Practicing The Property Manager Mindset with Gary Spencer-Smith
In this episode, RevNYou with Real Estate Partner and property management expert, Gary Spencer-Smith, shares the tactical tips and techniques that he’s used to manage his portfolio of real estate, as well as the rental properties of many others through the development of his own property management business.
With 6+ years running his property management business, which he’s recently sold, and many more years of being an active real estate investor, Gary has released his new book:
The Property Manager Mindset – Reduce Stress, Save Time, Earn More Money to share his toolkit for succeeding in the property management game.
Tactical talking points include:
Property management is really about people management – properties are straight-forward, people are not Viewing your tenants as clients, and yourself as a rental housing provider (not a landlord) Shifting your mindset from what you tenants do to you vs what you do for your clients Seeing your property management as a business…because it is! Simple shifts to put minor property management headaches in perspective How to avoid nightmare tenants and situations by screening effectively What to do when a tenancy trends in the wrong direction Seeing your property management experiences as opportunities for education and growth Stories and personal experiences from Gary to illustrate the property manager mindset in action
Whether you plan to manage your own properties, end up doing it out of necessity, or are making the jump from DIY property manager to hiring out a 3rd party, this is going to be an incredibly valuable conversation to learn from.
And if you’re interested in buying Gary’s book, The Property Manager Mindset, you can do so on Amazon here:
The horror stories we could tell you from selecting the wrong people to occupy our investment properties. It can cause you too much time, headaches and way too much money! It is so important to learn how to pick the right tenants.
#1 – Buy the right property.
That means by buying the property for the type of tenant that you want to have. It’s no good buying a student house and then wanting to find a family to live in it. Likewise, you don’t want to buy just a single family home and then have students rent it out.
#2 – Buy in the right area.
Does the type of tenants that you are willing to deal with want to live in an area that you are going to buy houses in? Don’t just buy in an area because it’s cheap and it looks great. Ideally you want to be buying in the right area, but you want me buying a house that will add value in that area.
#3- Match the tenant to the property
Watch the video Grading your tenants A,B, and C for more depth detail to understand what that means. For the purpose of finding awesome tenants, you want to match the tenant to the property, which means if your looking for students, you want to make sure you’re looking for a student type house in the affordability that a student can afford. You don’t want to get the single family home that is a 20-30 40- 50 minute drive from home. Most likely they will want to live five minutes away. They might be choosing your property for the wrong location.
#4- Properly screen your tenants.
We can’t stress this enough. If you want to find awesome tenants, screen out the bad tenants. It’s as simple as that. It starts from the way you communicate with them, from your type of advert that you write, it starts with the property that you have, and the area that you’ve got. That’s where the screening process starts.
You really want to continue communicating with your tenants as you’re finding them.What is the communication like? You want to be firm but fair. If you want to find awesome tenants, that means they need to know that you know the rules and you will be a fair person, but you’re going to abide by those rules. If they’re aware that you know the rules and they’re going to try and bend the rules, they’ll be less likely to want to become your tenants. So you want to get rid of those bad tenants and make sure that you just ended up with all awesome tenants.
A few years ago, we were approached by a gentleman that was looking to hire a management company to run his property. It wasn’t just any property – this was a property he’d built himself in the 70s. He knew every nut, bolt and screw in the building. Apparently, he had been making regular yearly calls to various management companies looking to hire but things never seemed to work out. He just never seemed to find the right company.
You may have already experienced the same feeling. Hiring a Property Manager can be a stressful time for some investors.
In my experience, each market area will have various types of Property Managers that you can get quotes from. The options will vary from a friend’s friend that looks after properties, to real estate agents, to mom and pop shops, all the way to larger management firms.
As an investor, it’s important to properly align yourself with a Property Manager that has the same principals as you when it comes to running an apartment building. Chances are that you will be working with this person for a long period of time therefore its a good idea to find someone that you like and respect.
When the gentleman called us, we were a young company and hungry for business (as we always are…).
After several discussions and meetings, we won the business. We’ve been managing the property ever since and our relationship with this owner has blossomed into a wonderful partnership. We spend a lot of time providing him with great service, providing the property residents with great service and things have worked out great. But, a big part of what sold this business, and we’ve found helps us stand out from other property management contracts, is our onboarding process. It’s not just about bringing in a new client – it’s all about ensuring that the owners and their tenants are set up for a successful partnership.
Getting the management agreement signed is the easy and sexy part of this business. Managing the property and all its stakeholders is a completely different ball game. When you’re looking for a property manager, ask them about their onboarding process for new owners and their tenants. If you want to ensure your property is going to well taken care of and that you have a professional running your rental property, understanding what they are going to do as soon as you become a client will help you.
Having on-boarded hundred of property owners over the years, I know how important this first step is to the relationship between property manager and owner. If you’re not having your expectations met at this stage of the relationship, it could be a short and bumpy ride.
Below are 5 Key Items to Ask a Potential Property Manager Before You Hire Them:
1. Do You Have an Owners Manual?
The very first item that you should look for is some sort of owners manual detailing how the management firm runs their operations and what you can expect to happen in certain situations.
Having clear expectations from both parties on any business transaction is a must. In the world of Property Management and investment properties, it’s critical that the owner and the property manager be on the same page on how run a building. Ambiguity and assumptions are dangerous and therefore should be avoided at all costs.
Items to address in the manual could include the following:
When do I get paid my cash flow?
When and how do I get my statements?
How do you deal with late rents?
What dates do you send out eviction notices out by?
How does the Property Manager handle expense expenditures?
When such a document exists, there are no surprises as to how things work. Sometimes you and your property manager may agree that a situation should be handled differently, but generally, an owners manual or a guide to the policies and procedures will ensure that you know what to expect from your property manager.
2. How Do You Communicate with Your Owners?
How you’ll communicate with your property manager is important. Find out how your property manager will typically communicate with the owners and establish your own communication strategy that will work for both parties. Setting the ground rules for regular meetings/discussions is critical.
Some property owners are of the opinion that no news is good news while others want to know every detail. Let your property manager know where you sit on this so that you are getting the information that is important to you.
Agree on times and frequency of phone calls. This is intended to be a minimum. Example would be 1 phone call per month to review financials if you’re an owner of a larger property. For single family houses, you may only need to speak quarterly or semi-annually.
Agree to an email volume that can accommodate both parties. Do you want email notifications about every little thing, or just when something important happens?
3. What Will You Do For an Initial Property Inspection?
Now that the fundamentals are in place, you want your property manager to go do a full inspection of the property. You want your Property Manager to know every detail on the property and you should help him in every way possible. In an ideal situation, your manager should be able to produce a ‘building file’ on the property. This building file would essentially act as a central holding spot for all the property details.
Some key items are the following:
– Taking pictures (professional ones are recommended) – Documenting general condition of common areas – Roof and window condition – Age and serial numbers for hot water tanks – Alarm System details – Functioning keys for all doors – Water shut offs – Elevator details – Pool maintenance – Heating source(oil, natural gas, electric …) – Central Air system
A well-documented building file can be very useful for both owners and property managers. If you’ve recently purchased the property, providing your property manager with the inspection report can help speed up this process.
4. How Will You Handle Tenant Introductions?
Tenant relations are one of the most important tasks for any owner and property manager. You want your manager to take the time to go and meet with each of your tenants. This goes a long way to building and cultivating great relationships.
In addition to the introductions, welcome letters should be distributed with all the details on how to work with the new managers.
5. What Kind of Software Do You Use? And What Is Available for Your Owners?
If you’re working with a professional management firm, chances are that you will be provided with a web-based portal to access your property details. Find out how this works and whether the manager will provide you with all the login details of how to access your portal as well as how to use it.
In most cases, you might be using the portal more often that you speak to your manager so it could be a key component to your overall management solution.
There is a lot of emphasis on property steps and questions to ask when hiring a Property Manager, and these are important, but many of them overlook how much emphasis should be put on the on-boarding process. Now you know what to ask about and look for when you meet your property manager.
Written by Tony LeBlanc.
Tony LeBlanc is a zealot when it comes to managing your property. His first gig? He was a precocious teen and live-in superintendent. Yes, that’s right, he was practically born into the industry. His resume is lengthy, but here are the highlights: A successful entrepreneur two times over, income property owner, and a competitive body building software engineer with a financial background that would fluster your financial planner.
Ground Floor PM is a strategic firm born of his desire to create wealth for property owners. With his solid financial acumen, and technical skills, he’s created property ecocystem, with to the minute financial reporting and forecasting. His reputation for anticipating trends and recognizing value are renown. Prepared to act as an advisor on future investments, he sees himself as a partner in your long-term growth. How’s that for a service perk?
I remember the first time my house was robbed. The thought that my personal space had been violated, felt horrible. The idea of a stranger walking through the house and going through my things was nauseating.
It is a terrible feeling, but it happens all too often. I’ll get a call from a tenant, landlord or property managertelling me a property has been broken into. The window has often been smashed, the door kicked in, or the locks tampered with.
It’s a scary experience for the tenant, and it is a headache and drain on money for the landlord. More often than not these instances can be easily avoided with some simple maintenance of the property’s security.
Here are my top tips to for rental property security.
Secure Your Main Entrances
In most provinces it is a requirement that all entrance doors be fitted with a deadbolt.
While it is optional to use a single or double cylinder deadbolt, I highly recommend installing a double cylinder deadbolt for extra security. This is especially important if you have a window nearby. A double cylinder deadbolt will stop the thief from reaching in and opening the door from the inside.
The deadlock can be a separate piece from the door handle, or you can buy a deadlock that is incorporated into the handset.
