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What You Need To Know Before You Own Your First Rental Property!

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Advice For New Landlords

Pieces of the puzzle with your first rental propertyI’ve been helping landlords for years now and as I look through the masses of info = I have shared, one gap I find is what a new investors needs to know before they own their first rental property.

The trigger for this was just a quick comment a subscriber named Matt left me the other day.

You see Matt’s been reading my articles and watching some of my videos preparing for his first rental property which he closes on at the end of the month.

He’s being pro-active, he’s getting prepared and educated and he’s being very smart about getting started!

I love it.

To hopefully get him off to an even better start I replied back to his comment with some additional tips and suggestions, but  I realized that unless someone is reading that specific article they will miss that specific information!

So I realized maybe I need some information all in one place to help others just like Matt! So here’s what I have.

Getting Started With Rental Property

Some of the information I’m going to talk about here you’ll find in other articles on the site or videos here and on YouTube I’ve done and I’ll include some references to these at the bottom of the article.

In my experience I’ve found that I read one article and don’t quite get a concept, but when it’s explained slightly different or from a unique perspective suddenly it becomes crystal clear.

I’ll also include a subscription form at the bottom where you can get my guide “The Secrets of Successful Rental Properties” where I also talk about some of these tips that apply to your first rental property and to your fortieth rental property, or at least in different ways.

So rather than babbling too much more, let’s get started!

Leases – They Are Not All Created Equal!

leases for your first rental propertyIf you’re not familiar with my background, my online start was with a site that helped landlords evict tenants in the province I’m located in, Alberta Canada.

Sure I had my own sites for my Real Estate biz that I’d created in the past or paid someone to build, but AlbertaEviction.com was all my own.

This site came about because of my own personal experience with so many evictions over the years. Now I hope it’s not a shock that a guy who educates landlords has had to evict a ton of tenants.

It should be more of a reality check.

Because just about every landlord I know has had to evict a tenant at some point in their career. Time and circumstances change situations and a perfect couple one year may be divorcing or laid off the next causing you the landlord problems as their problems trickle down.

It’s not uncommon for me to get emails from landlords telling me how they’ve had great tenants since they bought their first rental property five or even ten years previously, but suddenly they’re stuck evicting someone.

It can be a bit of a numbers game and the longer you own a property and the more tenants you have the better (or should I say worse) chance you have of getting a bad tenant.

In my case, I’ve just dealt with so many more tenants than the typical landlord that I’m that much more experienced with the negative aspect of the business.

Which bring me full circle back to my point about leases. One of the biggest problem so many landlords I helped through my eviction site had, was they used the wrong or if not wrong, a poor lease. Leases are not all created equal and the rules in various states, provinces and countries also vary making it important that your lease applies where your rental property is located.

An example of this is in my local area is that I recommend to landlords to only use “Fixed Term Leases” rather than “Month to Month Leases”. The reason being (at least in Alberta Canada) a landlord doesn’t need to renew a fixed term lease (find out local rules that apply in your area!).

“Fixed Term leases refer to leases with a start and end date, they can be as short as a one month term or as long as several years, but they have a defined end date.”

In English, that means that if I have a tenant who is constantly late with rent, doesn’t maintain the yard or I’m just not getting along with, once the lease term ends, I’m not obligated to renew it, they have to leave.

If instead I used a month to month leases that just rolls over with no fixed ending date, I require a valid reason to evict the tenant, so unless he is doing something in serious breach of my lease, I’m stuck!

The lesson from this is, understand your local tenancy laws and make sure your lease fits what’s best for you! You may not have the same rule about fixed versus month to month, but you need to understand what does apply and make sure your lease includes what benefits you the landlord the most.

Next step is to ensure you have a very specific lease for your region.

If you’re buying a generic lease from an Office supply chain, a corner store or downloading it off of the internet, it better apply specifically to your region.

Now just about any generic lease will work everywhere, but the problem is they are generic and they don’t contain the specifics you need to enforce them for your benefit.

If you can make your properties non-smoking, your lease needs to contain that information. If you don’t allow pets, your specific lease should state that. If you don’t want tenants to sublet rooms or the basement or a garage, your lease requires a clause stating the restriction.

I could go on and on, and I already have I believe, but I need to because it’s that important. Generic leases get you started, much like generic house plans are the building blocks for your dream home.

You need to fine-tune that lease much like you choose colors and materials if you are building a home, so it suits your needs and protects your interests.

It may require buying a lease from a local landlord association, it may require getting a custom lease created by a Real Estate specializing lawyer in the area or it could be somewhere in between. Just make sure it’s not generic!

For a reality check it should also not be a single page! My standard lease I’ve modified and edited over the years as rules change, is four pages long and uses a small font in order to contain all my clauses and information.

It’s that long because I try to cover everything!! And your lease should too!

Now onto the next priority.

Tenants – They Too Are Not All Created Equal

Tenant problemsMore reality checks for you, not all tenants are equal or will look after your property the same way.

That nice looking couple who seem so pleasant may be professional tenants who bilk landlords out of months worth of rent and understand how to live rent free for months or even years at a time by being smarter than their new landlord.

There are so many districts throughout the world that have set up very tenant friendly legislation that makes it virtually impossible to evict tenants in a timely fashion.

They’re set up to allow tenants to appeal or delay hearings month after month and even then they are awarded extra time to vacate. Professional tenants understand these rules and once they are in, they can cause havoc.

