Canada is an awesome place if...
You have a place to live.
... and a job doesn't hurt.
The reality in Canada is that there simply are not enough places to live. There are people on the streets who are working and have money but there just isn't any place available. Indeed my son had a job in North Vancouver (70km away from home). He spent 6 months looking for any place to live and he had a better than median Canadian wage. Eventually he found a homestay where he had to be in by 9pm and leave by 9am for $1400/month...about half his wage!
I'm blessed. I have a large home. In my home.....
I have two homestay students in my house right now. I also have a friend who stays in the guest bedroom a few days every month. I have my two parents in law, my wife and my kids. We also have one renter currently and a good family friend who was hoping we could find a room for her to rent for a month or two.
Then today my wife got another phone call...."Do you have a place I could stay for six months". Honestly? No. Our house may have 7 bedrooms and 5 bathrooms but every room is taken and even the pull out bed in our living room is taken. Do we want so many people staying with us? Not really. However, we have a rule: Our house is on loan to us from God, so we use it to help anyone who needs a place to stay. Mostly
Now we have had many many people stay with us over the years and we charge everyone staying for more than a day or two rent. The exception is my parents-in-law who believe that children should not charge parents (even if they parents are richer than the children
When my son moved downstairs? He paid rent. When a good family friend comes for two months? She pays rent. When we help a homeless person get off the street? He paid rent.
No. It's not because we are greedy landlords.
Running the numbers
Ask @monica-ene and I'm 99% sure she will agree that I look at numbers carefully. When it comes to finances I put things to the test, regularly.
People tend to think "You paid off your house, it's free now"
Wow. That is a total lie!
For our Paid Off house every month:
Property Tax : $397 Property Insurance : $331 Water : $87 Electricity : $160 Gas : $139 Internet : $159 (although I get a short term discount). Repairs? : $400 (budget)
Total: $ 1,673 / month
and that's on a house I don't have a mortgage on!
Which raises the question:
Should I pay for someone to stay in my house?
Renting is just paying off the landlord's mortgage
I often hear the saying that "You should never rent, your just paying the landlord's mortgage". At face value that sounds true. Honestly though as a landlord I can't say it holds up in most cases.
I have 4 different rental properties. I'll use a condo I have in Terrace, British Columbia as an example.
I purchased the property in Terrace for $130,000 back in 2020. It was supposed to be for my son to live in while he went to University there...but he decided to study closer to home. As a result we rented the property.
But the question is always: How much is a fair rent?
Now I'm going to introduce you to "Opportunity Cost". Assuming I had $130,000 and put it in a time deposit. Fully guaranteed by the bank and the Canadian government. At the time I would have received 5% interest annually for 5 years. That's :
$6,500 annually ... for no risk and no effort. $541/month.
Should I rent it for $541? Well, no. I have to pay property tax $1,254/year ($105/month). I have to pay insurance $554/year ($46/year). I have to pay strata $294/month also. Total: $986/month. However, how about repairs? In the past 5 years I have had to pay $11,000 to repair flooring damaged by tenants. I've had to repair water damage to the bathroom. Install a new bathtub and sink. Replace a fridge which stopped working. Overall about $15,000 over 5 years ... about $3000/year or $250/month. Total : $1,236/month
How much do I charge? Well, break even: $1,250/month. Essentially I would make just as much money if I didn't bother buying the place and just put the money into a guaranteed investment.
Shouldn't the renter just buy a place there?
Hmm... Well, that is what I'm charging now looking back at the price I paid 5 years ago. If the same person bought 5 years ago and had a mortgage? Mortgage rate would be 6.25% and the minimum payment would be $858 so the monthly payment--$1540/month. Then it gets worse: All realtor fees and CMHC insurance and it gets even more expensive: $1,660/month.
But its much worse now!
However, if someone was to purchase the same apartment now? Average rent is $2000/month. But the property is $250,000 now. How much would the mortgage payment be now? $2,630!
Rent always goes up!
I see so many complaints among renters that rent always goes up. It's true! I started charging the tenant $1,250 back 5 years ago. The provincial government tells me how much I am allowed to increase the rent every year. It was 0% during COVID and about 2% after COVID. The rent can only increase once a year and if I skip a year I can't backdate a rent increase the next year. As a result: I could increase the rent by about $30/year after COVID. If I charged every allowable increase I would be charging about $1,320. I'd keep about $600/month after paying expenses.
If I sold the property for $250,000? I could just put the money in the bank, nice, secure and insured. Result $10,000/year in interest. Over $800/month. By being a landlord I get less monthly income than if I just sold and got rid of the headaches.
Am I making money by increasing rent? Nah. In fact I don't even bother with the rent increases. With everything else getting more expensive I don't want to make things tougher for the renter.
What do I look for in a renter?
A lot of landlords are really picky.
