Showing posts with label Tenants. Show all posts
Showing posts with label Tenants. Show all posts

Saturday, July 13, 2019

The Universe Has Your Back - A Real Estate Fable

I thought I was helping
Image by Gerd Altmann from Pixabay
One of my tenant families struggled to pay rent. It's been an issue over the past three years.

The family would miss a rent payment. Then take a few months to catch up. Once caught up, they'd miss another payment the very next month. The cycle repeated.

I deeply empathized with their problems. I had experienced many of them in my past too - a close relative going through a critical illness, losing a job, going through challenges raising kids, car breaking down at the most horrible time, etc.

I thought I was helping the family by being patient through all their troubles. It seemed that they were trying so hard and needed a break. Besides, they seemed to have been able to always come out on top.

The Universe Has Your Back


Things always work out
Image by Gerd Altmann from Pixabay
Finally, the universe heard them. Things started turning around. First, a social housing program helped them catch up on rent - $2,200 was gifted to the family. Next, both parents found part-time jobs. Shortly, they worked full-time hours and multiple jobs. Once they apologized for a delayed reply to my text because they were too busy working! Hurrah!

With a sigh of relief, they told me one day that money wasn't an issue anymore. They'd be okay from now on. They sympathized with my dependance on their rent payment to pay my mortgage and other costs. They said that I shouldn't worry about their rent anymore.

I felt grateful to the universe! Things always work out somehow.

You Just Have to Do Your Part


Just a short month later. Another missed payment.

This time, the auto-deposit process on my end glitched. All transfers usually get auto-deposited, but
Did I misread the signs?
Image by TiNo Heusinger from Pixabay


this one went back to the sender because of a recent new release of the banking app. Not realizing this had happened, the tenants unintentionally spent the returned rent money. They had no money to pay rent. Understandable. A new cycle of struggles began.

My tenant put together a payment plan. They sent it in writing and laid out upcoming catch-up payments. Date - payment - date - payment - date payment...

Then, they missed the first catch-up payment.

What happened? 
No answer. 
What's the status? 
Apologies. CRA delayed our child tax benefit payment. It won't happen again.

Then, they missed the next planned payment.

Worried, I followed up again.

The Universe Has My Back


My tenant was frustrated. She confessed that there was a time when they didn't have any money to buy groceries for weeks and were getting food packages at the church.  Once they started working, they've been handing over their full paycheques to me. There was a list of issues at the house they weren't happy about. They didn't get sufficient value and service from me as their landlord, for their money. They brought up a poorly executed door replacement job from two years ago and said that I hired a drunk...

Please move out! I pleaded.


I checked and verified that there were more affordable housing options in the area for a family of the size. I don't want your full paycheque. Please don't give it to me! It's not right that you don't buy food. It's not right that you don't love your home.

Please, please, please don't stay in the house, especially if you are not getting a good value for the price you are paying. You know where the door is! Please please please move out.

I was sending my thoughts to the universe, begging it to resolve this nonsensical situation.

My tenant didn't reply. 
They sent the next rent payment on time. 
And then the next one. 
To be continued?


Friday, December 28, 2018

When Frugality Fails

Being a landlord can feel EXTREME
Earlier this month, I started feeling as if

someone somehow 
made 
the God of Appliances 
MAD


Every time I picked up the phone, I heard one of my tenants deliver the bad news.

It started on Sunday morning.

Ring-ring. My fridge stopped working.

Monday morning. Ring-ring. My dryer stopped working.

Monday evening. Ring-ring. The washing machine doesn't drain.

At that point, I made a strategic decision of letting the phone ring and go to voice mail, while I was sorting out all these appliances issues.

Luckily, this was it for the time being!

Extreme Efforts Being Frugal


Most properties I get, come with appliances and in most cases they are pretty old. Hence, I expect at least some of the appliances would break fairly soon after the purchase.

In the past, I always looked for a used appliance to replace the broken one. I thought this was the most cost effective approach.

For two to three hundred dollars, I could find a decent used washer, dryer, stove or whatever needed. A new appliance would be about $500, almost twice more expensive.

With a used appliance, I also had to figure out a way to deliver it to the tenant, get it installed, and get rid of the old broken one.