All while not paying, or while damaging your property or worse building drug labs or grow ops which you get stuck fixing later.

The lesson from this?

Screen your tenants diligently and rigorously. Create systems and processes where you check and double check the information applicants provide you.

This includes calling and verifying all references, previous landlords and contacts. I even go so far as to check online profiles for their Facebook, Twitter, Instagram and more to see who these people really are.

If you put in the effort up front to do all this fact checking, research and verification, you’ll find you can save yourself a ton of headaches going forward.

As my friend Julie The Street Smart Diva and I often talk about with students who have gone through our coaching programs, it’s far easier to let the wrong person in than it is to get that same person out.

Your job as a successful and educated landlord is to make sure you never let that wrong person in and makes sure they end up somewhere else while you reserve your property for the fantastic tenants you deserve!

The Final Lesson For Your First Rental Property

Processes, systems and checklists for landlordsCreate Systems! I just referenced this when talking about screening tenants!!

As new landlords and investors you have a ton to learn as you get started with your first rental property. From the incredibly important skill set of screening tenants to property maintenance and much more.

Some you may do yourself, some you may hand off to others to do, but long term, many of these processes need to be repeated over time. Often over and over as you own a property for years or expand your portfolio.

The challenge being, if it’s been a years since you last screened a tenant, can you remember all the steps?

If you happen to own several properties already and you’re ready to do your annual or semi annual inspections, do you know what furnace filter sizes to bring to replace at a specific property?

Do you know how many smoke detectors are in the property that take batteries and which kind of battery so you have them with you?

Or if you are adding a second or third property to your portfolio, what did you forget to do or ask the first time that you need to know for the next time?

Did you talk to your insurance people in advance to get the proper rental insurance in place?
Did you have a list of home inspectors you know and trust at the ready?
Did you have a list of requirements for your Realtor of what your next property needs to have?

These are just a few examples of the hundreds of questions that need to be answered as you maintain and expand your portfolio.

And yes it is a lot of work, initially at least. But that extra work at the beginning as you take notes gives you references and the start of check lists and the systems you need to streamline your landlord business going forward.

Once you get the basics of these processes down and in some semblance of order you’ll find it a helpful resource that you can go back to for years and years and that will make your land lording experience simpler, less stressful and ultimately more profitable!

Now just to tie all this together and to help make this easier to remember, I want to share with you what I call,

The Educated Landlord’s Mantra

  1. Remember how hard it is to get them out (bad tenants)
  2. Do your due diligence (on new properties & new tenants)
  3. Trust your gut, but have processes (so you don’t forget steps or get caught in emotional decisions versus rational decisions)

If you can remember these three steps as you get started as a landlord, it will carry you forward many years!

Landlord Lessons
Wrapping Up

So, those were my thoughts and words of advice about your first rental property, what would you add to this? I’d love to get some feedback from you, maybe share your advice or some lessons you’ve learned as you started in your Real Estate investing journey!

Just leave me a comment below and share any stories you could add and any feedback you might have! I look forward to your thoughts and will reply back to everyone!

Also, if you didn’t grab my guide The 7 Secrets of Successful Rental Properties yet, simply fill out the form below and you’ll get it emailed to you!

And finally, if you belong to a Real Estate group, know other landlords who this could help or could simply share this with people on your Facebook, LinkedIn or Twitter feed, I’d really appreciate it!

There are handy share buttons right at the bottom of the article and the more people we can share this with, the more successful and educated landlords we’ll have out there!






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The Basics of Being A Landlord – The Skills You Need

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So You Want To Be a Landlord?

I seem to get a few emails/calls about being a landlord, so here are some quick thoughts from me on the basics of being a landlord.

This will likely be a multi part series, so this post will focus on what skills do you need to be a landlord?

screwdriversmallHandyman Skills

Well some landlords I know are incredibly handy people, they are great with renovations, they love working on their properties and they are you typical Mr. Fixit’s.

However, I know many landlords who’s only tool they have ever used on their property is pen and paper. Rather than investing their time in a property, they have simply hired someone to get the job done. So while being handy helps, I guess it’s not a needed skill.

People Skills

How about people skills, a good landlord should have people skills! Again I know many landlords that are great people people and having the ability to relate to the tenants and get along with them has helped them tremendously.

But as I think about it, these same people have some challenges because they tend to get buddy buddy with their tenants, which rarely seems to work out well.

I also know many landlords who I would definitely put people skills at the lower end of their abilities, yet they are also tremendously successful. So maybe people skills aren’t quite as essential as it seems to be a successful landlord.

Fierce Negotiator

agreementsmallThis one has to be important because first you need to be able to negotiate the best possible price on the property you’re purchasing as a rental property, then you need to negotiate with contractors to get the best prices, tenants to get the highest rates and everyone in general to get the best deals.

Except this can be a horrible plan for long term success.

The people you buy your property from resent you for being such an aggressive negotiator, the contractors won’t work for you again because they hate getting nickelled and dimed and tenants can’t wait to get out as they never feel comfortable and often feel ripped off.

In my experience it often works out far better when it’s a win/win negotiation. Where both parties get a fair deal whether it is the purchase/sale of the property, the renovation work and even the rental amounts. So maybe you don’t need to be such a fierce negotiator to make your job as a landlord easier.

Now, I’m not saying have some of the above mentioned skills won’t help you, it just appears they may not be as important as people often believe. Many people find success anyways, even if they are lacking in or more of the above areas.