To further secure your entrances from unwanted intruders, install solid wood or metal doors. Flimsy wood or doors with windows can easily be kicked or smashed in. A solid construction door will ensure that any potential thieves will have a hard time getting through.
If you have had to evict a bad tenant, get your locks rekeyed. This is often cheaper that buying a new set of locks. [Note from Julie: We install the SmartKey locks by Weiser on many of our properties so rekeying doesn’t require a locksmith].
Check Your Window Security
Whilst windows must be fitted with a mechanism which prevents the window from being opened from the outside, in a lot of provinces they don’t require a lock.
However, in most cases a burglar can easily smash a window and open the latch, giving them easy access to your home. If burglars can see that you have installed locks on your windows, they will second guess breaking in. A locked window with broken glass is harder to get through than a window that is opened.
Install External Lighting
The last thing a would-be thief wants is having a spotlight shone on their suspicious behavior. Motion sensor lighting is an excellent deterrent to intruders.
As a minimum measure, make sure you install security lighting at the main entrances to your home. If you have a larger budget, consider installing security lighting around your property to illuminate potential hiding places for burglars.
Install A Security System
Security systems are one of the best deterrents you can install in your property. It also has the added benefit of increasing your properties desirability to prospective clients.
If you already have one installed, make sure you run new tenants through how the system works. Some people prefer their privacy, and may not share their own access codes with you. As the landlord, you can ask for your own access code that you can use in an emergency. [Note from Julie: on a few of our rentals with security systems we have a master code the tenants can’t change – they can always change their own access code, but our master code will always override the system. This is especially important if a tenant forgets the code, leaves without telling you their code, or as already noted, there’s an emergency requiring you to go inside.]
If you don’t have a security system, you should consider getting one installed. There are many different security systems available. These include options that won’t require drilling holes into walls or taking a long time to install. There may even be an insurance discount available if you have a monitored security system in place. And, tenants in certain areas might be willing to pay additional rent just for the peace of mind a monitored security system can provide.
Make sure you thoroughly discuss with the security provider the details of the system and how it works. Check if there are any long-term binding contracts associated with installing the security system. Not all security systems require this, however, it is a good idea to check.
I recommend landlords are present during the systems installation. This helps to address any further questions or worries you may have.
Advertise That Your Home Is Secure
Posting up security signs in prominent places can work as a good deterrent to would-be thieves. These signs are reasonably cheap and should be placed in a noticeable location such the front door or entrance to the property. Many times the company will give you stickers or signs to put up.
Keep the signs generic. Don’t include the make, model or manufacturer details of your security system on the sign. This information can be used by more experienced burglars to disable or bypass your security system.
Remove Potential Hiding Places
Do you have any shrubs or objects near the windows or doors of your property? These can be used as a cover for someone trying to break into your home.
If possible, get these removed next time you clean or renovate your property. If you have any tall or thick shrubs around your doors or windows that you don’t want to remove, make sure the tenant keeps them well trimmed.
Document All Of Your Furnishings
If you own a holiday rental or include furnishings with your property then it is a good idea to have a detailed record of the items in your property. If your property is broken into and something is stolen then this will make it easier to replace and claim with insurance.
Details that you should document include:
A Photograph Of The Item
These details should be kept with you, and not on the property.
Consider engraving or using invisible ink to mark your belongings. This can help recover any stolen property. Engrave something that is traceable such as your drivers license number.
Before you do engrave your belongings, double check with your insurance company and make sure that engraving doesn’t void the warranty.
For items that can’t be engraved, you can mark them with an ultraviolet pen. These pens don’t damage the item and are only visible under an ultraviolet light. These marks can fade over time, so renew the markings whenever you get the chance. If you have tenants in your property for long periods of time, make sure you re-mark everything before a new tenant moves in.
Items to consider marking and documenting include:
Garden & Power Tools
Any bicycles you keep on the property
Anything else of value in your rental
Before You Start Updating Your Security
If your house is currently occupied, please double check local laws and the contract your have with your tenant. It is illegal for either the landlord or tenant to remove or change any locks without getting the consent of the other person. You may have to wait to update your rental property security until the tenant moves out.
If you are choosing to upgrade the security of your property above the minimum standards, then it is important to talk to your tenant. You may need to add an addendum to your lease to account for the new agreements you make to cover the new security measure. Make sure you put any agreements in writing and make sure that both of you sign the agreement.
Whether it’s for your tenants, your own peace of mind, or a bit of both, updating security is something that can prevent hassle, reduce potential insurance claims, and increase the confidence you have that all is well with your investment!
AUTHOR BIO: Nathan is a founder of a LocksmithsInSydney.com. Locksmith Sydney provides the resources you need to make sure your property is safe and secure. He specializes in helping property owners find the best locksmith for their security needs. Check out his simple free checklist to securing your home against intruders.
“It should be illegal to turn away someone because they have a pet”
It was the start of a hot headed debate in a local rental Facebook group I use for promotional purposes when we have a vacancy.
Landlords chimed in with horror stories of damage while tenants shared their tragic stories of having to give up their beloved four legged family member because there was nowhere to live that would accept the animal.
Personally I am not a fan of the government telling me what I can do in my rental business so I would MUCH prefer the choice. And, my advice to the tenants on the forum was to make themselves the best possible applicant for a property and they will find that there are more opportunities to live with your pet than you think there are. The problem isn’t always the pet – it’s the tenant’s application.
My experience is that a great tenant is a great tenant … if they have a pet it just means they will probably stay longer and pay me a little more rent.
But there is a lot to consider when you make this decision, including whether you are even allowed to say ‘No Pet’s’ in your state or province (sorry Ontario landlords – you can’t actually say no pets!).
Here are my thoughts on whether you should allow pets in your rentals (thanks for the great question Christine).
If you do decide to make your rental pet friendly, you’ll definitely want to write a great rental ad that sells that benefit. You’ll also want to focus on ensuring you screen your tenant and ask great questions to ensure get the best one.
“Hey ya Tim, just wanted to let you know that the city didn’t pick up our garbage on garbage day.”
It was a tenant at one of my student rentals calling me.
“Huh? Well did you put it out at the curb before 8am?”
“On the curb? No. It’s at the back of the house. They don’t go and get it from there?”
It probably would have been pretty funny except my phone was ringing non stop. I was in high demand!
Now, if I was a single guy with a dating profile online, this probably would have been great news. But instead it was my tenants interrupting my precious family time with my wife and 3 boys.
I only owned five properties at that time, and was about to add several more to my real estate portfolio. Something had to change. I didn’t get into real estate to have it run my life. I got into real estate so I could have more control over my time.
One of the challenges with student rentals is that this is often the first time away from Mom & Dad … Since the majority of my real estate portfolio is student rentals, I really had to find a way to handle the incoming communication. I did not want to explain to students how I to change light bulbs or do a load of laundry.
This is how I got control over the incoming communication … and how just about any real estate investor with a growing real estate portfolio can do the same:
1 Property Manager
I managed my own properties for some time and all was going well till I added my 4th or 5th house. Then, it just all got a bit too much. It also meant that I was critical to the process.
What if I wanted a vacation? Who’d manage the houses then?
For my properties that are further away it doesn’t make sense for me to drive all that way to do showings. So, the property manager is very important. Make sure they have experience with the type of strategy you’re working on, get referrals, ask at your club meetings, get them to show you some of the houses they manage, tag along when they do a showing. They are going to be the main gatekeeper between everyday goings on and your freedom. (Read this for questions to ask a property manager before you hire them)
The millennial generation likes to text. It’s not a bad thing. Texting can be an efficient way of communicating especially when setting up showings. Your online ad will get lots more responses if you include a number to text. I’ve tried it with and without and I’d say the numbers of inquiries are about 3 fold with a text capability. But, there are a couple of important distinctions to make. You don’t want to give them your personal cell number and you don’t want to be ON 24/7.
My solution? A free service called textnow.com gives me a local Canadian cell number, which I can then give to students or put on an online ad. A great feature of this is that it has both an app for my iphone but also a web browser interface. Instead of responding to texts all day long you can then log into the web page and check them a couple of times a day. To take it a step further I’ve also given access to my virtual assistant so they can respond to texts on my behalf as well.
The last thing about texts is that you’ll ideally want some way of keeping them, as conversations need to be tracked so that they can be referenced in future if necessary.Textnow has the ability to send a copy of text messages to you via email. In my gmail account I then auto archive any messages coming in from the textnow domain. This way I am essentially archiving every text conversation I have.
3 Phone calls
Similarly to texts, students will likely want to phone and talk to you. You can utilize the textnow number and you can answer that directly on your smart phone if you’d like to. Clearly if you’ve taken on a property manager this will become less relevant over time, but I still remain involved and therefore this is a useful tool.
When accepting phone calls and messages from tenants, it’s important to make a distinction between different types of issues. We advise students to phone us if it’s urgent, for example a flood, leak, electrical issue etc. But if it’s just a general question or request (which it often is) we ask them to send us an email. That way it can be looked up in the future if necessary. Lastly have a clear voicemail reiterating this and providing instructions on what you’d like them to do.
4 Educating Tenants
We provide a binder in each student house, which has all the appropriate contact details and instructions of key things they may need to get involved with. The binder includes important information like what day the garbage needs to go out and who to contact in which situation. We also provide some fun things such as Pizza delivery phone number and other local amenities. You could include a bus timetable or a map of the city anything you think would be useful.
5 Not responding immediately
Our natural response to getting asked questions is to answer them. I remember when I started out I tried to respond as fast as I could. I wanted to be the best landlord ever. I’d phone people back straight away or respond to texts to make sure everyone was happy. The problem I found with this strategy was the quicker I responded, the more questions I got.