Luckily, my husband is quite handy and could help with most of this.

This is How We Did It


I'd find the most affordable decent used appliance and negotiate the price.

Then, coordinate child sitting, so we can free up either a Saturday or a Sunday.

Our weekends are packed with our youngest son's Russian lessons, music, hockey, and occasional birthday parties.

Our youngest son is nine and the oldest is almost 19. My parents and my-in-laws have 6 grand kids each. They used to be eager and excited to babysit the oldest couple of grand kids.

Let's be honest, after 19 years on grand-parents duty, I can't say any of the grand-parents are thrilled when I ask them to spend a day driving grand son #6 back and forth, trying to bribe him with just the right amount of doughnuts, chocolate milk, and chips as he goes through a back to back list of all sorts of developmental activities and sports.

Having said that, more often than not, our parents still agree to help us out.

Childcare arranged - Yay!

Next, we'd borrow our friends' mini-van. Our friends have three kids of their own. So this is a hassle for them as well. They have to move car seats, strollers, and downsize their life for the day every time we need to borrow their car.

I'm grateful every time they help us out! To thank them we always bring back their car with a tank-full of gas.

Transportation Arranged - Yay!

The following step is to make an appointment with the tenants, at least 24-hours ahead. This is usually the easy part since the tenants look forward to getting a working appliance.

It has to be on the weekend, though! Because my husband has a day job. All this investing jazz is happening after hours and on weekends.

Tenants on Standby - Yay!

On the day of, usually a Sunday


1) Wake up early in the morning, seven-ish

2) Get Starbucks, it's going to be a long day!

3) Pack and drop off the child

4) Give extremely-detailed-instructions to the grand-parents about all the activities they have to tackle including a back up plan in case the child is in a whiny mood

5) Get the mini-van from our friends

6) Pack all tools and hardware

7) Remember to take the key, in case tenants aren't home

8) Go and get the appliance from the seller, typically someone I found on Kijiji

9) Drive to the tenant, either to Barrie or Guelph

10) Attempt to install the appliance

11) Find out that something doesn't work or is missing - pipes, outlets, drains, narrow doorway. It's guaranteed that something is going to be messed up or in our way.

12) Go to the hardware store for the parts and tools, minimum twice

13) Finish appliance installation super-late in the evening

14) Roll out the old appliance to the curb. Comply with local city and safety rules (ex., if it's a fridge, take off the door!)

15) Get fast food. We are super hungry and done with all the snacks by this time

16) Drive back to Toronto. No traffic on the way back - Yaaay!

17) Fill up the tank and return the mini-van

18) Pick-up the child from the parents

19) Go to bed at two or three am

20) Wake up four hours later

The job is done! Yay!

How Much Money-Wise?


With do-it-yourself approach, we'd pay about $300 for the used appliance, $50 for gas, $80 for a full tank of gas as a Thank You to our friends, get coffee, fast food and realize one out of every four new used appliances would break within several months after purchase and we'd have to fix it.

In summary, used appliance would cost about $600, while a new one would be about $800.

   Used Appliance      New Appliance   
Appliance$300.00 $500.00
Delivery$- $100.00
Installation$- $200.00
Starbucks for Two$12.00 $-
Fast Food for Two$20.00 $-
Gas & gas re-fill$130.00 $-
Fix New Used Appliance$132.50 $-
Total $ Cost$594.50 $800.00


How Much Effort-Wise?


In addition to dollar cost, we'd need to collaborate with and inconvenience a whole bunch of family and friends to coordinate appliance re-placement.

Collectively, we'd spend over 150 hours either putting in heroic efforts AND/OR sacrificing our weekend.

The result would be subpar. After all this time invested, our old new appliance will likely break soon or stay functional for just a couple more years. So we'd need to re-group and fix it again!


People InvolvedDo It Yourself Delivery /InstallProfessional Delivery/Install
Grandparents @ 12-14 hours20
Child @ 12-14 hours10
Friends @ 12-14 hours50
Husband @ 12-14 hours10
Self @ 2-4 hours admin work11
Self @ 14-18 hours inspiring my husband to put in heroic efforts over the weekend10
Handyman @ 2-3 hours01
Tenants @ 3-6 hours22
Total # Participants:134
Total Time Needed from everyone involved128 to 156 hours8 to 16 hours




With PROFESSIONAL help,
being a Landlord feels smooth

Landlord Job gets Easier with Professional Help

As my portfolio grows, appliances issue come up more and more frequently.