So what skills are valuable to a landlord?

Organization, Patience and Humility

hourglasssmallNow these three skills I do believe are important. Again, they may not be essential, but definitely important.

If you’re organized you can find records, receipts, invoices and more that are required for everything from your taxes to warranties to simply getting your books done correctly. Having systems in place to guide you along the way is one of the best methods to help with this.

If you’re patient and understand your Real Estate is a long term investment it makes being a landlord much easier. With the constantly changing market trying to time your purchases of a rental property and your selling of them can be incredibly stressful.

Rather than following the get rich quick path that so many people promote with Real Estate a longer term approach with an extended time frame (and lots of patience) will guide you through the ups and downs of the inevitable transitions through both buyers and sellers markets.

Finally humility. Have you ever run into a pompous landlord who knows everything about Real Estate? I’m willing to bet many of you have and apparently one ex-subscriber felt that way about me.

You need humility so you can go to others when you have questions or are unsure of the answers. It’s why you need a Real Estate agent who understands investment property when you’re buying. It’s why you need an accountant familiar with Real Estate if you are a landlord so you are aware of the correct deductions you can apply for and the correct processes for setting up your accounts.

It’s why you need to call plumbers, drywallers, painters and other contractors when something is beyond your scope or when it makes sense to bring a pro in to get the job right. Doing all of this takes a bit of humility at times as we often believe we can do it all.

And perhaps we can, but if we do, then we lose focus on what the property is. An investment that should be run as a business.

What do you think?

Learning To Landlord By Trial And Error

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Learning to landlord by trial and errorSounds scary doesn’t it? Making a mistake as a landlord can cost thousands of dollars in lost rent, due to damages and in some cases even lead to foreclosure. But I run into landlords every week who got into the business with minimal to zero knowledge of even the basics of being a landlord.

Learning to landlord on the job can turn into a very expensive education and that’s where I come in. Hopefully.

With dozens and dozens of articles and videos on the site providing the basics already, I’m planning on adding even more so I can help others avoid the trial and error path.

Now, if you’ve already registered to receive emails on my site you know one of the first things I ask you is what challenges you face as a landlord. I’ve had some great responses from people and hopefully I’ve provided some answers to help you with those challenges in my replies to you.

The question I have for you in this article though is what was your most expensive mistake?

My Expensive Landlord Mistake

costly landlord lessonsPersonally, my biggest mistake when I started was not following my screening process and skipping steps along the way. During this learning curve I let in some of the wrong people because I went with my gut, rather than following my process.

This brilliant decision making cost me most of my Christmas vacation as I had to spend it fixing walls, repainting a property I had just painted less than six months earlier, cleaning and doing general fixes so I could have it ready to go for January 1st and not lose anymore incoming rent money due to vacancies or deadbeats.

It’s part of the reason why one of the first courses I put together on the site was my tenant screening course, which I give away for free because it’s so important to a landlord’s success! Since I started following the procedures I laid out I’ve only had to evict one tenant out of my regular fixed term rental properties in the last seven years.

Of course, if I had followed my rules that one eviction would have never come to an eviction which was another lesson. That particular situation involved a young couple who split up and rather than  allowing/forcing them to break the lease and both move on, I allowed the boyfriend to stay and to have his brother move in to help cover the rent. Ooops.

So maybe that didn’t fit specifically into the screening category, but it did fit into my screening system which I strayed from as I didn’t due my proper due diligence with brother number two.

Your Turn

Your Landlord LessonMy list of other expensive lessons could go on. From not doing enough due diligence one early properties  we bought to initially trying to do all the work ourselves rather than farming work out to contractors. But what about YOU?

What have some of your expensive lessons been? If you can take a few moments to leave a comment to help other landlords that would be great. By sharing some of our experiences we can make it easier for others to learn from our lessons and to help avoid some expensive pain.

Plus it may point me in the direction of my next course which hopefully helps everyone.

So leave me a comment below and let’s see who we can help with it!

Raising Your Rents, Without Raising the Roof

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Increasing Your Rent Without The Ruckus

Rent increases - positioning them with tenantsLast article I talked about how stupid we tend to be as landlords. We have a great property, we treat our tenants well and yet you still feel bad about raising your rents to help cover our own increased costs.

Tenants understand costs increase, they know taxes go up, the can relate to increased insurance costs, but what they won’t tolerate is greed or abusive rent increases. It’s a pain in the butt to move, but if they feel wronged, it’s worth it to them.

On the other hand, if they feel like they are in a good spot, the increase won’t put them in the poorhouse and perhaps most importantly, it’s a fair rent increase, they typically have no problem staying. As always, it also requires common sense.

If vacancies are skyrocketing and rents are dropping everywhere else, you can be assured your increase will definitely have a higher chance of causing them to bolt. So know your market and understand the local laws and regulations regarding increasing the rent you charge your tenants and increase it when applicable.

Because when or if the market does slow later and you have a vacancy, you will definitely have to lower them to keep attracting tenants.

It’s All About Positioning

I was recently coaching a landlord through this and it all starts with positioning. She hadn’t raised rents for several years and was missing out on as much as $300 per month of additional rental income. Her current tenants were good, so throwing a $300 increase all at once at them was going to be a little unfair.

After all she didn’t want them to leave, she just deserved fair value for her property.

The lesson from that is, if you are paying attention to your local rental market, you’ll have a pretty good idea of the local vacancy rates and whether rents are increasing or not. If you pay attention to this, you can deal with more gradual increases which benefits both the landlord and the tenants.

