Becoming a landlord in Ontario is no easy task. There are a lot of processes, regulations, and responsibilities attached to the role, and ultimately, landlords are accountable not only for the wellbeing of their properties but their tenants’ too.
With that in mind, however, the upside of becoming a landlord in Ontario is that it can be both extremely lucrative and personally rewarding, which is why it’s a goal of many people across the province to become landlords themselves.
If you feel up to the challenge and are motivated to take on the role of becoming a landlord in Ontario, here’s everything you need to know about the process and position before you start searching for tenants.
Purchasing The Right Property
Depending on your homebuying budget, you might already have a good idea of the type of home you want to purchase to become your rental property. Whether it’s a condo unit, a townhouse, a duplex, or a standalone single family home, what you can afford to buy is relative.
However, you must keep in mind that when purchasing a home with the intention to rent it out, you should base your buying decisions on what will end up earning you the most amount of money most reliably. Instead of buying a property that you yourself would like to live in, make your intentions clear about wanting to become a landlord with your Realtor® first.
While Realtors® specialize in the purchase and sale of homes, they also have a thorough understanding of local rental markets and where the best ROI can be found. When purchasing a property to rent, it’s not always advisable to go after the nicest homes in the most desirable neighbourhoods. The reason being is all about monthly cash flow — something your Realtor® should offer you their professional insight into.
The more expensive the home, the more expensive your monthly mortgage rates are. And depending on the status of the local rental market, you might not be able to find renters willing to pay the full amount of your monthly mortgage rates in rental payments. This is called being “cash flow negative,” which means you earn less from your tenants than the cost of the property’s mortgage.
This is why it’s important to do your market research and find the right property at the right price first so that you can be more confident about mitigating your chances of being in a cash flow negative situation.
Not sure which type of property would offer you the highest ROI? Read through our related post, “Condo vs Townhouse: Which Is The Better Investment?” here for answers.
Do Your Homework First
Following our point above, before you invest in a rental property, it’s important you’re completely familiar with all of the provincial and municipal rules and regulations surrounding becoming a landlord in Ontario.
In Ontario, our provincial government has different rules and regulations about what constitutes a home as a rentable unit, and so will your own municipal government too. Before you buy a home with hopes to rent it out, study all of the laws surrounding becoming a landlord in Ontario and which boxes a home needs to tick in order to qualify as a safe, rentable space within your municipality.
If you’re unsure about whether or not a home constitutes a legally rentable space, don’t hesitate to contact both your provincial and municipal governments directly to ensure the property is in compliance with their regulations and bylaws. The last thing you want is to purchase a home and find out that it requires major repairs or renovations before you’re able to legally rent it out.
For more information about this, you can refer to Ontario Landlords Association (OLA) page for advice on provincial rental regulations. If you’re located in Toronto, you can also visit the city’s page detailing the Rights & Responsibilities for Landlords & Tenants.
At Christensen Real Estate Group, we have comprehensive experience helping our clients become landlords in Ontario. If you’re interested in learning more about how we can help you earn regular income from owning a tenanted property, read through our informative guides below.
Screen Your Tenants
Once you’ve purchased your ideal rental property and you’re certain it legally qualifies as a safe rentable unit, it’s time to start looking for tenants. However, it’s very important not to be overly eager to rush in new tenants and start collecting monthly rent cheques just yet.
In an ideal world, you’ll want to have one set of tenants for an extended period of time, not different sets of tenants in and out the door on a frequent basis. The good news is that the current rental climate in Ontario is healthy, and if you’ve got a nice, clean, finished rental space, you should have no problem finding tenants no matter where you are.
However, the importance of properly screening your tenants before handing them a lease cannot be understated. There are enough nightmare stories about tenants causing regular disturbances, failing to pay their rent on time, or damaging properties to go around already — you certainly don’t want to be the next landlord that has to deal with tenants like that.
Once you’ve interviewed a few potential tenants, our recommendation is to request a few pieces of documentation from them to narrow down your candidates. These include a credit check, a list of references from employers and previous landlords, and both employment and income history.
Becoming a landlord in Ontario isn’t the only way to earn reliable income in the real estate market. Find out more about the 4 Real Estate Investment Strategies To Consider if you’re not entirely sure the landlord life is for you.
Be Prepared For Income Gaps
Even if you’re able to find the perfect tenant with a squeaky clean record, it’s still in your best interest to be prepared for missed payments and potential gaps in regular monthly income.
Whether it’s down to a sudden life change your tenant experiences while renting your space or a brief vacancy of your home between tenants, you need to be financially secure enough to accommodate for missed payments or gaps between renters.
If, for example, your tenants aren’t able to pay their rent on time or you can’t find a new tenant for a couple of months at a time, it’s your responsibility as the landlord to prepare for that possibility. Unfortunately, that means being prepared to pay for your rental property’s monthly mortgage payments from your personal bank account.
Just remember, at the end of the day, your tenants are real people too and, as we all learned over the course of the COVID-19 pandemic, life events can be unpredictable and are liable to (eventually) throw a few curveballs your way.
With that in mind, you need to be understanding and have patience if your tenants go through a major life change that results in some cash flow issues. If your tenants are late on a monthly payment or they miss one completely, it’s always worth it to maintain a healthy tenant-landlord relationship with them and offer them an alternative rather than a warning.
Are you actively looking for the perfect investment property, or are gearing up to start your search soon? See how our unique approach to buying a home can help expedite the process, then take a look at our current featured listings page to see what’s currently available.