Sometimes, as often as three times a day!

My friends and family will NOT want me to hijack all their weekends, so that I can save $200 on an appliance.

I will never see my son again, if spend all my time trying to get and install cheap used appliances.


Also, my husband would very likely ask for a divorce if I queue up appliance deliveries and other handyman work for the next three-four-five weekends in a row...

Lately, I always go for NEW appliances and pay for PROFESSIONAL delivery and installation. 

This is the ONLY way I can scale to 50 doors.

Thursday, December 27, 2018

Vacancy: Landlord's Worst Nightmare

Vacancies Keep me Awake at Night!
A few days ago we filled our last vacancy.

What a Relief!

The search took about three weeks. Our property manager began advertising the unit on November 19th. 

We started with $1,650 asking price, which was higher than the average for similar units in the area. There were barely any inquiries at that price. 

December and January are typically slow months for tenant search. People are busy with holiday prep and after holidays they go into hibernation-mode for the remainder of the winter. I was worried that we'd have a vacancy until Spring.

Vacancies Keep Me Awake at Night

The reason I am so afraid of vacancies is because they are very costly. Every month of vacancy, I'd have to come up with money to pay the mortgage, property taxes, utilities and, in case of this specific property, property management and condo fees as well.

Ouch!

Typically, they recommend that you include 2-5% vacancy fee in your cash flow calculations.

Given 5% vacancy, my annual cash flow would be $1,280. Or $100 a month.

In reality 5% only works if you manage to go without vacancies for a while. Actual losses are a lot higher!

For example, my annual loss for a year with one month of vacancy is about ($1,660). That's because:

I will not get a month of rent of $1,600
Pay about $300 for the utilities during that month
Pay about $2000 for tenant search and making the unit ready - fresh paint, minor fixes, etc. add up
Pay all regular expenses of $16,960...

If my property is vacant for two months, the loss will be ($3,560).

With three months of vacancy, I'd lose ($5,460).

Once I do find a tenant, it will take a l-o-o-o-o-o-o-o-o-o-o-o-o-ng time to catch up.

I'd need the tenant to stay for almost 2 years, to catch up after one month of vacancy.
The tenant will have to stick for over 3.5 years to catch up after two months of vacancy.
Lastly, the tenant will have to stay for almost 6 years, to fully catch up after three months of vacancy.

My math is simplified, of course. I don't take rent increases into account at all, for instance. Still, you get the idea why I hate vacancies. Vacancy losses are horrific.

The danger is on the flip side as well. If you rush and get a BAD tenant, you can end up with thousands and thousands in losses... See my blog post here for details - My $30,000 Mistake.

Here is a chart with the numbers in my examples above:






Projected:
5% Vacancy
   Actual:
   1 month
   Vacant   
   Actual: 
   2 months 
   Vacant   
   Actual: 
   3 months 
   Vacant   
Gross Rent$19,200$19,200$19,200$19,200
Less Vacancy($960)($3,900)($5,800)($7,700)
Rent Income$18,240$15,300$13,400$11,500
Expenses
Financing Cost$6,860$6,860$6,860$6,860
Condo Fee$5,304$5,304$5,304$5,304
Property Taxes$1,961$1,961$1,961$1,961
Other$1,200$1,200$1,200$1,200
Property Management$1,094$1,094$1,094$1,094
Insurance$540$540$540$540
Total Expenses$16,960$16,960$16,960$16,960
Net Profit (Loss):$1,280($1,660)($3,560)($5,460)



Success! Got a Great Tenant

Needless to day, the pressure was on.

We lowered the price by $50 to $1,600. Luckily, the interest picked up! 

The ad generated over 230 views, 15 inquiries, three viewings, and a great application on December 9th. 