Some of this goes back to being away from mom and dad for the first time. But it’s not just students. A lot of people are just used to instant gratification. I learned the hard way that communication needs to be carefully managed. Urgent things can be dealt with quickly but outside of that I encourage people to send an email and let them know that I’ll respond within 24 hours. Delaying a response to “the internet is down” often means that by the time you’ve respond they’ve unplugged the modem and plugged it back in again and it’s working! Educating tenants with the best way to communicate from day one is best as they’ll hopefully respect that and act accordingly. Trying to change behavior once it’s established is a harder prospect.
It’s possible you can handle everything on your own and not have to use any of the tips and strategies I’ve talked about above. But I believe the sooner you start getting help and put systems in place as you’re growing your real estate portfolio (especially with your student rentals) and putting some tools in place the sooner the sooner you can move on to buying another property, going on vacation or just spending more time with you kids. At least with these things in place you’ll have a choice!
[plain]Tim Collins has been investing in real estate since he was 20 years old. Tim is the authority on student rentals and is regularly featured in Canadian Real Estate Wealth Magazine. He focuses on building his student rental portfolio with joint venture partners, whilst also helping others with advice and guidance through speaking engagements, workshops & studentrentalinvesting.com.
If you’ve ever had a late night call from a tenant or you’ve felt frazzled because you have wasted an hour trying to find a document for the insurance on your property or your tenant’s lease? These are the systems good landlords have in place to manage their properties and not lose their minds. And, these are the kinds of systems that allowed Quentin D’Souza to build a beautifully cashflowing real estate portfolio and start and develop a hugely successful real estate club in Durham, ON, all while working a full time job and spending time with his family.
A well set up phone system is a major key to your ability to be able to manage your time well and set boundaries between your business and personal life.
1. Use evoice.com or grasshopper.com to create a phone system with prompts that filter tenant requests to different phone lines. Press 1 for one type of problem, press 2 for another etc.
Educating your tenants on the difference between types of requests is an important component in getting your filters to work for you. The tenant binder, which will be explained later on, and move-in are wonderful opportunities to do this.
2. Create a 2nd phone line to deal specifically with maintenance issues.
Set this line up so you’re not notified directly on your cell phone. Check these messages regularly and respond promptly, but not immediately. However, ensure that you manage tenants’ expectations reasonably when it comes to maintenance response times. Once the expectation is set, always respond within the expected response time. I generally provide a response within 24 hours.
3. Create a 3rd phone line to deal with vacancies.
As with the maintenance line, you should not answer this line immediately. Deal with it systematically, but not with emergency priority.
4. Create a 4th phone line to deal with emergencies.
Have these calls forwarded directly to your cell phone. If tenants contact you on this number, it means there is an issue that has to be dealt with immediately, not in a day or two.
5. Do not have tenants contact you directly by cell phone or text message.
Tenant requests can be overwhelming over time, and you don’t want to give the appearance that you are buddies with the tenant. Keep a professional relationship at all times. Keeping this boundary firm can be the difference between successful landlording and wanting to throw in the towel. If you are going to use a cell phone to communicate with tenants have a separate phone number that you use for your rental properties.
6. Put phone numbers on magnets with the name of your company and place it on the fridge when the property is rented out.
This allows easy access for tenants to the necessary information and insures they don’t forget the correct numbers. Remember to educate them about the proper use of each number and what does and does not constitute an emergency.
Property Management Tip #2: Create a Property Binder
Each unit should have its own binder that contains key information regarding the property. This is referred to as the tenant binder in other parts of the book. Here are the policies that govern the property/tenant binders:
1. Use a white one-inch 3-ring binder.
2. These binders remain in the property at all times.
3. Educate the tenant about everything in the tenant binder at the end of the move-in inspection.
Use this as an opportunity to create a relationship with the tenant and show how proactive you are as a landlord. Explain that the tenant binder is a friend of both tenant and landlord because it has the answer to many problems. If used properly, the binder can save much time for all involved, so being knowledgeable about it is imperative.
See www.theontariolandlordtoolbox.ca for a Sample Property Binder.
The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords by Quentin D’Souza is now available. Grab your copy today for simple solutions to managing your property.
Once you’ve taken the time to make sure your property is ready to show and you’ve written a great rental ad the next step is to screen the prospective tenants that call you.
Many people are content to exchange emails with potential tenants to set up viewing times and I have seen others that encourage text messages. You can do that, but you are missing out on a great opportunity to screen your tenants and you will absolutely waste time going to show your property for the wrong people or people that do not show up.
We’ve learned that if someone won’t pick up the phone to speak with us to set up a time to view the property, they really aren’t that committed or interested in the rental property. These are the folks that will email you to set up a time to see the place and then never actually show up or call to tell you they aren’t coming. And when they show up, a good percentage of the time, we would not rent to them because they want a shorter lease, too many people are going to live in the property, they don’t have jobs or there is some other challenge that we could have covered quickly on the phone and saved us all the trip.
My recommendation – get your potential tenants on the phone before you get up off your comfy couch and show your property. It’s up to you … but it’s been a much more effective way of handling tenant showings for us. But, what do you ask the tenants when you get them on the phone? I’m glad you asked … I shot a video to help you with just that very question:
Tenant Screening Questions to Ask Before You Waste Time Showing Your Property to the Wrong People:
When you are asking questions you’re listening for things that might be a yellow or red light. Not sure what I mean, check out this video Dave shot for you on our simple screening tenant screening process:
When you do get set up a time to show the property, here’s how to get ready:
Finally, if you aren’t sure how the whole rental process works, here’s 5 Steps to Rent Out Your Property and Handling Tenants Who Break Their Lease (prevention is the best medicine). Tenants are your customers. You will not be a successful real estate investor without them. However, you need to find the right ones for you and your property to minimize the stress and strain you can feel. It takes work but a little effort finding the right people will go a long way! Good luck.
If you want more help on picking great tenants for your property, grab a copy of More than Cashflow. There’s an entire chapter dedicated to finding great tenants – plus the whole book will help you understand why you get bad tenants and how to prevent them.
Looking for a way to buy a home to live in without having to carry a giant mortgage on your own income? Buy a multi-unit property like a duplex, triplex or fourplex and move into one of the units. A well chosen property can find you living in a much better area than you could have afforded otherwise and paying a lot less “rent” than you would have otherwise done.
We did this in Toronto for a few years. We moved into a three-unit property that we owned. Our friends moved into the top floor; we lived on the main floor; and we rented out the basement to some university students.
The key benefits:
We did live for cheap. Our “rent” was substantially lower than it would have been if we had rented the same property;
Parts of our home expenses were a tax write–off, thanks to the rental income;
We got to live in the very desirable Little Italy area of Toronto, only minutes from a subway stop. We were also right across the street from a large off-leash dog park (which our dog Bram would stare at longingly as he sat in front of the window.)
The money we saved went towards some of our other investments, paying down student loans, and renovating this property to increase it’s value and generate more rent in the future.
It’s a great way to get into the rental market business, build your wealth and reduce your personal living costs. You’re also able to keep a really close eye on your rental and take better care of any issues that may arise.
The major drawback of living in your multiple unit rental is that the burden of managing the property and dealing with the tenants. Tenant selection is just as critical when you, the owner and landlord, are going to be living on site.
When we first moved in, we didn’t select our tenants so carefully in the tri-plex and the lessons we learned the hard way became one of the founding reasons we started Rev N You and I wrote More than Cashflow. We created a lot of problems for ourselves that were preventable!
While we were living in this property, our tenants in the basement were constantly fighting. We were often being called in to play referee until one morning at 3 a.m. it all came to a climax when one of the basement tenants pulled out a butter knife and threatened her roommate with it. The tenant without the knife was terrified, called the police, and moved out in the morning.
The knife wielding tenant stayed in our basement for two months after this but stopped paying rent. Imagine the joy we felt living above an unstable tenant who also wasn’t paying rent.
The point here is to let you know that there are tremendous advantages and disadvantages to living in your investment property while renting out the other units to tenants. It is a great way to live for less and possibly enjoy a better home or area than you can otherwise afford. Nevertheless, as noted in the above, small residential properties with two, three or four units are a great option to consider.
Canadians – word of caution for your taxes when you use this strategy:
If you do decide to live in a property that has been a rental or will be a rental for you and you decide to call it your primary residence to avoid paying capital gains taxes on the value increase that takes place while you live there, you cannot depreciate it when it’s a rental only. If you do depreciate it, you can’t claim it to be capital gains exempt, even for the period that it was your primary residence. Plus you want to get clear on what you can and should write off, and how you can determine values for when it’s your own home versus a rental. A few hundred dollars spent on good advice could save you thousands in taxes.
Here’s some advice on the prevention side of things … simple strategy for screening and picking the best possible tenants.
The laws are different in every province and every state, so you have to look up your specific area but this will be a good general guide for most landlords.
“Well, we’ll just give him a few more minutes to show up,” the judge on the telephone line said.
We were waiting for our tenant to come onto our scheduled dispute resolution hearing (a conference call with the “judge”, the tenant, and the landlord) so he could defend his side of the story. We’d asked for an order of possession for our property because he was a month behind in his rent payments and had been paying a month late for a couple of months now.
To get this far, we had to issue several notices, provide multiple documents to the residential tenancy branch to prove he was behind on rent, and we had to prove that we had served him all the documents. This can be done in several ways, but in our case we’d chosen to send the final notice of the hearing by registered mail after posting several documents on his door.
It’s a lot of work to file all of this paperwork. There is also a filing fee of $50.