When it comes to a strong rental market with vacancies dropping and demand for units increasing, it’s very important for you to be paying attention to how the market is changing. You need to have an idea of how much rates are increasing so you don’t get left behind and this is also where your positioning starts.

When I refer to positioning, I’m talking about putting yourself in the best light. The position that helps you, while at the same time puts you in a position to still provide good value for your tenant.

In this example, if you’re finding rents have gone up $100 per month for properties equivalent to yours, you start off with that in your written letter to the tenant. Now I’ve always advocated trying to get top dollar for your property initially. I believe having one of the nicest rental units in the area helps set you apart, helps get you better tenants and helps you garner higher rent.

You may already have been $100 higher to start with if you followed this process and if you are, you’re in a great position. Because you don’t have to raise your rents $100 this time, if you show your tenants how much others have raised their rents and end up only raising yours $50 or even $75, you’re still the good guy.

If you haven’t been following this process, you can still use this technique, but you won’t be quite as far ahead, but an increase is an increase!

Sample Letter of Rent Increase

So let me give you an example of some wording you can use, and feel free to copy and use this where you need to!

As you’re most likely aware local rents have increased over the last year as the costs of everything from taxes to insurance have increased. After doing some research we’ve noticed rents in this area have increased by $100 per month and in some places even more.

Now while we value you as tenants, we need to cover some of our increased costs and remain competitive in the market. So rather than giving you a big $100 jump per month, we’d like to reward you for being good tenants and only increase the rent by $75.

At this price, you are still getting the property for less than similar properties in the area. We hope you find this fair and again, we really appreciate having you as tenants.

How does that sound? Does that make sense to you?

You’re starting by talking about increased costs. You segue to rents increasing by $100, and possibly more and then you increase the rent by less than the average coming out as as the good person.

You’ve positioned yourself as not only looking after your interests and trying to cover your costs, but also letting them know that you value them and that you’re trying to help by not increasing the rent as much as you possibly could.

Now depending on the market, you’ll need to change the number where they’re bolded to the appropriate values, but that’s part of your homework. Now just to make sure you get the impact of this $75 per month increase, you have to understand it becomes an extra $900 over the course of the year and that $900 can cover a lot of your costs. If you have a suited property and increase both suites by $75, that’s $1,800 to your bottom line by the end of the year.

If you haven’t raised your rents in several years, rents may have increased by $200, $300 or even more per month since the time you originally rented your space out. If rents have increased even $100 per year for each of the last three years, you’ve missed out on $7,200 worth of income. If your property was suited, that’s $14,400 in lost revenue because you didn’t increase your rents. 

Now this is assuming you raise them them maximum amount, but that’s to make a point. The point being, you’re leaving money on the table!

Guarantees and Rules

will tenants leave if rents increaseNow there is no guarantee this will work every time. You may have some tenants that simply cannot afford the increase.

Whether they are just getting by, whether your property wasn’t quite working for them, there will be times when people will move out on you leaving you with a vacancy. This isn’t a bad thing.

If that’s the case and you’ve done your homework, you now have a very solid idea of what the local rents are and if you have a great property, you will be getting an even larger increase than the potentially discounted rent you offered your tenants.

It can be sad to think about losing tenants and the extra work involved in having to prep the property for new tenants, going through the screening process, starting over with new people and the concerns about whether you picked the “right” tenants, but as I’ve also mentioned time and time again, landlording is a business. And you have to run it like a business.

Which brings us back to the rules your business has to work under. Make sure you understand all the applicable local rules for rent increases. There can be caps on increases, timelines for increases and many other variables you’re required to know when it comes to increases.

Some areas have rent controls in place limiting how much rent can be increased per year. Usually these are tied to inflation and they are typically far less than the market will bear. If your region is restricting your increases with rent control laws, you need to consider increasing rents the maximum allowable each year so you don’t get left behind.

Often you cannot retroactively increase, so if you don’t do it now, you lose it forever, so don’t miss out. Other areas have specific legislation about timelines for notifications to tenants about increases and how often rent can be increased.

My location requires 90 days notice of a rent increase (which must include three full months) and I’m only allowed to increase once every 365 days, or once per year. Your local landlord tenant laws may be similar or may be more restrictive, so make sure you look into that as well before you attempt to increase your rents.

An illegal increase may not necessarily result in fines ( in most cases they are simply void), but if you’re not sure find out. Usually it just results in resetting the clock and delaying when the rent actually increases.

Finally, some areas also have caps on how much rent can be increased in a year. This too can cause issues if you miss out as you cannot stack multiple years if you missed out. So again, become familiar with the local legislation.

If you’re going to be a successful, educated landlord, you really do have to run it like a business and this means rents changing to reflect the market. These days those changes are typically going to be upwards, so you need to stay on top of your market!

Hope you enjoyed this article, if you have any hints or tips you can share with the other landlords that visit us, be sure to leave a comment below and thanks for reading this far!

The Curse of Knowledge

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Are You Smarter Than Your Tenants?

Curse of knowledgeI am blatantly guilty of the curse of knowledge and even though I’m fully aware of it, I often still fall into as it’s a trap that’s tough to escape. Being aware is the first step and this article hopefully helps make you aware.

So what the heck is this curse of knowledge? It’s what happens when you go talk to your mortgage broker, your financial advisor and even your mechanic.