Our property manager uses Naborly for tenant screening. I've never seen a Naborly report before and was quite impressed. The multi-page document covered most of the information that I typically review for a candidate and gave some additional insights. Here is what the report covered:
  • General info about all occupants
  • Previous addresses and address verification
  • Equifax credit summary and score
  • Debt summary including monthly debt payments
  • Rental history
  • Financial information
  • Employment history
  • Analytics showing the likelihood of key tenancy risks (late payments, eviction, property damage) 
  • Analytics showing the likelihood of a successful tenancy during the entire term.
Our property manager also collected a photo ID, a full credit report, and a letter from the employer. They conducted a face-to-face interview and verified employment and personal references. My property manager summarized their findings including possible risks.

I reviewed all the information as well and did my own due diligence. I typically research every piece of factual information and make sure all facts align and make sense. The way I do it is very simple: research every name, every address, every company name, every email, and every phone number that the candidate provided; look in Google and on all social media platforms; contact all references and chat with them; verify income.

In this case, all checks were successful. I accepted the application and to my delight, the tenant confirmed that they'd like to go forward as well.

No Vacancies!!!!!
Overwhelmed with JOY and
will definitely sleep like a baby :)
The property manager impressed me very much! This was the first time when they found a tenant for me and I loved how smooth the tenant on-boarding process was. 

As soon as this last vacancy was filled, I started sleeping like a baby again! 

Wednesday, October 31, 2018

The Beauty of A La Carte Property Management

Loving A La Carte Property Management
A friend of mine runs an amazing property management company – they offer on demand white glove property management services. I call it a la carte property management.

I think this service is amazing. In fact, it’s just perfect. I tried it last month on one of my rentals and absolutely LOVED it.

To start, let me share my view on traditional property management and some challenges that I've come across.

This will help me explain why I am so excited about a la carte property management!

The Pains of Traditional Property Management

Traditionally, property managers charge a percentage of gross rent per month. Usually, somewhere between 5% and 8.5% of your gross rent. For example, if you rent a unit for $1,500, you’d be paying around $100 a month to the property manager. You pay based on proforma, not actual, i.e whether or not your tenant pays rent, you still pay your property manager.

Given a skinny average cash flow of $200 per unit, property management could easily take away half of your cash flow. So instead of getting $200 a month in your pocket and self-managing the unit, you’d be getting $100 a month from the unit when you outsource property management.

The biggest benefit of hiring a property management company is that your property manager becomes the point of contact for your tenants, instead of you. You never see, communicate with or hear from your tenants. Your tenants contact your property manager with all their questions and issues. The property manager coordinates issue resolution, gets your approval on costly items, and sends you an invoice at the end of the month. This invoice includes:

  • Property management fee of 5 – 8.5% 
  • Cost of labour to resolve issues
  • Cost of materials to resolve issues
Traditional Property Management can get Ugly
Here are some examples of what is not included in the property management fee and will be added as an extra line item on your invoice:

Painting / cleaning / making unit ready for a new tenant, plumbing issues, snow/grass care, new tenant search, sending an eviction notice to a non-paying tenant, representing you at the landlord and tenant board, fixing a broken screen on a window, etc. 

Basically, everything is extra with the exception of:

  • rent collection 
  • the contact phone / email that your tenants get to call when they need help
  • in some cases, annual rent increases. In my case, I have to remind my property manager about these.

In theory, this model works great for hands-off investors. You pay someone else to take care of your property and your tenants. You pay the invoice to cover all associated costs. You trust your property manager to do a great job and believe they will act in your best interests. You sleep great at night and can spend your time doing something more exciting than answering your tenants’ calls.

However, in my experience so far, the model seems to fail frequently. 

Some property managers that I’ve run into would let your unit stay vacant for many months. They wouldn’t put in any effort into collecting rent. 

They’d procrastinate for many-many months keeping issues that are important from owner stand-point in their waiting queue, and decide that it's not necessary to address these issues at all. 

They’d find a gazillion excuses and explanations of why some issues cannot be addressed or addressed timely. 

In the meantime, your have zero interaction with your tenant and practically no insight into what is actually going on at your property - you are at the mercy of your property manager. 

While you are becoming more and more frustrated with how things are going, the property manager still collects the monthly fee.