The judge put us on hold, to presumably call the tenant. If we had not showed up, the ruling would have been in favour of the tenant but it doesn’t work that way when the tenant doesn’t show. They make every effort to get him on the phone and look for ANY evidence that the tenant didn’t know or wants to dispute the notice.
Our tenant clearly did not answer his phone as the judge came back on and said “Ok well I guess we’ll begin.”
The judge then reviewed in detail whether we had given the tenant proper notification of the hearing. He went through the facts of the case next. It felt like he was asking us questions purposely designed to trip us up. For example, we had dated the receipt of rent payment but not noted what MONTH that rent was for. The judge questioned repeatedly why we did it that way and whether it was for the current month or the past month’s rent because it was clearly paid in time if it was for this month. We started to worry that the little mistake of omitting the month of rent that payment was for on the receipt was going to cost us the judgement.
All onus is on you Mr. or Mrs. Landlord.
If you’ve never had to take an issue to a hearing or a court – just know that you must prove everything and, in BC anyway, the judge looks for any reason to rule in the tenant’s favour. In the end, the judge reluctantly admitted our case was pretty clear and gave us the right to ask for an order of possession. Now we had to wait two weeks so we can issue an eviction notice. It hardly felt like a victory, but it was what we wanted.
It was a better result than the last time we had a hearing. Our tenants broke their lease and we lost several thousand dollars as we had to do some work to the property to repair their damage and we lost rental revenue. Despite the fact that they were breaking their lease and had a rent cheque that bounced, we weren’t allowed to keep a penny of their rental deposit. I’ll tell you more about that in a minute.
Bottom line, prevention is the best way to handle tenant troubles.
I’ve written a lot of articles to help you find the best tenants for your properties and below is a video on one of the ways we screen our tenants, but today I want to help you by informing you as to some of the most important things you can do to cover your butt in case you ever do have to try to win a judgement.
If a tenant is moving out – ALWAYS get notice in writing.
Verbal or text message is not enough. Get it handwritten on a piece of paper with their signature or at the very least in an email. Ideally, use the forms provided by the landlord tenant board for your area.
Which brings me to an important second point:
Use the Proper Notification Forms for Your Province (or State) AND Get Proof
If you have ANY issues with a tenant regarding violations in their lease, communicate this violation over the phone or in person and follow up with the EXACT notification that you are supposed to give (the notices vary by province and state and what notice to give for what violation). Make sure you have reviewed when you give what notice. Timing of notice is very important.
If you deliver a notification to a tenant and they are not home, in many cases you can leave it taped to their door. HOWEVER, you MUST have proof that you did this. Proof can be a witness who will sign off saying they were there with you or a time stamped photograph. It wouldn’t hurt to have both.
Finally, if you are dealing with a broken lease, the onus is on you to minimize your damages.
Begin advertising the property AS SOON as you get notice. PDF and save copies of any online ads. Take time stamped photos of any signs you put up or any flyers you put out. And if you put ads in the paper, keep copies of the paper. You have to prove that you made EVERY effort to rent the property.
It doesn’t matter if a tenant violates the lease six different ways – it’s 100% your responsibility to prove that you did everything you could to reduce the damages. And, it’s 100% your responsibility to follow the residential tenancy act rules. The tenants aren’t really expected to know the law, but you are.
It’s not fair, but there is no point getting upset about that fact. It is what it is. Just be prepared!
Keep records of every communication in a tenant file.
Note calls (times and dates and subject). Save text messages (take screen shot photos of your text messages). Give receipts for rent paid, if it’s paid in cash. If it’s not paid in cash, be able to show where it was deposited (here’s where it’s really helpful to have one bank account per property). If you have two units in the same property that collect the same amount of rent you’ll need additional proof to show who paid what rent – so keep receipts of e-transfers or pictures of the cheques or issue receipts.
If you think something will be important to note, then make the effort to note it with proof.
Here’s the good news. In almost 13 years of being rental property owners and having close to 300 different tenants, we’ve had 3 issues that led us to a hearing of some kind. That’s not that bad. Think about it … that is 1% of the time!
So don’t let this freak you out … but do let it inform you to know your local laws and if there are any issues (noise complaints, pets not approved, added occupants, late rent, bounced cheques …) make sure you document the issue and serve the appropriate notices just in case it ever gets to the point where you have to fight for cash or defend yourself in court. Also find out what you can and can’t add to your lease.
The Case We Lost
In that case we lost that I mentioned above, our biggest problem was because Dave was trying to be compassionate for the tenants’ situation. He tried to work with them too much and didn’t follow the actual letter of the law until we saw there was a big problem.
The two biggest issues were in not forcing them to put their notice in writing (they text messaged us their notice but it had ambiguity) AND we didn’t use proper notification forms from the beginning when the rent bounced, the lease was being broken and other issues arose. Because we didn’t follow the rules on little things, we were unable to win a judgement for the big things. Plus, we didn’t have a clause in our lease saying we were entitled to claim liquidated damages for a broken lease. We’ve since added it to every single lease and you might want to as well if you’re allowed in your area. Basically put it in your Lease or Tenancy Agreement that if they break the lease (by moving out earlier than the term states), that you have to right to charge Liquidated Damages. The amount has to be reasonable – probably somewhere around $300-500. It won’t guarantee you will get it, but have it in the lease so you can argue for it if they break the lease. The judge won’t give it to you if you didn’t put it in writing to begin with!
Hope you never have to find out how important this is -but if you do – at least you’re ready!
If you want more help on picking great tenants for your property, grab a copy of More than Cashflow. There’s an entire chapter dedicated to finding great tenants – plus the whole book will help you understand why you get bad tenants and how to prevent them.
My Mom will be so proud to learn what a clean freak I’ve become. Running a motel and then a Bed and Breakfast for a total of 34 years made her very particular when it comes to cleanliness and working for her for 5 years cleaning motel rooms as a teenager did force me to pay attention to details.
But being a property owner for over 12 years has really taught me the importance of clean houses. We’ve talked over and over about how a clean property attracts MUCH better tenants. If you’re having trouble renting out a place – a professional cleaning just might be the answer.
There is a big difference between a property that seems clean and one that actually is clean. Surface clean is actually easy to attain and you’ll get away with it when the rental market is hot or it’s been a short tenancy. When you’ve had long term tenants or you’ve had several move outs where the property has only been surface cleaned you’ll soon find the property just “feels” dirty. Good tenants will walk away and not apply.
Guys (aka my husband Dave) may walk in and think it’s clean at first glance but discerning guys will even notice it’s not sparkling clean. Gals (aka me) will walk in and think – eeewww feels gross in here. Floors are clean and counter tops are wiped so why does it feel dirty? Likely it comes down to these 5 things that no tenant remembers to clean (unless you remind them) and most landlords forget to check.
When you do your tenant move out inspections make sure these 5 things are getting the attention they deserve:
How fun was that? I never knew cleaning could make you smile but I think it just did.
Now let me hear from you … pop on over to YouTube … give this video a thumbs up if you like it (and why wouldn’t you like it – we had some fun with it!) and let me know what your top tips are for clean up after your tenants leave!
A few years back we had a vacancy in one of the units we own in Kelowna, BC. This property is right by the beach, steps from great shopping and dining, and was priced right, according to our property manager and our own research. The rental market was slow, but it was not getting any interest so we knew there was an issue.
Whenever we’re having trouble renting out a property we troubleshoot the issues in this order:
How many calls / emails are we getting in response to our ad? If we are getting less than we should given the rental market conditions (e.g. vacancy rate) there’s an issue with our ad.
How many people have viewed the property?
How many have completed a rental application?
Each question can reveal major issues with your process. For example, if lots of people are viewing the property but not completing an application that can mean the property doesn’t show well, is overpriced for what it is, or that you’re marketing to the wrong people. If you have a lot of calls and emails but nobody is showing up to view the property, there’s an issue with how you’re handling your tenant leads. (You might want to read 5 Steps to Rent Out Your Property to help you with the entire process or view our video on How to Show A Rental Property).
In the case of the property in Kelowna, we had only had two calls and one showing in almost a month. There was CLEARLY an issue with the ad. As it turned out, there were three key issues with the ad. First, the ad was placed in apartments when it was a suite in a house. It was also a horribly written ad with embarrassingly bad photos. No wonder nobody was calling!
Our realtor in Kelowna was generous enough to pop in and take some great photos for us and I rewrote the ads and posted them in all the appropriate places with directions to call our property manager. The place was rented in less than a week after that.
On the weekend we began showing our latest rent to own home to prospective tenant buyers. Dave’s been sick for over a week now, and I’ve been a bit overloaded trying to do some of his work and and keep up with mine (at least that is my excuse for what I am about to tell you).
I dragged him out to the showing even though he wasn’t feeling well. It’s difficult to do a busy showing solo – especially when you have to be on your toes enough to get a sense of someones income and financial situation to do a preliminary screening.
We showed up 40 minutes early because we’ve learned that REALLY keen rent to own tenants show up 15 to 20 minutes early. When we walked in we both realized that many of the light fixtures weren’t back up after the painting and the downstairs bathroom was still missing face plates, toilet paper rolls and towel bars after the reno.
The bad part? I had walked through the property two days before and didn’t notice these things. When I had walked through I was checking on renovation garbage removal, kitchen cleaning and the carpet cleaning. I totally missed the light fixtures and little odds and ends in the one bathroom.
So there we were … 20 to 40 minutes before the tenants are to show up and the place is not in what we consider to be show-ready condition.
Well, this is why we show up early, bring tools, cleaning supplies and a get ‘er done attitude.