They speak in some sort of gibberish where they use words like amortization, fiduciary standards or ABS control module malfunction. Fully expecting everyone else knows what these words also mean.

Now often we may know some, but as the conversations drag on new and even more industry based jargon comes out. But it doesn’t end there.

In many situations when dealing with people who work in a specific field, they have specific knowledge that a layperson may not have. An example right off of this site would be something as simple as the master key system I teach new landlords about, or the process I teach for screening tenants. A new landlord wouldn’t necessarily know either of these, often even established landlords don’t!

Task, procedures or simple industry knowledge that seems natural to the person in the industry, but requires further explanation when talking to someone who is the proverbial duck out of water is where the curse of knowledge comes into play. And this curse can affect how your tenants and you get along, how profitable your property is and even how safe it can be!

You Really Just Have Different Knowledge

voodoo dollThe biggest problem with “the curse”, is you assume the other person has the same knowledge as you, which which is a gateway to misinterpretations. You believe the tenant should understand the bank requires your mortgage payment on the 1st, hence they have to pay on the first. They may think the bank will understand if the tenant suddenly had to pay support payments or an unexpected expense. Or worse yet assume you will constantly carry them!

You understand leaving windows open in the winter to cool the house down is an ineffective use of utilities (and if you as the landlord are paying them, is an added expense!). Yet to the tenant, they may just think utilities are free and it never occurs to them that it costs you extra money that takes away from potential improvements or maintenance of the property.

It’s not as if the tenants are dumb, they just don’t have your knowledge, or the curse that comes with it. With any luck your business model as a landlord isn’t based on finding tenants that aren’t as smart as you. Hopefully you are finding intelligent, thoughtful people that make your life easier, your property safer and don’t burn your property down.

You just have to remember, it’s not the matter of tenants being dumb when it comes to property versus you, it’s just that they have different knowledge. Often many of them have only been on the rental side, they don’t understand the ramifications of not paying on time, of leaving outside taps open when it’s freezing outside, or the downside of taking smoke detectors down when they go off and not informing you.

Part of your job as a successful landlord is to make sure you educate your tenants on many of these little knowledge gaps that you may have between the two of you. This is what’s called an information imbalance as Dan and Chip Heath refer to in their book Made to Stick: Why Some Ideas Survive and Others Die (which I’d recommend you check out if you are into marketing and/or business, and yes that is an affiliate link so I get a few nickels if you purchase it through there, so thanks).

So How Do We Educate Our Tenants?

Training your tenantsThis is where the big problem shows up, because it requires more work on our part! We need to take time to educate our tenants and to create systems so we continue to do it every time.

One place to start is creating a property binder for each of your units. In the case of an up down suite, each tenant would have their own binder covering the property. Some of the information overlaps, such as where the water shut offs are for the property, location of the breaker boxes and proper use of the heating and cooling systems where applicable.

This binder stays in the property and is the ideal for putting the tenants copy of the lease, any walk throughs, local information such as shopping, restaurants, schools, post offices and banks as well. It is their go to reference and can even include manuals for stoves, fridges, and laundry machines.

Another area we can work on is explaining our leases in detail to the tenants. No glossing over the fine print. Thorough explanations of why you always need to get paid on X day is required, from there explanations of any penalties or repercussions that also accompany late payment. DO NOT LEAVE THIS VAGUE!

Next step, thorough walk throughs of the property. In one of my email tips I refer to explaining about water shut offs on toilets, taps and washing machines. Make sure you point these all out to the tenants and explain them. With external air conditioning units, maybe take a minute to explain covers need to be off when using them or that they shouldn’t block the sides.

As a landlord, you’re probably already a homeowner, so while much of this isn’t rocket science, it might as well be to someone who this is brand new too. If this is the tenants first rental unit ever ) or they have limited experience with these items), you may have to walk them through how to use the laundry, the oven or even the programmable thermostat!

By putting in the time when you sign the tenants in, you can prevent hours of frustration and possibly expensive repairs or headaches later. But by putting in this extra effort you’ll also stand out in more ways than you realize.

It’s just one of those ways you can be a standout landlord that you’re tenant will also remember and refer people to in the future!

The P.S.

The landlord tenant relationship is a two way street. As landlords and especially as long term landlords, we often forget the hardships involved with being a tenant. There is also a curse of knowledge associated that goes along with being a tenant and it may be a matter of the market changing, new rules being put into place or just our forgetfulness about what it was like being a tenant ourselves once.

While I always caution against being buddy buddy or Facebook friends with your tenant, it is important to let them know they can contact you if there are problems. you don’t want to be the landlord they fear, but rather the landlord they respect because you look after them. Previous bad experiences with bad landlords can color the perception of  tenants and this can taint the knowledge tenants have.

Bottom line, do right to your tenants and the majority of the time they will do right back to you. Now get out there and get your systems in place to break down the knowledge barrier between you and your tenants!

Renting Out Rooms – Running A Rooming House

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Running A Rooming House As A Rental Option

Running a rooming house and renting out roomsThe longer I’ve been in Real Estate, the more ways I’ve seen to make money with Real Estate.

Whether it’s flipping properties, rent to own strategies, buy and hold or any of the myriad categories in between, there are simply dozens and dozens of ways to make money in Real Estate and running a rooming house is one area I specialized in.

Now, word of warning, rooming houses aren’t for everyone! Just like some individuals can’t handle the stress of flipping and others can’t handle the stress of dealing with tenants, rooming houses require a specific mentality to balance everything out.