And the issues that are bothering you and costing you time and money still remain open, adding up to hundreds and sometimes thousands of dollars.

The Beauty of A La Carte Property Management


The way on demand property management works is very simple.

You run your property the way you like. You keep in touch with your tenants. When you need an extra set of hands or an expert to do a certain property management or tenant management task, you pay for the service.

There is no monthly fee. You pay as you go.

In my case, I have a triplex in Guelph. My monthly gross rent is $3,126. I have long term tenants in two units. They are great tenants and rarely have issues or requests. They keep an eye on the property and bring up issues that need my attention. We have a great relationship. There is really no need to hire a property manager to manage these two tenants.

The third unit has higher turnover. My last tenant was a young professional. He bought his own place and moved out. I needed to find a new tenant. 

The property is about an hour away from my place. I have so much going on that I really had no time to clean, freshen up the unit, market it, screen applicants, etc.

In addition, I recently re-financed the property and pulled out most of the equity. As a result, my cash flow is barely positive. Every penny counts. There is no room for an ongoing property management cost.

Hiring a traditional property management company doesn’t feel right and, frankly speaking, isn’t cost effective.

A la carte property management, on the other hand, is just perfect.

What I needed was:
  • Great team to freshen up the unit and get some work done - mainly cleaning plus repair a couple of minor things
  • Expert marketing and advertising - respond to numerous requests timely
  • Run an open house for all interested applicants and show the unit
  • Complete applicant screening, reference / background checks, etc.
  • Help me choose a great new tenant.

This was exactly what I got! It took them under a week. I got a great price. 

I loved the experience and the result:

Feeling Happy!

Zero vacancy.
Perfect new tenant.
No ongoing cost.
Got exactly the services I needed when I needed them.


Would you like to try a la carte property management? 


Ping me in comments below, if you’d like a referral to my friend’s firm. They are based in Toronto and serve a pretty wide radius. 

A la carte property management also works great for 2nd homes and cottages. For example, you can outsource your Spring / Fall routine to a professional property manager. 

Sunday, September 30, 2018

Plumbing 911!

Oh-oh! Plumbing 911!
Over the past couple of weeks, I had to deal with a few plumbing issues. Just wanted to share some pictures, so that you can see how simple or extensive a plumbing problem can get!

Urgent yet Easy Plumbing Issue


Our tenant called on Friday evening. Their basement was flooded. Every time they used a toilet, the water would back up in the basement. Urgent help, please! - tenant really needed help. It's unpleasant when you can't use the bathroom.

We called a few plumbing companies and were placed in their priority queue. We called and called! Trying to expedite the resolution. However, no one was available and most companies didn’t even return our calls. Thankfully, our tenant was quite understanding. We did our best to get help as fast as it was possible, but no luck until the end of the weekend.

It helps when you have good local connections in the area! 


This is one of the reasons why I’m working towards gradually shifting from self-managing all units towards partnering with a property manager.

Finally, we got an appointment scheduled for Monday morning.

Fortunately, it turned out that the issue itself was easy to fix.

The plumber cabled approximately 45 feet to clear blockage, finding it approximately 32’ in the drain line at the front of house. When he retrieved the cable, we found roots on the line.

Roots Blocked a Pipe

Non-Urgent yet Difficult Plumbing Issue

We recently acquired a duplex (the one we've split up into two units). During pre-purchase inspections, we identified two problems that needed to be solved:

1) Sewer stack rusted and needed to be replaced
2) After each rain, rain water mixed with sewage backed up into the basement.

The two issues were not urgent and didn't create too much inconvenience for the tenant - he knew we'd find a good solution and was not rushing us.






Our tenant recommended an outstanding local plumbing company! 


Two technicians visited us and did a lot within just a few hours:

replaced the old stack with new ABS plumbing
cleared sewer lines, removing calcium build-up and roots
fixed broken plumbing under the utility tub in the basement
replaced P-traps and some old sections of the lines
cleaned floor drain and put a back trap on it
there was only one section of the lines (6-7 feet) that could not be snaked and inspected with a camera.

Now, the first issue was resolved.

Next, we had to wait until it rained, to find out if the basement would flood.




Flooded! Not Again...


There was a big storm over night! Unfortunately, the basement still got flooded.