We set to work … and with the exception of a few light fixtures that were too high to reach without a ladder, we had the place ready. And I got to thinking that we should create a checklist for ourselves and for you, of everything to bring to a tenant showing just in case your walk through before misses something (or somethingS!).
Lysol wipes or nice smelling cleaner & rags (I like Method Grapefruit cleaner personally)
Tenant rental applications
The property inspection report (this is more important for Rent To Own homes than a regular rental)
Receipt book (although we don’t normally take a deposit without screening our tenants if there are multiple people that want it that is what we’ll do to set up a first come first serve type of arrangement)
Black plastic garbage bag (for last minute trash pick up)
Extra lightbulbs (there ALWAYS seems to be a bulb out that wasn’t out before!)
Other people recommend things like fresh flowers, a bowl of candies and air freshener. I could add them to the list but truthfully we never have them. We do have a box in our car that has a stapler, scissors, tape, black felt markers, paper clips, business cards and some other office materials which comes in handy … but we don’t bring it in. We also usually have a drill, garbage bags, doggie bags and two dogs in our car!
When you arrive for the showing: open some windows to get fresh air in, turn heat or air conditioner on to make the home comfortable. Turn on lights in every room, open blinds and curtains, and put on a smile!
We generally show our homes vacant so we do everything we can to make the home look and smell fresh, clean and well maintained. And ever since we ONLY showed homes like this we’ve found it MUCH easier to attract great tenants that pay us the rent we want to get for a home.
Most of the real estate investors we’ve met that are selling all their property are usually doing it because they are tired of dealing with tenants. It’s the same reason a lot of people we know are scared of becoming real estate investors. They have heard horrible stories of bad tenants. And we totally understand. When we had bad tenants we had many conversations about selling everything we owned and getting out of the real estate business.
Most of the people that contact us with hard to rent properties or bad tenant stories have made one of two mistakes. They’ve bought a property that doesn’t easily attract good quality tenants (or bought a property with bad tenants in place) or they made an exception to their tenant selection process and let someone move in that should never have been approved.
We’ve had all of these problems happen to us. We eventually just sold the properties that never attracted the good tenants and started following very strict tenant selection criteria. No matter how anxious we are to get cash coming in on a property we won’t deviate from our criteria. We know how badly that can go so we’ll happily wait another month to get the right tenant in a property.
And you know what? It’s working really well! Our tenants aren’t perfect but most of our tenants are pretty awesome! They care about the home, take care of it, pay their rent on time and respond to us when we need them.
So what do you need to do to select the best tenants from your pool of applicants? Here’s a checklist to help you.
Tenant Screening Checklist
1.Tenant Application with Signed Consent permitting you to do a credit check and reference checks (you may also want to have a separate letter signed by the prospective tenant authorizing you to verify their income from their employer).
Most states and provinces have application forms that are ok to use for that area or a local landlord association will usually have one you can use that is legal for use in your area. We also recommend you have each person over 18 that is going to live in the home complete this form and provide you with their consent. And make sure all children and pets that will be living in the property are named on the application and in the lease (with their birth dates).
2. Confirm their identity by asking for their Provincial or State Issued Drivers License. We usually snap a photo of it so we have a copy for our records. The big thing we look at is that their license confirms they are who they say they are and that the address on the license matches the address they’ve given us and shows up on their credit report!
3. Credit History: The score matters but it’s really not just about their credit score. You want to use the credit report to see if they are generally responsible with their use of credit, if they have a bunch of people after them for payments, and if there are any gaps in their credit history which could be an indication of a bigger issue like incarceration. If someone has filed bankruptcy in the past that doesn’t mean we wouldn’t take them as a tenant. What’s more important to us is what they are doing with their credit and their finances AFTER they’ve filed for bankruptcy. If they have filed bankruptcy in the past and again are in financial trouble then that is a giant red flag for us.
4. Income and Employment Verification: This one is tricky because an employment letter is easily forged, and many of the larger companies or government affiliated companies will not tell you anything about an employee. Even with the written consent of their employee they still will not tell you anything except to verify that person works at the company. So this one is not always straightforward but here are a few of the things we do to get as much information as possible.
Google the name of the person in quotes. For example“Dave Peniuk”. If hundreds of results come in, specify a city. Type in“Dave Peniuk” Burnaby. Sometimes you’ll find a reference to the person on a company website, a LinkedIn Profile, a Facebook Profile or some other online page that can give you more information and possibly verify the information you’ve been given.
Find a number for the company they work for using the phone book or an online search.We never bother to call the number the person gives usto call because there is no way for us to know that it’s not just a friend’s cell phone. At least if we track down the company number ourselves and get to the person who can verify that the tenant works there we feel pretty confident that part of the application is true.
Ask for a pay stub to verify the income if you’re concerned. Keep in mind that painters, servers, and other service professionals may actually collect a lot of their income in cash so their pay stubs may not be a real indicator of their income.
5. Rental History: Basically you want to see how often they move. If they have moved a lot then, unless there is a good reason the moving will stop, you can expect a short term tenant. You also want to make sure that all the information you have checks out with where they say they’ve lived. Finally, look for gaps. If you discover an address is missing or there is a time period where they don’t have an address listed you’ll definitely want to find out why they didn’t disclose it. Was there a dispute with the landlord? Were they out of country? Or were they somewhere that they didn’t want you to know about?
6. Do they have a story? This is a BIG one. The most troublesome tenants we’ve ever had have been the ones that had big stories right from the beginning. If you have a tenant with a story listen carefully to the story. Are they blaming other people for their situation? Are they giving you a big story about their last landlord being evil? If you’ve asked about gaps in their employment, missing addresses in their history, or a credit issue and the answer has been a story that sounds a lot like it’s all someone else’s fault then you probably want to run quickly in the other direction.
7. Do they do what they say they are going to do? The best tenants show integrity and accountability from the start. Do they show up to see the property on schedule or maybe even a little early? Do they deliver the application and deposit when they say they will? Do they return your calls or emails promptly? Tenants that do not do these things in the beginning will never do these things later on. And tenants who ask for a bunch of exceptions and make you work super hard to convince them to rent from you are usually the first ones to complain, first ones to ask for exceptions when they make a late rent payment and the first ones to cause you a ton of grief. Look at how the tenant is behaving and ask yourself if this is someone with integrity, accountability and respect for others? If they do what they say they are going to do you’re off to an excellent start!
You may be wondering where references are on this list. It’s not that we’re saying you shouldn’t check references but we don’t put much weight in references. If someone asked you for references are you going to give them a nice cross section of people to call or are you going to give them the best people? And landlord references aren’t usually worth much either. Right or wrong, we only half-heartedly check landlord references. Mostly we just ask for landlord references to see what the tenants will say. The reality is we’ve found that current landlords never say anything to deter you from renting to someone so we rarely bother to call.
Even if the tenant is bad the current landlord is not likely to say so – after all they want them to move out! We will call past landlords (that is, the landlords before the current one) because they may be more up front given that the tenant is not trying to leave their premises right now but we usually do this as a final check, after we’ve gone through everything else. By this time we’re pretty confident that the person will make a great tenant, and the past landlord usually just verifies that fact.
Hopefully by using this checklist you’ll have an easier time screening your next tenants. And with better tenants we’re pretty sure you’ll be a much happier investor!
“I hate it! I absolutely hate it. I just don’t know why he would do it that way. Now when my garage door is open I have to make sure my child doesn’t wander into the alley and get hit by a car. It’s just not safe now. I feel so exposed. I don’t know why you didn’t consult with me about it. I have no privacy now. It’s totally ruined my back yard.”
I wish that were the entire diatribe but it wasn’t. It went on and on. I tried to patiently let her finish but I eventually felt my frustration rise and interrupted with “I thought you were only going to use it to store a boat – I didn’t realize your daughter would be playing in the garage every day.”
Which just caused the above sentiments to be repeated with more detail as to what the garage would now be used for in addition to storing the boat.
I realized I was letting my emotions get in the way of this conversation and forced myself to shut up and take a deep breath.
What had happened was our tenant had moved into a home of ours that had a garage off the back lane way that was fenced off. When she moved in we acknowledged that if she wanted to use the garage for something other than just a workshop (which is what it had been used for to date) we would put a gate in the backyard for her.
Turns out creating a gate was not going to be as simple as we thought. The driveway was upward slanting toward the garage (making inward opening of a gate challenging), the fence was not a good size to be easily hinged and turned into a gate, and there were posts in all the wrong places. It was basically going to require a rebuild of the back fence to make it work and the purchase of a gate. If you’re going to go to all that trouble, to me, you should put in something that will be easy to use not something you have to get out of your car and drag open manually whenever you want to go in and out. And, we weren’t going to spend the thousands and thousands of dollars that it would cost to do that.
After looking at what other folks on the lane had done, I decided to simply move the fence to open up the garage.
The whole thing took our carpenter half a day to do and less than $100 in materials. And I thought it looked great.
Our tenant, however, did not.
But by the end of the conversation she had calmed down and was thanking me for getting her access to the garage so quickly and she apologized for freaking out.
So how did that happen?
I have to thank some precious advice I took from Dale Carnegie’s book “How to Win Friends and Influence People“.
In his book he says “I have come to the conclusion that there is only one way under high heaven to get the best of an argument – and that is to avoid it.”
So how do you avoid an argument?
It’s not easy – believe me – every bone in my body was getting defensive, my temperature was rising and I was feeling myself change from a calm state to an agitated one. And, like I said, I actually did have an uncontrolled outburst but I quickly got myself under control and remembered the lessons I’ve been learning from Dale Carnegie, Brian Tracy and Robert B. Cialdini and others. I bit my tongue and let her speak.