Rooming houses as a category typically come with a poor reputation. With stories of problem tenants, drugs, sketchy areas and more it scares many potential landlords off before they even start. And truthfully, it can be this way, but it doesn’t have to be.

So what does running a rooming house involve? It’s usually a home or a building that rents out rooms on a daily, weekly or monthly basis. Most are furnished, and they typically provide shared washrooms, possibly kitchens and possibly laundry areas.

They also tend to cater to people at the lower end of the rental system who may not qualify for typical rentals or who don’t wish to be tied down to extended leases.

Folks who cannot afford deposits or first and last months rent, people who tend to deal in cash and people who get paid weekly.

These are your normal rooming house tenants, sounds appealing so far doesn’t it?

Our First Rooming House

It was in 2004 that we bought our first “rooming house” style property and we bought it for a couple reasons. First it was the other half of a duplex we had already purchased earlier form the owner and second, cash flow. Huge stinking cash flow!

Rooming House kitchenYep, we were suckered in by money and we quickly learned some lessons about running a rooming house. This particular property was set up with three rooms downstairs that were rented out on a weekly basis as furnished room rentals and the owner lived in a suite upstairs. They had a makeshift kitchen in the basement crammed in with the laundry. With all three rooms full we would make in two weeks what a normal basement suite generated in a month.

Our thoughts were to upgrade the basement units a bit and to rent out the upstairs to an onsite manager who would deal with collecting rents, signing people in and out etc.. The former owner had mattresses on the floor, supplied black and white 13″ TV’s and was typical of rooming house landlords. We have learned consistently not to be typical!

First thing we did was replace the mattresses with new futons that allowed the guys to have beds or couches in the limited space, we got rid of the crappy TV’s and upgraded them to 20″ color TV’s and brought in night side tables and a few other “upgrades”. Two of the rooms were already occupied, so we painted the hallways, the other room and generally updated what we could, but it was still a cheap rooming house, sigh.

My First Negative Experience

Needless to say the rules involving running a rooming house and for renting out to weekly tenants are often considerably different than renting out to longer term tenants in regular rentals. Due to the high turnover, the cash based business, the timing required and the type of tenants, credit checks are simply not done. That’s the first challenge with running a rooming house.

People show up cash in hand and need a place now typically. There’s no two or three day waiting period to check references or get reports back, it is cash and carry. This leads to all sorts of “fun characters” and takes us to my first negative experience which took place within the first month of taking over.

The key to making this work is to stay on top of the tenants. Rent is due weekly and it must be paid on time. See any problems yet….

Within the first month I put in a new fellow, sketchy would be putting it mildly, but he had cash in hand, By the end of the first week I had complaints from one of the other longer term tenants. He was leaving dishes in the sink, he would forget to lock the door, typical problems and things that have to be dealt with quickly.

I was due to collect rent so my wife and I headed over to get rent, do some more work to improve the place and make sure it looked ok. At this point I need to bring up the fact I was brand new to this and had only been a landlord of any capacity for just over a year, so I didn’t necessarily know the rules, or follow them…

Don’t Try This At Home Folks

I knocked on buddy’s door and I could hear him moving in there, but he didn’t answer. So I knocked louder. Still nothing, I told him I could hear him, still nothing. So being a frustrated landlord I broke the rules and the law and unlocked his door to confront him.

To add some perspective I stand around 6’2″, weighed around 220 pounds and I’m reasonably athletic (at least at the time). Buddy was 5’8″ maybe 150 pounds, so I wasn’t worried about a confrontation, although I was getting my money, I hoped.

When I open the door, I find buddy sitting on the floor, needle in hand and likely just finished shooting up. Being a calm, rational person I did what anyone else would do. I blew up! I told him he had 15 minutes to vacate (also against the rules, but by his glazed yet fearful expression he understood it was time to leave).

I went and explained to my wife what had happened and the door to the basement opened and the tenant I thought I had confronted walked in. I had just evicted someone who wasn’t even supposed to be there. In my defence, there were no lights on in the room, they both had long shaggy dirty blonde hair, they had the same build and I had only met him once.

I explained to him what I found, told him as well, 15 minutes be gone. I gave him 15 minutes, went back to the door and he had his stuff packed and was ready to go, then I noticed the TV was missing. When I politely inquired about it he told me that someone had come to take it away to fix it. I went from seeing red to seeing crimson and told him he had about 1 minute to get the hell out, to forget about his security deposit and to avoid me for the rest of his likely short life. Welcome to running a rooming house and the experience of renting out rooms.

Rooming house info and resources Click to get more info about rooming or boarding houses

That Was Then

We were ready to shut down that experiment, but for some reason struggled through and learned some valuable lessons. About six months later someone else approached us with a rooming house they hoped to sell. This time though, it was a full duplex at a price we couldn’t refuse. It had ten rooms in total and when full generated almost $6,000 in gross income every month.

With new systems and process in place from our earlier mistakes, we continued to expand and at our peak had eight rooming properties and over 50 individual rooms that I dealt with on a weekly basis. That equates to collecting rent 2,600 times in a year if I was 100% occupied. Talk about an advanced lesson in landlording and running a rooming house business.

Now, many years later, would I do it again?

Definitely, although I know I would make numerous changes along the way.

Would I recommend it to everyone?

Not really.

Although there are many that could make some huge income off of this. The income from that one duplex alone was over $30,000 per year, even after vacancies and expenses. Plus, it’s almost doubled in value from our original purchase price.