The plumbing company let me know that most likely the problem comes from the city lines.

However, we had to inspect the last section of our pipes, to make sure everything is in order on our end. Without this, the city would never start looking into the problem.

The plumbing team came prepared to inspect the last bit of hidden lines. Take a look at the pictures below to see what it took!

Now, we know that all of the plumbing under our house and up to the City line is in good shape.We'll wait for a rainy day to find out if the basement would still get flooded. Fingers crossed...

Getting ready to dig!


Where does this pipe go?

Holly, molly!

New Pipes!

No More Flooding (Hopefully!!)

Cleaning Up!





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!

INCLUDES:
- Lots of Parking
- Large Patio & Backyard

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

OTHER:
- 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.


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:

Hydro
Gas
Water
Tax
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.

Thursday, March 29, 2018

Tenant/Landlord Perspective on Rental Property Lease Agreement

Choose Great Tenants!
Starting April 30, 2018, all landlords in Ontario, Canada are required to use the standard lease agreement template for residential rentals.

Many investors and landlords are not happy about this new requirement.

They don't like the fact that the new lease agreement spells out all the rules that tenants may want to know.



These rules are designed to:
"provide protection for residential tenants from unlawful rent increases and unlawful evictions" and "for the regulation of residential rents" 
per Residential Tenancies Act, 2006
However, some of these rules are not at all landlord- or business- friendly. 

In this post, I’d like to recap what I learned from a lawyer and a paralegal presentation, who have been in the residential rentals business for many years and have seen a lot of landlord/tenant situations. I'll also share some of my own thoughts and findings on the rules landlords are supposed to follow in Ontario.

My goal is to share the key concepts that will benefit beginner landlords without sacrificing the happiness of their tenants. 

First things first:


If you are reading this post, finding it helpful and are not my Mom, please leave a comment at the bottom or share it. Your comment will make my day AWESOME and I am very grateful for it 😁🙏


The Term of Tenancy Agreement is Always Indefinite


Landlord specifies the term of the agreement in section 4 of the lease agreement template. The choices here are fixed length (ex., a year), monthly tenancy, or other (ex., daily or weekly).

Most new investors believe that it is beneficial to sign a lease for a year. Many landlords also learn at various real estate courses that it is a good practice to renew the lease for another year at the end of each term. 



"The tenant does not have to move out at the end of the term." 
- section 4 of Lease Template

The truth is that no matter what type or length of term you put in your lease agreement - a year, monthly, or daily - the tenant has the right to stay in your rental unit FOREVER. 

The tenant will leave if and only if he/she leaves voluntarily OR landlord goes through the process of ending tenancy using one of the very few permitted reasons.

Please note that in case of a problem one year lease really restricts the landlord from evicting the tenant early. For example, N8 form states that the termination date cannot be earlier than the last date of the fixed term - i.e. end of the year for an annual lease. While monthly lease can be terminate with a 60-day notice. Because of this landlord should try to stick with month-to-month leases and stay away from annual ones. 

Can a Tenant Break a Lease? Anytime


On the flip side, suppose you sign a one year lease, but your tenant wants to move out early. Per current rules, tenant is supposed to give landlord a 60-day notice, which has to be effective at the end of a month. 

But if your tenant is going through hard times, chances are they'll move out much faster and with a much shorter notice. In this case, they'll stop paying you rent as soon as they are out. If you try to insist on 60-day notice and they can't afford to pay you, they will not pay you.

In this case, your best course of action is to be thankful that the tenant has moved out on their own accord (rather than staying at your place for free until the Sheriff changes locks) and get a new paying tenant as fast as possible.

Having said that, more often than not, I see tenants giving sufficient notice and coming to a mutual agreement with the landlord to break lease early. This approach is most effective both for the landlord and the tenant. This is why it always helps to have a good business relationship with all your tenants, so they let you know as soon as they decide that they'd like to leave.





Can a Landlord Use a Non-Standard Lease? 


Yes, in theory a landlord can still use their own lease. It's against the rules, but possible if a tenant agrees to sign the non-standard lease and doesn't ask for a proper one. 

