The accidental landlord – what every landlord must know
I think to understand what a landlord or landlady is, we should give the terms a definition. Here is what I found on Wikipedia:
A landlord is the owner of a house, apartment, condominium, land or real estate which is rented or leased to an individual or business, who is called atenant (also a lessee or renter). When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner. The term landlady may be used for female owners, and lessor applies to both genders.
This is a pretty good start, but I feel it should include a few more items; like room, space, and flat.
On the surface it is a pretty simple business, a property owner exchanges the use of the property for money, goods, or services.
The same business model has been used for centuries and will likely be used for centuries to come.
The reality is that as simple as it sounds once you ad people and personalities it can be a very complicated and stressful business.
I think a big part of that is because not only are you dealing with money, and customers, you are dealing with where people live and work. It is a 24/7, 365 day per year business.
The main purpose of this post is to help what I refer to as the accidental landlords. I get a lot of questions from this segment of the business, and I always want to help.
Here is my definition of an accidental landlord:
A person who is renting out a room or apartment in there house.
A person that has moved out of town and could not sell there house, so they decide to rent it out.
A person who inherits a small real estate portfolio of under five units.
A person who buys a house that has a tenant occupied unit in it.
A person who buys a house that is currently occupied by a long term tenant.
Basically any small independent landlords who do not intend to accumulate large property portfolios.
I feel education is the key to making sure landlords follow the rules, attract good quality tenants, and create both a great landlord and tenant experience.
I also feel that these accidental landlords are often vulnerable targets of professional tenants. They also can get taken advantage of by not having a proper lease, or they may provide a poor tenant experience and cause stress for them and there tenant.
A poor tenant experience can get a small landlord involved in legal battles, tenancy board, property damage situations, and of course lost revenue.
To help avoid some of the above listed experiences, I have compiled a landlord starter kit list (I hope this helps).
#1 Tenant screening, tenant screening, tenant screening – I have written several posts on this topic and I cannot emphasize it enough. If you are buying a place that is tenant occupied, you need to know all about the current tenant. Do not trust what the current owner might say. They could be trying to sell there way out of a tenant issue. If you own a vacant space and plan to rent it out, make sure to properly screen your applications. The tenant screening should consist of the following four pillars:
Past and current landlords
Verification of employment or source and amount of income
I often here a lot of excuses when it comes to not properly screening tenants. I am going to eliminate your excuse bag and provide some of my personal resources. You will need to check out your local tenant rules and laws (I do not take any responsibility for the quality of my resources if you decide to use them).
#2 realize you are running a small business – This can be a good news and bad news situation. If you are a landlord, you need to realize you are a small business owner (congratulations). That means you need to keep track of revenue and expenses. This can help you out in many ways at tax time. Make sure to get advice from an accountant when you are filing your tax return. If you only have one unit, you do not have to get to fancy, but you should at the very least get a scribbler from a dollar store and write down everything you are spending in relation to your rental unit, also write down the revenue and keep your receipts.
If you have a small business, that means you have at least one customer. This is where customer service comes in to play. If your tenant contacts you, make sure to get back to them promptly. We get a lot of compliments from our tenants about how quick we are to respond to issues, and our top notch customer service. When we consult with landlords I often find landlords feel like they are being bothered by there tenants when they bring up an issue. I have had to give several small landlords a wake up call speech about how they are a business owner and need to provide a high level of customer service, and yes it will cost money to hire the right people for the job. As you can tell we are very customer focussed and we have little patience for landlords that ignore tenant complaints, do half assed repairs or ignore required maintenance.
Tenant turnover costs money, it is one of the most expensive parts of the business. If you provide great customer service, you will have longer term tenants, which will provide you with a more profitable experience.
#3 Know about the residential tenancy act in your area – Every province, state or country has residential tenancy rules, regulations and conditions that are designed to help make tenant / landlord experience great. You do not necessarily need to memorize the act, but you are required to have an understanding and know how to acquire the information. In our home province of Nova Scotia, we are required to provide a copy to the tenant when we sign a lease.
#4 Have a team of contacts you can call for repairs and maintenance -When you are a landlord of any size, sometimes repairs and maintenance are required. Make sure you have some contacts ready to go. What can cause a lot of stress for a small landlord, is not knowing who to call or have any idea how to solve a problem. That can lead to delays, and poor customer service. What ever the issue is, deal with it head on. Make sure to assemble a team. I have a listing of the people I use on this website. Even if you do not live in the area, note the kinds of specialists we have on our list. A prepared landlord is a happy landlord.
There is a lot more to the business, but these items will get you started and headed on the right path.
Michael P Currie