Is it a lot of work, yes, but is it 40 hours a week? No, usually only four or five per week which makes it an exceptional return on the investment.

The point of today’s article isn’t to get you to thinking about rooming houses as an investment, but rather to get you thinking about other opportunities available out there. I preach that up down rentals with detached garages, in my opinion, are the best way to go as far as good rental properties, but I also own condos, single family homes and yes rooming houses.

In some of my interviews with other landlords and in conversations, many are doing great with everything from vacation rentals to furnished executive rentals to single family homes. So there is no one right way. you just need to find the right way for you and then learn as much as you can to specialize in that area.

Rooming House Examples

Screening TenantsWhen we started to expand with our properties we had simple rules we stuck with. The properties we felt were ideal for running a rooming house had to have at least five rooms  to rent or capability to build up to five rooms. It had to have an upstairs and downstairs bathroom and shower setup, or again space for us to build it.

They had to have great transit access. We understood many of our tenants were new to the city and often took transit, so access was incredibly important. And we had to be close to the work, so our properties were positioned close to industrial areas where many labourers and trades would be working.

Knowing your tenants and their requirements was part of the battle and is something you as a landlord should be aware of as it makes finding and keeping them easier. Understanding what our style of tenant needed made our job of advertising and renting out so much easier.

The other lesson we learned was learning where to find our tenants. We hit up training centres for the trades, unions and even immigration companies about our properties. We took those that were interested on tour and we even found one company who rented an entire house from us for two full years at $4,000 per month to house incoming workers for a major project.

Finally, I’ve incorporated a series of questions I ask people who call my ads. Much like screening my regular tenants, I have filter questions to narrow down my waisted time. All designed to get better people in and to save my time.

So, my challenge for you, even if you have a regular rental, is to make sure you know the benefits of the property you currently have, or if you are planning on buying a new rental property, the nearby benefits. Then find that avatar or perfect tenant and find out where they work, what they do and then go advertise or visit those places in preparation of your next vacancy.

Investing in Real Estate isn’t fire and forget, it’s a business and requires some strategy behind it. Hopefully you enjoyed my long drawn out story and can learn some lessons from it you can apply to your landlord business!

If you liked this article let me know, if you want more stories about my experiences (both good and bad) tell me. Or if you just want more tips and generic landlord advice let me know too!

Just to add to this you may want to read another post I have about rooming houses. you can find it here, Profiting From Rooming Houses 

Boarding House and Rooming House information - Running a Rooming House
Rooming House Resource Page

Rooming House Tips

Guide to Getting Started With Rooming HousesIf you’re serious about running a rooming house or have just started one, I’d highly recommend you check out my Basics of Rooming & Boarding Houses Guide.

It’s $17, includes information on how to determine the best areas for rooming properties, the options for daily, weekly and monthly rentals and it gives you the information I wish I had when I started!

Click here to get your copy now (it’s a PDF, so you can have it in minutes) The Basics of Starting Your Own Rooming House

The Basics Of Running A Rooming House

So, are you intrigued? Does the idea of owning and running a rooming house sound like a journey you might be interested in taking?

Over the years I’ve owned a lot of properties and a lot of rooming houses and it hasn’t all been perfect, but that’s part of the learning curve. Sometimes there are expensive lessons we learn and other times there are inexpensive lessons.

That’s why it’s important to go into this with your eyes wide open.

Running a rooming house is more than just buying a property and putting bodies in.

There are rules and regulations that vary from place to place, city to city and even district to district. There is higher demand in some areas and lesser demand in others which can lead to underperforming properties.

Then there’s the concept of targeting certain segments of the population to develop a steady stream of clients. We learned early that we constantly needed to be advertising as an empty room meant we were losing money. Later we learned who and how to market so that we found our ideal tenants.

Learning all of this took years and not knowing it from the beginning likely cost us tens of thousands of dollars of lost income and bad purchases and nearly causes us to quit before we even got off the ground!!

In hindsight if I could have found training or information to help guide me and avoid those early mistakes it would have been priceless.

But that was my bad luck, or in this case your good luck as I have that information and I have a way to share it with you so you can avoid the costly lessons I learned.

I’ve put the information you need to know before you buy your first Rooming House property into an online training program call The Basics of Rooming Houses.

Now this may not be for you. If you like making mistakes, losing money, getting frustrated and quitting in frustration then you should probably don’t want to consider taking my training as it will make the majority of those painful experiences go away!

However, if you’d like to learn how to determine the local demand for rooms (along with understanding what you can charge for a room) I can help with that.

If you’d like to discover how the rules work in your area for room rentals or rooming house properties I explain how to figure it out and who you can talk to in order to get the details.

Perhaps most importantly, once you get through the initial training I teach you how to start finding more and more tenants so you eventually get to the point where you can live off of referrals and repeat customers! Once you understand how much easier this business is when people are calling you all the time you’ll really start to appreciate it.

I guess it really comes down to how serious you are, or how much money you want to lose on your own..

So if you’re someone willing to learn, to get educated and to get off on the right foot, you’ll want to go sign up for this course and get started today.

Click here to invest in your rooming house education – The Basics of Rooming House Course

You Mustn’t Stop Learning New Landlord Tricks

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Old Dog? New Tricks?

landlord tricksYes, I’ve become an old dog. When I look in that mirror I’m definitely not 29 anymore and I’m far past 39, but I do know, I need to keep on learning because the world isn’t stopping around me. And the last couple weeks have reminded me of this.