In case when the tenant asks for the standard lease and landlord doesn't provide it within 21 days, tenant has the right to leave and landlord would lose the tenant.

My analogy is: Can we drive above speed limit? Absolutely. But there may be consequences if we get caught. So everyone chooses their own boundaries and balances higher speed vs. # of tickets vs. safety.

In tenant/landlord situation, consequences usually come up when there is a disagreement between the tenant and landlord. In that case, Landlord and Tenant Board (LTB) will make decisions based on the Act and other applicable legislation. All terms of any lease agreement that are in conflict with the legislation would be deemed void and non-enforceable. 

LTB officers are very strict in following the legislation. My prediction is that they will not be lenient towards a landlord who decides to break the rules of the legislation on purpose.

This is why I recommend that you find ways to incorporate your additional terms into the new standard lease template and do your best to comply with the rules. 


Rent / Deposit / Increases?


Most landlords are already aware of the boundaries on the money side:
  • We can can charge last month's rent, NSF fees up to $20 and key deposit
  • We can increase rent per approved guidelines every 12 months
  • We have to pay interest on last month's deposit.
Now, these same boundaries are listed in black and white on the standard lease template, so that all tenants are aware of them at the start of their tenancy. 

This certainly clarifies the rules of the game for both parties involved. Very transparent.

Conclusion

Tenant Perspective: Follow three rules and you'll always have a home in Ontario with reasonable annual rent increases:

  1. Pay your rent on time and in full
  2. Treat your home nicely
  3. Respect the neighbours.

Landlord Perspective: There are way more than three rules. Learn them!



GOOD LUCK!! 👋


PS Let me know if you have any questions about tenants, landlords, or lease agreements? Use "Comment" box to ask.




Tuesday, March 27, 2018

A day in life - Investor / Landlord / Parent

Spring is here! I can’t believe a quarter of the year has already gone by. Since the beginning of the year I started a few things but it doesn't feel like I finished a lot. Today was a productive day and I’m optimistic. I am sure things will start coming together soon. So here is a scoop of the day.


Morning at the LTB Hearing 


Related image
Getting to LTB hearing!
Mornings are easy when you work from home. Basically, on most days no one sees me. This is why there is zero pressure to look decent. But today was different because I had a Landlord and Tenant Board (LTB) hearing at 9 AM in Barrie, which is about an hour away from my home.

I was lazy yesterday, Sunday night, and didn't print and fill out the L1/L9 update form. So I had to run around like a headless chicken to get everything done - shower, get dressed, make lunches for kids, print the forms, fill in the forms, and leave the house. I had planned to leave by 7:15 AM, so I could have plenty of time in case of traffic. Well, I left at 7:59 AM. Sounds pretty bad, I know, but surprisingly I still made it on time to the hearing.

LTB Hearing Topic - Application to Evict a Tenant for Rent Non-Payment 


The reason I went to the hearing was eviction for rent non-payment. A tenant lost her job a couple of months ago. As a result, the family is going through some financial difficulties and fell behind on rent. 

Unfortunately, it’s part of my job to take action on rent non-payment. I sent N-4 form on Jan 24th because I haven't received January rent in full. I was optimistic about the delay and knew tenant would catch up - and they did. Unfortunately, once you start falling behind, it is very hard to get back on track and start paying on time. January rent was paid in full, but of course, it was practically impossible for the family to pay Feb rent by the 1st. So the vicious cycle of rent being late continued.

I filed an application to the board on Feb 14th and the hearing day is today - March 26th.

The tenant didn't attend the hearing. This was good for two reasons. First, it is emotionally difficult for me to negotiate with a tenant because I feel bad for them and understand how hard it is to survive. In the past, I used to always end up giving them an extension, which unfortunately didn't help anyone - the tenant still lived beyond their means and kept digging themselves deeper into debt while I kept losing money.

Second, cases with only one party present (as well as all cases when parties agreed on a repayment schedule) are heard at the very beginning of the day. So my case went second and I left LTB at 10 AM.

Key Take Away - Don't be Creative, Follow the Rules 


The Hearing Officer asked me several questions. One of them was about the method that I served N4 with. I stated on my forms that I emailed N4 to the tenant. Email isn't one of the acceptable methods according to LTB rules. Unfortunately, I did not have a written response back from my tenant, but I let the Officer know that the tenant and I spoke over the phone.

