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Have you ever considered buying an investment property to rent out or renting your personal residence, but were unsure of the potential problems of renting?
Real estate has been one of the best long-term investments, but many potential investors give up on the idea because of property management jitters. If you don't have time to look after a property, there are many property management firms to undertake this for you. Make sure the one you choose has the proper qualifications and is licensed. A professional firm will be insured, bonded and licensed in accordance with the Real Estate Act of British Columbia.
However, if you decide to undertake your own rental management you should consider the following.
Rental Rate. The rental rate you set must be competitive. Clients are astute and may have seen many properties before they come to view yours. They will know if it is overpriced. Some may make offers, but if they feel your property is overpriced, the offer will likely be below market value. Remember, if you price correctly you will rent faster and will also get better tenants, as you will have more applicants to choose from.
Advertising. Advertising is important. You want to expose your property to as many potential tenants as possible for the least cost. Choose a newspaper that targets readers in the area of your rental property and keep the ad short and precise. If you are able to display pictures of the property on the internet, refer to the internet address in your ad. An internet display can give you an edge over other properties and save a lot of time for clients.
Preparing the Property. Make sure your property shows well. Remove any clutter, dirt and odours. The first impression is important.
Showing the Property. Be as accommodating as possible. People will not wait around unless your property is unique. Stack showings, as many people at once can create a sense of excitement about your property.
Taking Applications. Ask the applicant to fill out a detailed questionnaire giving previous landlord references, bank references, employment details and giving you the authority to do a credit check. Check all references and credit thoroughly. Check with the realtor if the applicant's previous residence was sold. The perfect tenant will treat your rental unit with respect, will pay the rent on time, and won't damage the property. This is the tenant you want to find. It may be cheaper in the long run to leave the rental empty for a month or two rather than to rent to the wrong person. Don't be tempted to forego the checking process if a tenant is anxious to rent immediately.
Accepting/rejecting Applications. Once you have decided to rent to an applicant, act quickly. Meet with the tenant to sign a lease and take your deposit as soon as possible. The applicants you do not choose may call and ask for a reason why they weren't accepted. Never give a reason other than “the place is already taken” as giving reasons can lead to legal consequences.
Preparing the Lease. Preparing a lease is fairly straightforward. There are standard leases to be obtained from the Residential Tenancy Branch or the internet. You may wish to add property-specific clauses such as who looks after the garden, pool, etc. It is a good idea to add a clause requiring the tenant to carry insurance, including liability insurance, naming the owner, as well as the tenant. The tenant's insurance should also provide for the tenant to be paid additional living expenses should the tenant have to move temporarily because of a major incident such as a flood or a fire. Furthermore, you may want to make the lease a fixed-term tenancy agreement with an absolute expiry date. This way, you have the option to extend the lease or decline an extension.
Moving the Tenant In. Before the tenant moves in, make a detailed condition report of the property. The Residential Tenancy Act now requires that such a report be filled out and agreed to by both the tenant and the landlord. In addition, take as many photographs as you can of the property on move-in date. Date and time-stamp them if possible.
Property Maintenance. You must provide premises fit for human habitation. This means they must be safe to live in and not a health hazard. All apparatus must be in working order, and it is your responsibility to keep them that way. If something breaks down, you must have it repaired within a reasonable period of time. The tenant is required to keep the property clean and habitable and undamaged. If the tenant damages the property whether intentionally or accidentally, the tenant is responsible for the repair.
Tenant Relations. Always maintain a courteous, professional relationship with your tenants. It is often harder to deal with problems if you have become friends.
Rent Collection. Insist on post-dated cheques when the lease is being signed. This simplifies rent collection. The new Residential Tenancy Act allows landlords to make post-dated cheques a condition of the lease.
Checking the Property. Under the new Act you now have the right to inspect your property when you wish, with proper notice. Drive by occasionally, and if you feel something is awry, give notice to inspect. Be thoughtful if you have good tenants, not to bother them too much. The new Act gives you the right to end tenancies for illegal activities.
Moving the Tenant Out. When moving tenants in and out, prepare a move in/out list with photos. If there is a dispute, nothing is clearer than a picture. The standard residential tenancy lease comes with property condition forms for moving tenants in and out. You must complete these, and failure to do so will result in losing the right to claim damage against the security deposit.
Dispute Resolution. Try to resolve any disputes with the tenant. If you cannot, then you can go to court, or arbitration at the Residential Tenancy Branch. Details are crucial now, including notes, a proper lease, and photos. The new Act allows landlords to serve notice to tenants by posting a notice on the front door, an improvement over the previous arrangement of having to send registered mail.
Owning a rental property can be rewarding and a good investment. The key to a trouble-free experience is finding the right tenant. This may not be the first person who is willing to rent the property, so take the time to do your “due diligence.”
And as said at the beginning of the article, if you don't have time to manage your rental property yourself, then consider a qualified, professional property management firm. They will be insured, bonded and licensed in accordance with the Real Estate Act of British Columbia.
Note: The above is for information purposes only and should not be construed as legal advice. Consult a lawyer if you have specific questions.