When I first jumped into Real Estate, I was veracious with my appetite to learn everything I could. I changed my whole life stye around and gave up many guilty pleasures like TV, computer games and more. Those little things that stole precious learning time from me.

I attended seminars, read books. moved from watching TV series to renovation series and home improvement shows and spent hours on the computer analyzing, researching and educating myself. Then when we had free time, we’d hang out with other Real Estate investors to learn even more.

It was like this for the first four years into what became our new full time career, then I think I just got comfortable. We’d bought and sold dozens and dozens of properties. We had systems in place, we knew what to expect and our learning slowed. We were comfortably numb.

We drifted back to more TV series, attended fewer meetings with other investors and started to rest on our laurels. We just wanted to get a little more balance of some kind in our life after all our hard work. Or so we convinced ourselves.

Not that we weren’t busy still, in a three month period around this time, we actually bought five properties plus a new home for ourselves and we had several other flip projects going on from earlier purchases that year. So there was plenty of Real Estate action going on and occupying our time.

We had renovations projects we had to schedule and manage, contractors to meet and coordinate with, we had advertising to prep and marketing for the rentals and the flip properties.  All with tight timelines as we wanted to get all the properties operational as quickly as possible. Empty properties simply don’t generate cash flow and unsold properties eat up profits with all their carrying costs.

Then The Bottom Dropped

Unfortunately, just about the same time we finished all the renovations and updates on the newly acquired properties is also when the financial crisis hit. So we moved into full hang on and wait mode. Which really elevated our coasting status.

Fortunately it took a while for the slow down to affect our rental properties and because we tended to have great tenants, it really didn’t hurt our day to day steady landlord business, but it virtually wiped out our growth as we weren’t sure the market was heading. Rather than make a bad decision, we just battened down the hatches so we could ride this through.

During this lull, we took advantage of our new found free time and promptly quit learning about what had gotten us to where we were.

While I found new areas to focus my thirst for knowledge with, I also started falling back into the habits of old. More TV, more games (Xbox now versus computers), less hanging out with investors and contractors and other people in the industry.

Sure our properties were coasting along fairly well due to all the systems we had in place, but we lost that excitement, that energy, that drive as we sat back and coasted on our laurels. (I know, finally it feels like he is getting to a point!).

Staying Thirsty

landlords need to keep educating themselvesSo the point. Finally.

To really succeed, you need to keep learning. Your competition is probably doing it, so why aren’t you?

We need to keep expanding our current knowledge and we need to stay on top of what’s happening in our field of choice. We have to stay thirsty. And this doesn’t just apply to being a landlord.

Our wake up call was a gradual nudge over the last couple of months. I’ve begun noticing all these new flipping shows appearing on the TV and new shows about rental properties and I’ve started to PVR them.

Now when I have a 30 minute break I’ll watch one of these for some thoughts and ideas. Some I may not agree with, while others are new and innovative, whether it’s new products available or new ways to look at situations.

One of these was a new flooring product I’ve seen multiple times on these shows as a substitute for laminate (personally I really dislike laminate floors, they typically get installed poorly and without proper underlay and insulation creating echo chambers in rental properties).

My wife and I have recently been busy cleaning up one of our shared accommodation properties and we’ve discovered several areas of water damage in the property to the currently installed  laminate flooring. We could potentially leave it be for another year, but this just opens the door for compounded problems and doesn’t solve anything.

The laminate came with the property and wasn’t installed very well to begin with. Add in seven years of use and abuse and it’s useful life had really caught up with it. As an added bonus,  if we improve the place, it also gives us an opportunity to consider higher rents in the future. So we have multiple reasons to deal with this.

Back to the new flooring product. Our flooring guy brings in a few samples to look at while he measures out the property and it’s gorgeous. It’s a very sturdy product and the way it is built, the fibre underlay creates a natural sound deadening effect.

Unlike laminate it doesn’t chip and it’s even resistant to denting. Unlike vinyl, it’s pliable and resistant to cuts. Plus it’s pattern is embossed into the product creating a texture that will help hide any accidents like a dropped knife (if they could even penetrate it!).

Perhaps best of all it will be one single piece that will run from the dining room, through the kitchen, down the hall and into the bathroom with no gaps or opening for water damage other than against the walls and cabinets. This will help prevent even more problems from potential water accidents.

So thanks to one of these renovating shows we learned about it and are now putting it in place. Thanks also to our flooring guy, we’ve had our eyes opened to other properties we can look at installing it into as well.

OK, product update.
This flooring is by Mannington and is the Sobella line.
The particular collection we are using is the Sobella Deluxe and
we chose the Hatteras pattern which works with the existing carpet
Mannington Sobella Flooring

So back to the point, if we weren’t open to learning, we wouldn’t have known about this product. If we hadn’t been watching these renovations shows and kick started some of our old habits, we would be looking at potentially installing more laminate.

Too often we focus on what we know as it is tried and true. We just need to be open to learning additional new things as we move forward. Whether it’s taking advantage of technology to improve screening tenants, or whether it’s staying current on new products for updating our properties our adventure as landlords is an ever learning process.

So stay thirsty, be the old dog (if you’re like me) and learn a new trick and don’t get too content you stop learning.

If you can relate to any of this, I’d love to hear your story, so leave us a comment and tell us of any tricks you’ve recently learned.