Lesson learned: Don't be creative! follow the rules and hand deliver or mail the N4!

Also, get a written confirmation of all your communications with the tenant. I should have emailed the tenant a summary of our phone conversation after we talked.

Precious Coffee
In addition, I got scolded by the security official for non-compliance with the HUGE sign on the wall that said that there was no food or drinks allowed. I have to admit that I saw the ginormous sign and consciously made a decision to hide my drink under my chair (which the officer spotted).

Lately, I've become so frugal that I didn't want to waste the coffee that I just got on my coffee points, thinking that the risk of being kicked out from the hearing room was low.  Luckily, the security officer was kind and let me keep my precious drink and asked me to wait for my turn in the waiting room, rather than inside the big court room.

My luck continued and the hearing officer was lenient as well. She made a decision to proceed with the order even though I used incorrect N4 delivery method. In a few days, my tenant and I will be getting the order in the mail. It will require the tenant to pay remainder of past due March rent and April rent within two weeks. In case of non-payment, I will have the right to request an eviction at the Sheriff's office. 

I truly hope that the tenant will figure out how to fully catch up and get back on schedule with rent payments.

Even though many of my fellow investors think that LTB rules are strongly in favour of the tenant and it is a bad thing, I believe that the system is fair and reflects the fact that Canada is one of the Happiest countries - in fact we are 7th in the World! There is a great responsibility on the landlord to find a suitable tenant and follow all protocols to make sure both landlord and tenant have an effective partnership.


Spent Afternoon Submitting Mortgage Application


Getting Mortgages requires LOTS of Docs and Info!!!
I got back home without much traffic as well.  I spent about an hour gathering up supporting documentation to send to a mortgage broker who is helping me refinance two of the properties. 

The purpose of the refinance is to pull out equity that has built up over the last three years. If all goes well and as per my initial calculations, my cash flow will still be $200 per property AND I should be able to get my down payment and renovation money back. Isn’t this amazing?!

This means that I’ll have the same money that I started with just over three years ago back in my pocket plus two properties that will continue to generate some cash flow. I’ll be able to re-use the same money and acquire new assets. My first properties will literally pay for a future new property. Neat! This is probably what the saying "money working for you" refers to.

Honestly speaking, this is the first time when I am trying to get my money back, so my knowledge is strictly theoretical at the moment. Let’s hope things will conclude as planned.

On a positive side, I was very proud last week when the mortgage broker complemented me on my AMAZING spreadsheet. It covers my portfolio and every bit of information that a mortgage broker might want to ask for.  In the last 4 years, I got 12 mortgages and 4 refinances done. No wonder, I am now a pro at predicting what questions a mortgage broker would ask.


Side Hassle - Networking Works!


A few weeks ago I started a side business hassle. It’s a small business that my friend and I are starting together. I had to do some work for it at the end of the day.

The interesting thing is that everyone who supports me on this side hassle are fellow investors and entrepreneurs who I've met at various real estate meet ups.

I’ve never been a networking fan, so every time when someone who I've met at a meet up helps me out, I’m super thrilled and excited. I have to agree that networking IS TRULY a great way of expanding your reach and range of possibilities. I am very grateful to my newly acquired partners, mentors, and like-minded people who share their thoughts and give me their honest opinions and feedback. 


Wrap Up - Kids and Karate


Now, changing hats and bragging a little bit on personal side.

My oldest son came back from school with a medal - 2nd place in a robotics competition. 

My youngest son scored in top 5 of 1,000 kids his age on a test. I am very proud of him. Also, I am happy because I no longer feel guilty about our policy on YouTube - kids basically have unlimited YouTube. As long as they do well at school and in their after school activities, they can spend all their free time as they please including being permanently glued to screens. 
Looks a lot more romantic than me sweating
in all the super-fat safety gear :)
And my middle son told me he wants to get a programming job. Can you believe it? That's purely his own initiative without any nagging from me or my husband :) He started putting a resume together!

I wrapped up the day by drafting this post and attending karate dojo. It was a sparing day! FUN!!