In a calmer mindset I realized how shocking it probably was for her to come out to her yard and discover the fence had moved. It was not what she expected to happen. I also realized that I should have consulted her about what we were going to do even though I likely would have made the same decision.
When she was done I said in the calmest voice I could pull together, “I am so sorry. I made the decision to move the fence– not the carpenter. It turned out it was actually rather complicated to put a hinge on the fence when we thought that would be simple. It would have cost thousands and resulted in a big gate you’d have to lug open every time you wanted in and out of the garage. I thought this would be so much better and it was easy to do.”
She had more to say but she was nicer about it now. And she started to apologize for being so angry. She said “I just don’t know what I expected but it wasn’t this. I just wish you would have asked me. Maybe I could have helped solve the problem.”
After a few more minutes of discussion our tenant then said to me “You know, I am sure in five minutes I will be used to it. I just wasn’t used to it. Thank you for fixing my fence so fast.”
Carnegie also says:
“You will never get into trouble by admitting that you may be wrong. That will stop all argument and inspire your opponent to be just as fair and open and broadminded as you are. It will make him want to admit that he, too, may be wrong.”
And that is just what happened.
So next time you find yourself faced with an angry person- tenant, spouse, relative or neighbour give these tips a try and maybe the result will be better than you could imagine. So far it’s working for me!
No matter how hard it is –do not get involved in an argument. Even when you know the other person is wrong, avoid saying so. Instead, ask yourself “What is to be gained by proving them wrong?”.Usually the answer is your own sense of pride – which really isn’t that important. What is almost always more important is that relationship.
When you are wrong – even in the slightest way – admit it wholeheartedly and quickly. “Any fool can try to defend his or her mistakes – and most fools do – but it raises one above the herd and gives one a feeling of nobility and exultation to admit one’s mistakes” (Dale Carnegie).
Let the other person talk more than you do and listen. Really listen and try to see how you would feel in their shoes. Consider their view point, be sympathetic even, and you’ll usually have a much easier time staying calm and listening to the other person when you do this and the other person will feel truly heard – which 9 times out of 10 solves the problem anyway.
I never offered to fix the fence or do anything further. I simply listened. And when I was done listening, I acknowledged my responsibility in the situation, apologized for what I had done, and let her know that I could see where she is coming from.
I wonder how many times in the past I could have used this and saved myself energy arguing, time fighting with the tenant and money spent fixing things that didn’t have to be fixed only to make problems go away that could have been solved with some simple alterations to how I handled the initial conversation?
Have you ever walked into a video store to rent a movie only to walk back out 30 minutes later with nothing to watch? If you didn’t walk in looking for a specific movie the number of choices can be so daunting! First you have to figure out whether you want a comedy or an action movie or a drama or a romance and then you have to determine if you want a classic, an older movie or a new release. Then you have to remember which ones you’ve seen, which ones had bad reviews and which ones your friends have recommended. The choices never end. And sometimes it’s easier to retreat without making a decision.When there are too many choices it’s debilitating.
Well … the entire book is full of different lessons that you can apply to business and marketing but there are a couple that we’ve learned first hand recently that I thought we’d share with you.
The first concept comes with regards to having an abundance of choices. When we kicked off our rent to ownprogram for 2010 in Nanaimo we wanted to showcase all the properties we would have available in the coming months. And what we found was that having an abundance of choices actually paralyzed people from taking action at all. It’s part of the reason why I believe we ended up with a property that was hard to fill (see:http://www.biggerpockets.com/renewsblog/2010/06/30/are-vacant-showings-better/).
What we found was that with each new option we introduced people found there were more trade offs to be made when they decided. For example, when we first opened up our doors to our new program we had three homes we were advertising. One home was an old character home with an ocean view but in an area some people didn’t like. Another was a new home in a very convenient location. And the other was an older home on a large lot in a very central and desirable location.
Of course each had different price points and very different benefits. And what we found was that most people kept focusing on what they COULDN’T have with any one home because none of them had everything people wanted in a home.
What we saw first hand was that giving people more choices doesn’t make them happier. In fact, it made them very aware of what they were giving up in order to get something at all. Back when we were offering all three homes most people walked away without making a decision at all.
AndBarry Schwartzsummarizes this very simply in his book by saying “Being forced to confront trade offs in decision making causes indecision and unhappiness.”
So Lesson 1 for us this year was to keep our inventory low. Even if we have two more homes coming on the market for rent to own, we don’t tell people about them until we are down to only one home available. We keep the choices down to two at the most … ideally one home only … so they can focus on whether rent to own is right for them, not whether the home is perfect for them (because I’m sure you know it’s nearly impossible to find the perfect home on a budget!).
The second lesson we learned is all around what Schwartz calls anchoring. And anchoring is simply the act of giving somebody a number to compare things to. He explained it using bread makers that weren’t selling at a department store. The breadmakers were priced at $247 but nobody was buying them. The store brought in a line of expensive breadmakers that cost $499 and suddenly the $247 machines were flying off the shelf.
At $247, with nothing to compare them to, people thought the breadmakers were expensive but as soon as the $499 machines arrived the $247 ones looked like a bargain.
I’m sure you can immediately begin to see how this applies to real estate. A big one is with regards to list price. A lot of investors mistakenly think they got a great deal on a property just because they bought it for a big discount beneath list price. The reality is that they just became anchored to the list price number and felt that anything lower than that was a deal.
Where we encountered this was with our option deposits. What we found was that as soon as you gave someone a value of what was acceptable for a deposit fee that is what they became anchored to. If, in an example, you mentioned $15,000 when you actually asked for $10,000 they were delighted. But if you instead used $5,000 in your example but then asked for $10,000 the tenant buyers would walk away thinking the amount you were asking for was totally unreasonable. It took us a few lost tenant buyers before we realized what we were doing.
So the second lesson is to be careful about numbers you give people to anchor to. Make sure they are serving you and not working against you!
The final lesson we learned this year is with regards to framing what we say. Subtle manipulations of how you say something can change whether it’s interpreted as positive or negative.
For example we discovered a small wording change with regards to the deposit (or down payment) that we accept from tenant buyers changes the whole feeling around the subject. Because, as you probably know by now, in rent to owns you accept a down payment up front from the tenants as the option fee that gives them the option to purchase the home from you at a set price in the future. If something happens and your tenants are unable to buy the home from you in the future or they choose not to, then that option fee is not given back to them.
We’re always very careful to explain this risk to the prospective tenants because we want everyone we work with to understand that they need to be serious about buying the home because this is a risk. But when we explained it to people as “losing the deposit” if they didn’t buy the home we never heard from those people again.
Instead, when we explained that the “deposit is non-refundable”, the tenants remained interested and continued to work with us if the program was a good fit for them. In other words, it was all in the frame we put around the deposit that changed it from being neutral to being negative. Once we realized that we stopped saying they would lose it and focused on calling it a non-refundable deposit.
So the third lesson is to understand how you frame your message and the impact it can have on the interpretation of it.
With every person we speak with and every deal we do we’re finding more ways to make small but powerful changes. And these are three concepts explained in the book “Paradox of Choice” that we’re learned the hard way this year.
Now that you’re aware of the impact giving people too many choices can have, and how powerful anchoring and framing your offers can be, we hope you’ll be able to skip over some of the lost time and energy and deals that we had to in order to learn these powerful concepts. And of course, you could also pick up a copy of Barry Schwartz’s book to really understand the concepts if you’re interested!
It’s not much of a secret that I am not a fan of managing my own properties. I tried it, learned a lot and then decided to leave it to the professionals. I wouldn’t say I failed miserably but I would say that I discovered that it’s not something I enjoy.
There are few things I love more than accomplishing my objectives.
When I plan my day and it goes as planned then it’s an awesome day for me. When you’re dealing with tenants you can forget about that plan! And you better believe the tenants won’t care about your final exam, your child’s soccer game or your family dinner. If their toilet is overflowing or the pilot light on the furnace went out in the freezing cold of winter then you must deal with that over everything else in your life.
That’s where I failed miserably. I wasn’t prepared for such calls and I certainly struggled with being flexible with my schedule.
Today we look for landlords like me. The tired and cranky landlord presents an enormous opportunity for a real estate investor. If you are prepared to handle the potential problems a property can have and you can spot someone who can’t then you’re quite likely to be able to pick up properties at a discount and be saving someone from an early trip to the grave.
But if you’re going to be taking over other people’s problems, and fixing them then you need to know how to succeed where the other landlord has been failing. You need to be prepared. You need to be relaxed and ready to roll with what is thrown at you.
The top five things you need to do to succeed as a landlord:
1.Be Prepared: Your tenants will call you with toilet troubles, furnace issues and other maintenance requests. Unless you want to be rushing out to the property to handle every little issue it’s a good idea to find a good handyman that you can rely on. We found a great guy that lived just around the corner from the Toronto triplex I tried to manage myself. He was able to pop over in the evenings or on the weekends and check out the little issues. One time the shower was spraying everywhere. Another time the door was sticking. For a small fee he would go over and check it out, and he was almost always able to fix the problem right then and there. Without him I truly would have lost my mind. First of all, at the time the only problems I could deal with were related to toilets. I grew up in a motel and would follow Dad around as he repaired and dealt with toilet troubles in the motel rooms. But beyond basic toilet troubles, I could barely change a lightbulb at the time. Second of all, sometimes I wasn’t even in Toronto when the tenants would call so having someone nearby that could handle the call for me was critical.
