I'm sure you've heard of horrible experiences landlords have encountered in Ontario. If you’re thinking of becoming a landlord yourself, you might even be scared. But it's all about your mindset. If you think that being a landlord is gonna be stressful...then it will be. However, if you look at this from a long-term perspective, you wouldn't mind putting in the work. Keep your eye on the prize, i.e, building wealth and setting your family up for success. Here are 4 tips you should keep in mind when becoming a landlord.
Tip #1: Preparing your taxes
Taxes can be a pain to deal with, but they're a necessity if you want to keep your rental property in good standing. Luckily, there are plenty of resources available online and off that will help make tax time easier for landlords who own multiple properties. Reach out to an experienced accountant if you don't feel comfortable doing it yourself!
What do you need to do? Gather the following documents for each rental property you own:
Annual mortgage statement - To deduct the interest paid on your mortgage as an expense against income,
Insurance policy information - The cost of insuring your building(s)
Property taxes paid during the year; bank fees associated with any loans taken out against them
Stationary used for paying bills related specifically towards these properties such as utility bills etc.
Internet service provider statements showing usage over time periods corresponding roughly with when those months actually fell within their billing cycles (you may need one per each location being rented out)
Cell phone bill showing how much was spent monthly per line associated specifically with these locations
Any other bills you've paid relating to your rental property
Tip #2: Finding the right tenant
The last thing you want is to rent your property and then have to evict the tenant for non-payment of rent or other violations of their lease. To avoid this scenario, make sure you conduct a thorough background check on each applicant before agreeing to rent them your property. The safest option would be to hire a realtor to screen your tenants. But if you don't want to go down this route...here's what you should do.
Check the tenant's credit history: A strong credit score indicates that they are responsible with their finances and will likely pay their rent on time every month. If their score is low or non-existent, it could indicate that they struggle with money management skills (and perhaps even have an addiction). If so, you may want to consider moving forward with another candidate instead of taking a risk by renting them your home.
Check references: Ask previous landlords about what kind of tenant they were while living at one of their properties! You'll likely get some insight into whether or not they lived up (or down) their reputation as one who pays bills on time and keeps the property clean & safe from any damage caused by neglectful behavior such as smoking inside where children might play after school hours etc.
Tip #3: Assemble a great team of professionals
Assembling a great team of professionals is essential to success as a landlord. When you're ready to hire a lawyer, accountant, plumber, handyman, and property manager, make sure they are experienced in working with landlords and have an understanding of your local market. They should also be able to provide references from other satisfied clients.
Tip #4: Managing your finances for each rental property Rental properties follow many of the rules of a business. The home is your venue, and your customer is the tenant. As such, you should manage your property's finances like you would a business.
Create a business account for your rental property
Rent cheques should be deposited and all expenses deducted from this account
Keep track of your tenants' rent payments and when they are due, along with any late fees or penalties that may apply if they don't pay on time.
You should also keep track of any deposits they put down as well as any security deposits or last month's rent (if applicable).
Keep track of all expenses related to your rental property, including repairs, maintenance costs, utilities, etc., so that when tax season rolls around again next year it'll be easy for you to calculate how much profit (or loss) was made off each one during that period!
I hope that this information has helped you understand the basics of being a landlord. Remember, it's fear that keeps most people from becoming a landlord. Don't let fear get in your way of living your best life.
Still have questions about being a landlord? Let's connect! Book a time at www.sylviaho.ca