Friday, August 31, 2018

In The Landlord Paradise

I love flowers on the side of the house!
In the last post, I shared that I've been tolerating an eight-month long vacancy because of fear, which wasn't even my fear to begin with, but it still paralyzed me.

Now, determined to fix the issue, I set out to find a great tenant ASAP.

Determining Price

To determine the price, I analyzed all for-rent ads on Kijiji. There were 39 of them.

Out of 39, only eight were listed under “House Rental” and the rest were in “Apartments and Condos”.

Even though my unit is an apartment in a duplex, it comes with a basement and a backyard, and takes up a larger part of a two-story house. I decided to put my ad under “House Rental”. It seems to be fair and puts my ad into a bucket with less competition.

Out of 39, the majority of 21 ads were two-bedroom places like mine.

In some cases, prices included all utilities, some covered only some of the services, and some were with tenants paying for everything in addition to the rent. In my case, utilities must be included because meters are not separate.

During my analysis, I made the following big assumptions about the monthly cost of utilities:
  • ·         Water = $100
  • ·         Hydro = $200
  • ·         Water + Hydro = $300

I used these assumptions to calculate all inclusive price for all ads.

Next, I looked at two bedroom units by price and saw that out of 21,
·         6 were below $900
·         4 were between $900 and $1,000
·         6 were between $1,000 and $1,100
·         3 were between $1,100 and $1,200
·         2 were over $1,200.

Aiming to be in the middle and also making sure cash flow would be positive, I decided to price my unit at $1,150.

Placing the Ad

Kitchen Looks Great!

I placed the following ad:

Big 2 Bedroom Duplex for rent $1,150 all inclusive

$1,150.00 URGENT

Looking for responsible tenant(s) for this Spacious Move-In ready Duplex!

- Lots of Parking
- Large Patio & Backyard

- Bright living and dining rooms
- Great functional kitchen
- 2 bedrooms with large built-in closets
- You'll love the spacious Bathroom (pls see pics)!

- Lots of storage space
- Central AC
- Appliances: Fridge, Stove, Dishwasher, Washer / Dryer

UTILITIES: all inclusive

Please text/call or email Anna at MY_PHONE / MY_EMAIL to book your viewing.

We'll be showing the unit this week on THURSDAY, FRIDAY and SATURDAY.

Please reach out to me now to book your viewing: MY_PHONE

Unreal Number of Inquiries

Living + Dining Remind me of Spain Villas - lots of white tile
I got a gazillion responses, mainly through texts!

I booked 31 viewings over four blocks of time: Thursday afternoon, Friday morning, Friday evening, and Saturday morning. Only two people are scheduled for Saturday morning.
So far, as of the end of Thursday, 20 people showed up out of 29.

Landlord Paradise

Since the level of interest turned out to be super high, I started to wonder if I’ve set the price too low.

I asked a few applicants how my unit and its price compare to other apartments they’ve seen. Most said that they are comparable; and only a couple of people said that I could charge a bit more. I checked with my property manager and he thought the price was right as well. It’s what people in the area can actually afford to pay for this size and type of a place.

It appears that the market is very landlord friendly. Lots of demand, and lack of units. Landlords get to choose from a large pool of applicants.

It’ll be a long time, before I forgive myself for an 8-month long vacancy in this landlord paradise type of market. Unreal. I’m such a la-la.

Home Alone: Ever Think a Tenant Might Come After You?

Source: Home Alone.
In my last post, I talked about a duplex conversion. Here’s a prequel to that story…

Eight months ago, we got a duplex in Chatham. The duplex has a one-bedroom unit at the front and a two-bedroom unit at the back. There was a door between the two apartments. I'll call it "The Door" for the remainder of this post.

At purchase, the small front unit was already rented to a tenant and the bigger back unit was vacant.

Long story short, my property manager and the tenant in the small unit did NOT start out with the right foot.

As a result, I was under the impression that the tenant in the front unit was a

  • frightening, 
  • sneaky, 
  • irrational, 
  • demanding, and 
  • crazy person, who is 
  • impossible to deal with, and 
  • who’d sue me at the drop of a hat. 
  • I was seriously afraid of her and her meaniness.

(Hmm... I was wondering if meaniness was even a word.
Now I know that it isn’t, but I’ll still keep it.)

By the end of 8-month long vacancy, the longest vacancy I’ve ever had,

I finally started questioning the absurdity of the situation.

After all, I am the owner of the property. My property manager is so scared of my tenant that he doesn’t take any action. I am so afraid of the tenant, because of how terrified my property manager is, that I haven’t done anything either for a very-very long time.

I know that every month without a second tenant costs me A LOT of money. The money that I don’t have. I am doomed unless I stop chickening out, step up, and take massive action. So I did….

Home Alone

This property is in Chatham, which is 3-hour drive away from home. I decided to come for a weekend and clean / paint / fix the back unit, so that it’s ready to be rented. If my property manager is too afraid to handle this, I’ll just deal with it myself.

I got to Chatham and kept to myself. I didn’t see the tenant face-to-face during the entire day. I cleaned, vacuumed, planned remaining action items around the unit, went to shop for small decorations for the upcoming showings, etc.

Source: Home Alone Movie - Bad Guy!
At sunset, I was starting to panic.

The darker it got outside, the more panicky I felt.

Finally, my brain started spinning and painting petrifying pictures…

I could hear my tenant having a guest over. They were watching TV…

My crazy-irrational thoughts went kind of like this:

“… There’s a door between the two apartments.

It doesn’t have a lock.

What if my tenant is indeed as horrifying as my property manager believes her to be?

What if she sneaks in during the night and kills me in my sleep?”

What if, there’s a lot of them next door?