If you aren’t sure how to find a good handyman, ask your neighbours. Go to the local real estate investors club meetings and ask them. Or fire up your computer and check online. We found our handyman by asking around. One of my classmates at the time had a handyman cousin the area … and that is who we ended up using.
2. Remember – your customer is your tenant. It’s so easy to forget that your tenant is your customer when they are calling you on Saturday night in the middle of a romantic dinner with your spouse requesting you to fix the pilot light on the furnace (this happened!).
If you owned a restaurant and someone complained about your service, if you care about your business at all, you’d listen carefully to their concerns and try to fix the issue. As a landlord you should treat your tenants with the same courtesy. Remember they probably have options and can move somewhere else. If you always remember that the tenant is your customer and that it’s your tenant paying your bills then I think that everything will be a lot easier to handle as a landlord.
3. The keys to success are in the systems you implement. Find simple systems for managing the emails, voicemails, paperwork and even the keys to the properties. A simple system for the regular things you handle as a landlord will save you time, money and stress.
Let’s take keys for example. The keys to enter each property need to be labeled and stored in an easy to use way.
I can’t take credit for this idea (I got it from Robert Elder ofQuick Start Landlord), but I can tell you that even with just a handful of properties you are going to want to pay close attention to this little trick. It will save you time and money. The trick is to label every key with some sort of code that allows you to identify the address as well as to indicate the date.
Why? As someone who has a key to my aunt’s place, my home, my parking garage, and a friend’s place I can tell you that I already forget which key is which. If I also had to figure out which key opened which rental property I would be standing in front of a house for an hour trying to find the right key. When you add to that the fact that you’ll find yourself changing the locks on the home every few years, you could end up with dozens of keys that don’t even open any doors anymore!
And, while you’re at it, why don’t you go to your local hardware store and buy a little container that is normally used for organizing nails and screws and use it to store the keys for each of your properties? Ahhhh simplicity.
4. Master the art of marketing. I’ve written about this over and over. In fact, in the February 2010 issue ofCanadian Real Estate Magazineyou’ll find an article I wrote on “Attracting the Best Tenants”. That article is all about marketing secrets to make your business successful at finding tenants to rent to. The bottom line is that you need to understand what the tenants in your area want. What are the features and what are the benefits of your property as they relate to the wants and needs of your tenants? This is often things like proximity to a good school, ease of access to public transportation or market specific needs like air conditioning or covered parking with plug ins for vehicles. When you understand what your tenants want you will have no problem composing compelling advertising that fills your inbox and voicemail with messages from prospective tenants.
5. Do whatever you can to reduce tenant turnover– it’s your biggest ongoing expense! Cutting corners will eventually cut your profits. If you try to show a unit without first getting it ready to be viewed, you’ll struggle to attract good tenants. In the end you’ll end up with lower rent rates and a more troublesome tenant renting from you. But the biggest thing you’ll find hurting you in the long run is tenant turnover. It’s almost always better to charge slightly lower than market rent to keep a tenant in there longer than it is to squeeze every dollar of possible rent out of the property but have tenants leaving annually. It’s also better to address tenant requests and concerns as quickly as possible. Keeping your tenants happy in their home and comfortable with you can result in loyal residents. Plus, we’ve found, our tenants are often the best source of other high quality renters. Because they are happy renting from us they tell their friends and we often get emails asking if we have any places available for rent because our current or former tenants have recommended us as landlords.
Many worn-out landlords look at their tenants as a pain in the butt. They weren’t prepared for the calls. They forget that their tenants are in fact the ones paying their bills and should be treated like the valuable customers that they are. They also don’t realize that simple systems like the one I mentioned for keys will make all the difference in streamlining and simplifying your business to make it easy. And finally, inexperienced or tired landlords probably have never taken the time to master the art of marketing to attract new tenants nor have they taken the time to try and keep the good tenants happy in their home.
If you tackle these five success secrets I am confident you’ll find yourself succeeding where other landlords have failed.
You’re either going to be a property manager yourself or you’re going to have to hire one.
Either way, this is a critical piece of the real estate investing puzzle. And it’s also an area where we’ve really made some mistakes, felt some pain and learned some lessons. In our latest group coaching call with our 12 Months to $1 Million members we took a bit of time to talk about Property Management.
In this 12 minute podcast, we talk about why Julie isn’t interested in being a property manager, why you should think long and hard about managing your own properties, and why it is a good idea to self manage your first investment for a little while. Have a listen:
2012 Update: We no longer have our 12 Months to $1 Million Coaching Program. We’ve changed how we help. If you’d like to learn more about how we can kick start your investing or help you step into real estate investing as a full time gig check out our WORK WITH DAVE AND JULIE PAGE.
This week’s email is from Scott in Toronto, Canada:
Hey Julie and Dave,
I purchased a property in downtown Toronto [Julie edited out the location and a few other details] nearly two years ago for $329K (putting 25% down) which will rent out furnished for approx. $2500 (below the1% rule and just above .7% – loved that article by the way).
I have occupied this property since the purchase, but am looking to make this rental property #1. It is fully managed, with a maintenance cost (which keeps rising!) and has since appreciated to approx $345K.
Here’s the tough part, I prefer to have the property management here take care of finding a tenant (it is my first one and all) but they want to charge a month’s rent in order to do so. This is standard, but unfortunately, it puts my monthly cash flow in the negative by about $35 a month ($420 total).
Alternatively, I can try and place it on my own and eliminate that fee which would provide me with a positive monthly CF of either ~$175 or $85 if I have to still give a realtor half of the month for bringing me the tenant. Either way, my mortgage is a ridiculous rate of prime -0.85% (1.4%) variable open until March 2013, but can be switched to a fixed mortgage at any time without fees (and if done, could actually lower my mortgage payment depending on the amortization used).
Do you think it makes sense to operate at a negative cash flow while the financing is so advantageous? I realize this banks on property appreciation predominantly, but even if the value stays stable (now that we are theoretically at the bottom ; ) you have somebody else creating equity for you and that’s not a bad thing.
And Here’s Our Response to this reader’s Biggest Real Estate Question!
Thanks for the GREAT question(s) Scott!
And, since we know you’ve been reading Rev N You for awhile you probably know that we’re going to say the answer really depends on your goals. 🙂
Let’s start with renting your place out. Whether you should pay a management company a full month’s rent to find, screen and place the tenant or do it yourself is a great question. It’s something we recently struggled with on our Triplex in Toronto. Our friends that were living there and looking after it for us moved out so we turned it over to a management company.
One month of rent is a serious kick to the cashflow pants. Personally, we chose to place the tenant ourselves because there are a lot of other things we’d rather put that $1,700 (1 month’s rent) towards. Being so far away this was tricky but our friends helped us out with the showings.
If you are planning to do a furnished rental there are plenty of other considerations that you should factor in. The biggest is that typically furnished rentals are shorter term. This means you will be dealing with more turnover. Turnover always costs money even if you are renting it out yourself. We recently did a furnished rental and will write an article about the advantages, disadvantages and considerations involved in a furnished rental in August.
It really comes down to how much time you have and whether you want to deal with your tenants at all. If you want a little challenge you could always try it once (renting it out yourself). In Toronto in particular we love the Viewit.ca and Craigslist.org listing combination. It hasn’t failed us yet. Check out our article on the 5 steps to rent out your propertyfor more details.
As for operating at negative cashflow… we did it for awhile with a condo we had in North Toronto. When you consider the principle paydown and tax write offs you’ll USUALLY find that you’re still coming out ahead by a few thousand dollars every year even when you’re in a negative cashflow situation without appreciation. That said, I always remember something I read (in I believe, Rich Dad Poor Dad) which said “How many houses can you own if they all cost you $100/month?”
In other words, it really does come back to your goals. It will be tough to build a giant portfolio of negative cashflow properties. But if you are starting out slow and your goal is to use as little of your own time and energy as possible to begin building your portfolio then you may be best suited to find stable easy to manage neutral or slightly negative cashflow properties. But, if your goal is to begin making money from your properties and build a large portfolio then I’d consider approaching this from a more hands-on perspective to maximize your profit and your learning.
Our Nanaimo property manager once said to us “when you’re making good money in a job it does you no good to make a bunch of money on your properties – the government just takes it anyway“.
So, there are plenty of perspectives on this. You’ll have to figure out what works for you.
The call we recently had with William Lederer was a great one for learning to find, screen and select tenants and he had a 59 page e-book that went with the call. It might be worth checking the call out or his Ultimate Property Management book. While not Canadian, it’s really an excellent resource for landlords and property owners.
As for the financing – go back to your goals once again but that financing is sweet and prime minus anything has gone the way of the dinosaur. For the most part I think you’re better off to keep that sweet mortgage and just pay down the principle on your mortgage while you can. If you fall on hard times or find you need to lengthen your amortization period to improve the cashflow then you’ve got that option.
That said, the experts we follow are calling for rates to continue to increase. So … take a look at the possible scenarios and determine what risks you are and aren’t willing to take.
I will make a few final notes on your situation only because I happen to be very familiar with the building you live in. I do have a few concerns with that area because of the glut of other very similar units that are also rentals, the poor access to the Subway, and the maintenance fees which, which last time I looked at them, were substantially higher than most other buildings in the downtown area.
Given these concerns I would try to do whatever you can to make this a positive cashflowing property from the start because you may find it’s tough to keep renters in there at times and rent rate increases could happen very slowly over time due to the continued growth of similar units all around it. It’s just something to be aware of as you’re weighing the risks and the rewards.
Phew!! I do hope this helps you a little bit Scott. You’ve definitely given us a really big case study to share with our students. We’d love to know what you end up doing and how it works out for you.
