviously if you are renting properties on an ongoing basis, you would want a separate phone number for that purpose.)
I usually create a web page that describes and shows the property. You want people to know lots about the property before they come to see the property.
9. Should you wait until an existing tenant moves out before attempting to rent the property?
Remember that the law requires that an existing tenant be given significant notice to enter a property. On the other hand, if the existing tenant gives permission …
On the one hand:
It is more difficult to rent, sell or do anything with a property that is occupied by tenants. In some cases it is better to let the existing tenant leave. Once the existing tenant moves it you will be able to do the “fix up”, “clean up” and “paint up” that is usually required to attract the quality tenant that you need.
On the other hand:
If your current tenant is cooperative and the property “shows reasonably well”, the existing tenant may be willing to “show the property for you”. This of course depends on the quality of the relationship you have with that tenant. (One more reason why you want a good relationship with your tenant.)
10. How and when to show vacant properties
You should have “open houses” for prescribed hours during which people can come by. Simply have a blog that describes the property, has plenty of pictures, that people can view prior to attending. You only want people to come see the property who have seen the property online and have an interest in it.
Be careful about scheduling individual appointments. People frequently just fail to show up.
In conclusion (at least for now) …
Hope you found these thoughts helpful. They are some of the things I have learned in more than 30 years of tenant selection. There is always more. I may update this post at a later time. But, those of you who have comments, feel free …
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