How would I stay awake through the night to make sure that I’m prepared to run out of the house and call 9-1-1, if necessary?”

Survival Plan

Source: Home Alone Movie
I decided to set up my sleeping station on the main floor. I placed my sleeping bag strategically in the kitchen. As close as possible to the two exits: the main entrance and the patio door.

I couldn’t see The Door between the two units when I was laying down, but I’d only need to lean forward just a tiny bit to see it.

I tried very hard to stay awake.

I wanted my tenant to fall asleep first. The TV was still mumbling through the wall.

After a day of driving, cleaning, shopping, and working, with every minute passing by, it was getting more and more challenging to keep my eyes from shutting.

I put a Windex bottle next to my pillow. In the worst case, I’ll spray it into her eyes and run for my life!

I positioned a rolling chair right next to The Door with the intention that it would start rolling and make a rolling noise as soon as someone walks through The Door. And that'd wake me up!

I turned my computer on. It would be a lot more cheerful if I had youtube… but I didn’t want to use too much data on my phone.

Deadly silence on my side of The Door.

I turned on the only movie I had on my computer. Beauty and The Beast.

Bad decision! I dozed off before the first song ended…

OMG! She is Right Next to Me!

This is it.

I heard the sound of the rolling chair in my sleep.

It’s happening.

I opened my eyes, ready to run for my life:

“Oh, my gosh. I am so sorry! I just wanted to turn the AC up. I didn’t know you were here! I didn’t mean to scare you! Why are you sleeping on the floor? Would you like me to bring you a mattress?”, said my tenant. I could tell, she felt awkward.

As far as I can tell after meeting and spending some time with my tenant one-on-one, she is practical, to the point, and doesn’t plan to harm me or anyone else in any way.

I’m not sure what the actual misunderstandings and miscommunications have been about between the tenant and my property manager, but the "Horror Tenant" issue did cost me a lot of money, time, and stress.

Lesson learned –  Don’t let other people’s fears become your fears and put you into hibernation mode for months. If you have a problem, take action to start solving it.

$300 Duplex Conversion

Over the past year, I’ve been meeting a lot of investors whose strategy is duplex conversions.

Here is how it works, in a nutshell:

  1. Buy a home 
  2. Get permits to add a legal unit to it. For example, create a legal basement apartment; Or get a permit to split the unit vertically creating a quasi semi-detached home.
  3. Hire and oversee contractors & trades to get the work done
  4. Re-finance to get your money back
  5. Rent both units
  6. Live happily ever after (or until you get another one of these duplex conversions).

Based on meet-up presentations I’ve seen, my understanding is that the cost to add a legal unit nowadays averages at about $90K in GTA. Perhaps, you’d see numbers between $75-110K, depending on how optimistic the presenter is.

Here’s how our “Duplex Conversion” Happened

My husband and I got a duplex. It turned out that the two units are connected by a door. Initially, there was not even a lock on the door, which wasn’t an issue since one of the units was vacant at the time.

As we were getting ready to find a new tenant, we had to replace the door with a wall and properly separate the units.

In Our Case, Duplex Conversion Was a Lot Less Elaborate

Step 1. Take measurements & get some two-by-fours and other hardware

Step 2. Measure & cut.

Step 3. Put a back wall up & add insulation

Step 4. Finish up with the fancy front wall. VoilĂ !

Now we have a proper two-unit house. Can't wait to find a great tenant to move in!

Oh-oh! Power Has Been Shut Off

Taking out melted
two-week-old food
out of someone else's fridge
does NOT feel glamorous
Hi! Did you have a good summer?! I hope you did!  I'll post a few articles today. I did a lot of camping in August, and stayed offline most of the time. It's time to catch up now.

Yay! We got a New Door - door #18!

At the end of July, we acquired a new asset. It’s a condo townhouse in Barrie, ON, which we will fix up, clean, refresh and rent to a nice family.

This town house is different for us because it’s our first condo – comes with a pool, gym, and snow/grass services. Very nice!

On the flip side – vacancy costs a lot more than with our typical freehold town homes: Condo fee is quite an expense to carry in addition to mortgage payments!

Oh-oh! Did I miss something??

Since we’ve done quite a few acquisitions, you’d think that everything would go smoothly! but…

I didn’t call the power company to open a new account fast enough and they shut off the power!

This mishap was a definite oversight on my part: I had a lot on my to-do list and held off with all the administrative set up for too long, so that I could finish higher priority tasks. Now, I am sitting at the house and waiting for my hydro appointment.

Since it’s summer and there is no tenant yet, being without power isn’t really a big deal.
No hydro during winter when you already have a tenant would feel a lot more stressful. And that has actually happened last December at another property when a furnace suddenly died.

Having said that, previous owner of the place was leaving quickly and left all her groceries in the fridge. I can tell you for sure - Taking out melted two-week-old food out of someone else's fridge does NOT feel very glamorous. I had to triple-bag the garbage. Yucky....

Any Costs?

Luckily for me, there is no re-connection fee.

The only cost is my time – I have to drive to/from the property and stay here during my scheduled 4-hour appointment time block.

This trip pretty much takes up an entire day! I can imagine how stressed I would've been, if I was still working and had to ask for time off to take care of this.

I am keeping fingers crossed, and hope my cell phone and laptop battery will last until the technician arrives.

Here we go… The technician is here! Hurray!

Should've Would've

Here's what I should've done.

Within a couple of days after closing, I should've called all vendors, enabled new accounts and set up auto-payments for the following services:

Condo Fee

In addition, I should've notified each provider of my intention to rent the unit and to have tenant pay the utilities down the road.

In this case, many vendors have a process for rentals to make sure the account automatically goes back into the owner's name without re-connection fee, as tenants come and go.