Choosing to become a landlord is a big decision. Whether you are buying a new rental building or converting an existing family home to now accommodate renters, there are several things to do to get your property rental ready.
A recent survey conducted by the Canadian Imperial Bank of Commerce (CIBC) found that around 26% of current homeowners are landlords.1 Those households that do own separate rental investments often earn more than 50% above their property’s monthly expenses.1
Being a landlord can be a smart financial decision, however the choice still requires a lot of preparation. Not only do you have to make sure your property is sufficiently livable, but there are other items to consider ensuring you are optimizing the return on your investment.
Preparing Your Property for New Tenants
Getting your property ready for new tenants can be a challenging task, especially if it’s a new property you have never lived in. Nevertheless, the Residential Tenancies Act requires that you create both a livable and habitable space for your tenants. It’s equally important to crunch the numbers and set up the right rental processes ahead of time, before renters take occupancy.
1. Taking Stock of Your Property’s Condition
The first thing you should do to prepare your property is take inventory of any repairs and deferred maintenance that have yet to be remedied. The law requires landlords to repair and maintain their property to comply with health and safety standards.
Another reason you would want to address these issues is because it could impede your ability to market your property to potential renters. It can also help you to have a record in the event you don’t remedy certain repairs and your new tenant tries to claim damage they caused as a pre-existing issue.
2. Choosing to Repair vs. Renovate
Once you have a list of work that needs to be completed, your next big decision is deciding whether it’s more effective to patch and band-aid any immediate issues or take an approach of renovating key features to be more sustainable and enjoyable.
The benefits to completing simple repairs is that the upfront cost is often less than completing a large-scale renovation project. However, overtime repairs might not always hold up which could cost you more money down the road.
Alternatively, renovating your property is much more capital intensive, but can have a lot better long-term payoffs. One example to consider is how the new improvements should increase your property’s value. Newer features also can withstand more wear and tear which could lower your overall upkeep costs.
In some cases, renovating may be the only way to go. For example, if your property has fallen into distress that has several code violations, while you might not have given those items a second thought during your occupancy, your tenants will.
Since property owners must meet health and safety requirements, to rent your home could mean investing thousands of dollars in updates and to make sure everything meets local and provincial requirements.
You also want to make sure your tenants are comfortable, to the point where they enjoy the space and want to continue to rent from you. In fact, having newer, higher-end amenities and features could open your property to a broader pool of renters.
Thus, it’s always important to consider the renter’s enjoyment when deciding between repairs and renovations.
3. Crunching the Numbers
Before you commit renting your home to new tenants, it’s imperative you run through the numbers to make sure you will be generating enough income to cover all your operating expenses (and then some).
Things to consider include how much you will charge for rent, the lease structure, and other inclusions and exclusions. It’s also important to consider new or existing financing costs. Make sure to also factor maintenance and potential vacancies into your calculations.
In some cases, you might even want to consider converting your house into a duplex or 3-unit to maximize its cash flow potential. Here is where crunching the numbers really becomes important.
For example, converting a property from a house to a duplex could cost you between $80,000-100,000. Other than the actual renovation work, other costs include fees, inspections, and permits to ensure the property is converted in a legally permissible manner and is up to code.
While converting your home to a multi-family property can cost a pretty penny, eventually you may find it will net you a higher return on your investment.
4. Implementing the Right Rental Practices
Getting your home rental ready means having the right rental practices in place before you start marketing your property to prospective tenants. This means developing a standardized plan for managing your property effectively.
Your plan should include taking into consideration how you will screen tenants, market your property, respond to maintenance requests, and collect rent. It’s also important to have the right insurance in place to reduce liability risk.
If you don’t have the time or energy to implement solid rental practices for your home rental, delegating those tasks to a professional might be more cost effective and save you a lot of headaches.
For years, Marda Management has helped thousands of investors manage their home rentals. Whether your property is large or small, Marda Manage can help alleviate some of the work in getting your home rental ready.
1 The IJ Staff. (2018, May 22). More than one quarter of Canadian homeowners are landlords. Insurance Portal. Retrieved April 1, 2022, from https://insurance-portal.ca/article/more-than-one-quarter-of-canadian-homeowners-are-landlords/