Real Estate Millionaire students, we’ll call them Sherry and Curtis, are making great progress with the course. When we had a coaching call with them, they were all fired up to turn their home into a rental property and buy a new place with a basement suite. The strategy (turning your home into a rental property when you move to a new place) can often be a very good one.
We were excited for them, but when we spoke to them, we were a little concerned that they were getting too emotional about things. Sherry was afraid of turning her home into a rental property. She had put a lot of time and effort into creating a beautiful and comfortable home over the years and was really worried it would deteriorate without her. Who will water the flowers she asked? Curtis was excited to get into the real estate investing game and couldn’t wait to move into a home with a yard.
They were planning to meet with a realtor the next day to get an idea of what their current home was worth, and then they were going to look at some listed properties in the potential new area on the weekend.
When we hung up the phone with them we sent a follow up email with some pieces of advice … the biggest point from Julie was:
“Take a deep breath – I sense a lot of emotions (fear, excitement, nervousness) and that is NOT GOOD. Emotions are bad when it comes to investments. DO NOT LIST YOUR HOUSE IN A PANIC. DO NOT BUY A NEW HOUSE BECAUSE IT LOOKS GOOD. DO NOT DO ANYTHING THIS WEEKEND. Give yourselves time to think in a relaxed state. There is no urgency to your situation and that gives you power (and control). You always want to have power when it comes to real estate.”
That was Friday. Sunday morning we received an email saying “Don’t be mad, but we just put in an offer on a house“.
We are not about to get mad. We want our students to take action – and there is NOTHING WRONG WITH MAKING OFFERS. And, as long as you make them “subject to” an inspection or financing, it gives yourself a way to back out if your research turns up areas of concern. However, when you do make an offer, especially in this buyer’s market, make sure you keep control of the situation.
In our students case, we think they lost control for the following reasons:
They’d only looked at a handful of homes in this area (which is pretty light market research),
They were still very emotional about everything,
The realtor had only given them 4 business days to remove their subject to inspection clause,
Closing was only 30 days later (when they’d specficially stated they needed time to sort out whether they were in fact going to turn their home into a rental or sell it),
And, the realtor coached them to go in with a strong price to show they were serious. They only offered about 4% less than asking!
The good news was that the realtor had been unable to present the offer to the sellers, so there was still time to change the offer. We suggested that they contact their realtor and find out why, in a buyers market without competing bids on this property, she was pushing them to be so aggressive. And, we also suggested STRONGLY that they change their offer before it was presented so that they had a lot more time to conduct their due dilligence and ensure they were comfortable with their decisions (of buying, of renting or selling their place, etc.).
They ended up pulling their offer … and guess what … 3 weeks later the house is still on the market. If they want to, they can now go back in, more relaxed, offer a lower price, give themselves more time for the details, and get a much better deal. But that is because they’ve now had 3 weeks to slow down, take the emotion out, revisit their goals, and look at more properties. They still like this one … but they know that there are other potential deals out there now too.
The 3 Biggest Lessons to Learn from their experience are:
SHOP AROUND! Be patient as you look for the deal that is right for you. When you find the perfect place – act quickly and decisively, but be sure it’s the right deal. This house may be a great deal but the only way they can know that with certainty is to look at a lot of other houses in that area. This means looking at 20 – 50+ online listings, viewing dozens of houses through open houses or appointments, and becoming an area expert.
Always remember the motivations behind the people you’re working with. NOBODY will love your money as much as you do. Realtors get paid when the deal is done. That doesn’t make them bad people but it does mean that some realtors will push for terms and conditions that get the deal done … not necessarily that get YOU the absolute best deal for you. Great realtors know the market inside and out, understand deal making, and are able to work hard to find you the deals that meet your goals. Not every realtor is created equal. There’s nothing wrong with parting ways with your realtor if it’s not working out – just be honest and up front about it.
You must take fear, excitement and any other emotion out of the equation. If you are emotional then you will not make good decisions. Things can go wrong, and little things probably will go wrong. That is just life … if you’ve been following our renovation adventures on our blog, we’ve had plenty of little set backs. It’s cost us more money than we expected and added a week to the project but we never once thought “we never should have done this”. Think about what could wrong, and then think about what you would do if that actually happens. Write it down so that you can actually see your fears in front of you. Most of the time the fear is irrational, unlikely or manageable. (That said, next week we’ll share a response we had to a reader about the risks in real estate, and when to know when the risk is too great to proceed). If you are too excited, then just take a step back. Don’t do anything for 24 hours and then see how you feel.
We’re really proud of Sherry and Curtis – they are making fabulous progress towards their goals. And they are incredibly smart and hard working people. They are taking time to educate themselves and they are reaching out for help to avoid the pitfalls that often trap new investors. They will be successful in their real estate ventures and in their life.
We don’t think they were making a life destroying mistake with the deal they were creating, but we do believe that they weren’t getting the best deal they could– especially in the buyer’s market we’re in right now. We knew they were emotional about the whole thing, so we know they didn’t think it through. It can happen to ALL OF US (believe us, we know)!
Some Words of Wisdom:
“Those who have never made a mistake are doomed to work for those who have.” – unknown
“The reason you are in negotiations are to do better than your alternatives.” –Keith J. Cunningham
“Aim for success, not perfection. Never give up your right to be wrong, because then you will lose the ability to learn new things and move forward with your life.” – Dr. David M. Burns
“Have a bias toward action — let’s see something happen now. You can break that big plan into small steps and take the first step right away.” – Indira Gandhi
Being a rental property owner means dealing with maintenance, repairs and tenant upgrade requests. Even if you’ve hired a property manager, you will still have decisions to make regarding the upkeep of your property.
In general, you should set a maintenance schedule that keeps your property and the unit(s) in your property in the best shape possible. There are several reasons for doing this, but the biggest one is that a property that is kept in good condition attracts and keeps good tenants. The second big reason for doing this is that regular maintenance is often a good way to keep costs down. If you leave things unfixed for long periods of time it can cause other issues. For example, a leaky sink left unfixed could be damaging the cupboards and even the floor underneath the sink.
If you have a property manager ask about their schedule for doing the following things. If you manager your own property, then here’s a suggested schedule for checking on things.
Monthly: Walk the exterior of the property and pick up garbage from around the property. Make sure the lawn is mowed, weeds are pulled and everything is in good shape. If you have laundry facilities, check that the lint is being removed from the dryers and take out any money if they are coin operated.
Quarterly: Check windows, doors, and exterior of the house for any leaks or damage. It’s also a good time to check on the furnace or air conditioner and change filters.
Semi-annually: Change the batteries in the smoke detectors, check carbon monoxide detectors, clean gutters, check appliances, plumbing and electrical outlets in the house. Check for things that might be loose as well (door knobs, railings, or screws). You aren’t looking for things to fix but you want to be aware of things that may require maintenance when a tenant moves out or trying to find little things to repair cheaply as a way to prevent bigger problems later on.
When tenants move out: Have the carpets and drapery cleaned. Paint the walls if necessary (and usually it is), and get the unit professionally cleaned (including the stove and fridge).
Planning for this regular maintenance on your rental property makes things fairly easy. You will have a good idea of when major expenses like a new roof, a dishwasher or a paint job will be required. You can set aside a little extra rent money to cover these costs. The trickier part can be knowing when to make improvements to a rental property when a tenant is asking you to spend money.
In our Toronto tri-plex we recently turned down our tenant’s request for blinds in the living room of one unit. But at the same time, we agreed to put in a new toilet in another unit. Our tenants can easily figure out that we’re bringing in nearly $4,000 in rent per month from this property, so they may think we’re being stingy by refusing their requests. But, you have to keep in mind that, while you want to keep your tenants happy the money your spending needs to either prevent or reduce an expense or it needs to generate revenue.
In the case of a renovation or upgrade requested by a tenant, we ask ourselves a few questions when we’re considering whether to do the work the tenant is asking for:
What are the costs of not doing it (is the tenant likely to leave and what will that cost if they do?)?
Is there another way to address the problem?
Are there any issues with delaying the expenditure?
After we consider these things, we use a final formula to calculate how long it will take to recover our costs.
Total Cost of the Upgrade or Repair / New Money Earned (or Money Saved) each Month = # of months to repay the expense.
On items under $1,000, as a general rule of thumb, if you can recover the cost in 12 to 18 months then the money is well spent.
In the case of the blinds, the tenants wouldn’t pay more rent just to have blinds. Instead we agreed to pay for dry cleaning the curtains which will be less than $100. There’s no direct return on this – but the tenants wanted the “dirty curtains” replaced so this will keep them happy and it’s not a large expense – especially given that the tenants have been long term.
For the toilet replacement request, we decided that getting rid of the grungy old toilet will not get us higher rent, but it will make it easier to attract and keep good tenants. And, if we replace it now, our tenant’s father (an experienced plumber) will install it for free. Finally, we’re replacing a water guzzler with a low flush model (est. water savings of $10/month) that will qualify for a $75 water conservation rebate from the City of Toronto. The formula of benefits looks like this:
$250 – $75 rebate = $175 Cost of the Toilet
$175 / $10/month water savings = 17 months to pay off (PLUS we save $80 on installation).
The cost savings plus the added benefits of saving installation costs made it a very appealing use of our cash. Just remember – real estate investing is a business and you need to get a return on any money you spent – even if that return is simply in cost savings!
If you are managing a property yourself there’s some great books out there to help you. Two books definitely worth checking out are:
I know that’s a lot of information to digest and a substantial list of resources, but your monthly cash flow is dependent on you maximizing your rental revenue and minimizing your expenses – so this is pretty important stuff to know!