No kids
Children are hard on properties and cause lots of damage. Damage means repairs and less profit. Don't want kids.
No pets
Pets are even harder on properties (usually). They pee and poop and do awful things to the house. Again that means more repairs and less income.
Working individuals
Working individuals are working regularly so they are not at home much. Not at home = not much wear on the house. Fewer repairs! Side bonus: Working people tend to pay their rent on time.
Quiet individuals.
Working people also tend to get home, have food, then go to sleep. Tired from a days work. On the weekends they tend to go out and enjoy their free time. All of that means they tend to be quiet so no upset neighbors. Another benefit.
However
I work a little differently.
I want to rent to the person who will appreciate the property. Someone who will treat it like their home. Someone who will get enjoyment from it. Someone who will understand that I'm charging "break even" rent and not gouging them.
I've rented to families with young children. I've rented to people who were homeless. I've rented to divorced women trying to start a new life...with little to no income. I've rented to young families who are just starting out with infants. Not actually the ideal tenants for most landlords.
However, each one was so happy to get the house. Many of them were having a hard time finding anything to rent and they were worried what to do for their family. I like to be the person who comes alongside and says "I'll take a chance on you".
Sometimes things go poorly
Often times the people we rent to become friends even once they move out. Sometimes things go sour.
You see. The law favors the tenant and a bad tenant can cost a lot of money.
We had one gentleman who had mental issues. He almost started the house on fire. His incense and candles caused well over $10,000 in damage and the total rent we collected from him was barely $1,500. In addition he couldn't pay the rent for two months and tenant rights mean we could just kick him out. So, $8500 in damages and $600 in missed rent. (Typical rent is $800/month for a room where I live, we charged $300 which he wasn't able to pay).
However we had one tenant who simply refused to leave. When their contract was up they said "We aren't leaving". They weren't going to pay and they weren't going to leave. They said "We made it our home and we aren't leaving our home". Well, the lease was up. Their rights were done. However, police here won't evict someone from their home. Period. If a landlord wants to evict someone you have to go to court, have to hire baliff, pay baliff to enforce an eviction order, store the former tenants belongings for a year (at the landlords expense). That sucks. In addition...if a tenant wants to play the system...the can refuse to leave when the baliff comes (another court appearance). They can also appeal the order when the baliff arrives (another court appearance).
Result: I had two choices. $15,000 in legal fees and a year long court battle (or longer). Or PAY the tenant to leave. In the end I had to pay well over $10,000 to remove the tenant from the home.
The ideal tenant.
Who is ideal tenant?
Of course someone who appreciates having the home. Someone who pays their rent on time. Someone who takes care of the home as if it was their own.
And
Someone who lets me know when things need to be repaired.
Communications are important.
I had one tenant who wanted to make things easy for me and didn't want to tell me when things were not working right. Now I appreciate their desire not to bother me but...
They had two toilets that weren't shutting off properly. As a result two months later I got a water bill for over $1000! OUCH! If they let me know I could have fixed it for them AND saved me $2000 (it took a month to get repaired after I figured out what was wrong).
Another time there was a leak in the wall. The tenant didn't let me know, they just shut the door and didn't use the room. Two months later they call me to let me know their hallway floor is "squishy". When we went there the little leak in the bedroom turned into a blood of the entire basement. $1000 to fix the leak and replace wall and pipes. Another $10,000 to replace all the flooring which was destroyed because we didn't take care of the leak fast enough.
Not all landlords suck
Now don't get me wrong there are awful landlords out there who don't follow the rules! I tell every tenant who ever comes into one of my homes to read the "Residential Tenancy Agreement" which points out all their rights and responsibilities as a tenant. I actually go through it with them and show them that I can't just enter their property. I can't just evict them if I want to sell. I can't just increase their rent for no reason. They CAN just call someone in case of a real emergency, pay for the repair AND deduct that amount from their rent next month (although I appreciate a call first so I can try to find a better price). I show that subletting isn't allowed (unless I say so...and I don't like subletters).
Usually they think I'm just a little crazy pointing out the details. However, knowing the rules, rights and more makes things easier for everyone.
Good rules that both landlord and tenant must follow make things go so much smoother.
Someone who appreciates the home. Someone who looks after it. Someone who follows the rules.
My kind of renter.
...
That's my take on things as a landlord. Care to send a message with your thoughts? Or perhaps send me a link to your Hive Learners post showing me how things are different in your country? I love feedback and thank you for reading this far. Appreciate it.
Final take.
And just for fun:
I keep a whiteboard of the major expenses for each rental property so I can keep things straight. It isn't something I normally show people but I figured I'd give a glimpse to anyone who was curious. There is more on the whiteboard (credit cards, timeshares, etc) but this is the rental property portion....When I bring out numbers I have them very readily available ;)
