Investing in real estate is a great way to make passive income, but only if your real estate investment is well maintained until it is time to sell.
If you choose to rent out your investment property, you are risking your investment in the hands of strangers. So, how do you ensure your property and your investment is protected? Easy - get ahead of the risk and do your homework upfront.
Finding tenants through friends, or renting to friends seems like a great setup, right? It can be, but if you are managing the property yourself it could also create a very awkward situation. If your friend doesn’t take care of the property, you have two courses of action: taking care of damage yourself and maintaining the friendship, or requiring the tenant to pay for the damages and lose your friendship.
Our recommendation is to encourage referrals from friends, but not to rent to friends. In other words, keep one level of separation between yourself and your tenants.
The application should be thorough and every tenant should complete them. Make sure that you have clauses in there to cover you from subleases, pets, or guests staying for extended periods. Also, keep in mind that the exterior is still part of your property and this is a huge selling point for other residents. If the tenant is required to maintain yard space or garden, lay that out clearly. How do you feel about outdoor furniture? Is there a shared space? Layout every single rule that you can think of and don’t worry about the length of the contract.
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Will the application clauses stand up in court?
Not always,. For example, adding a clause to restrict long-term guests has not historically stood up in court, but it is our experience that if the rules are laid out clearly, you are most likely stopping any infractions from ever occurring.
While we don’t recommend renting to friends, we do encourage open communication between renters and landlords. This is a mutually beneficial relationship. Try to put yourself in the tenant’s shoes before coming down hard on the rules.
A Punch List
When you rent a car, the renter is required to walk around the car and sign a punch list that notes any outstanding damage. That way, if new damage is caught when the car is turned in, the renter is responsible for this damage. This is an excellent practice for a landlord. In addition to the punch list, take photos to document the condition of the property.
This is a tricky spot. It seems like you could require a security deposit to cover your asset, right? Wrong! In Ontario, the Ontario Residential Tenancies Act clearly states that the only money additional to first month’s rent is the last month’s rent. In addition, as a landlord, you are required to pay the interest on the last month’s deposit for any time over one year.
If you have any issues with damaged property, you have to make an application against the tenant to collect those funds. If you have followed our previous recommendations you are unlikely to face any such issues, but you will have a strong case if you do.
All in all, investing in property in Ontario is an excellent idea. If you decide to cover your costs by renting out the property, cover yourself as best you can, but understand that there is always a risk in bringing other people into your property. Need help finding the right property for you? Regalway Homes can help! We have several methods of property investment, including those that require minimal investment upfront. Get in touch now!
Regalway Homes | email@example.com | 1 844 977 2679