Owning a home can be expensive, and bringing in a tenant to help pay off the mortgage is a promising solution. As much as this can be an excellent investment choice to ease the burden, many homeowners don’t realize the potential pitfalls that are involved in becoming a landlord. Arming yourself with the knowledge of both the good and the bad elements is the best way to decide if this is the right choice for you.
Here are a few things to be aware of:
- What space are you renting out? Have you converted your basement into an apartment, and if so, did you do it legally? This is crucial when it comes to having a rental unit. Permits are required, and failure to obtain one can become a sticky situation. You may have to pay a fine, or even take apart all the work you did.
- Fire safety is also of the utmost importance. An inspector needs to come in and ensure that the space is up to code. Some of the necessary requirements are two exits, smoke and carbon dioxide alarms, and high ceilings. Find out everything thats required here: http://www.firesafetycouncil.com/english/pubsafet/apartments.htm
- You need to inform your insurance company if you get a tenant. Your premiums may go up, however it’s worth the peace of mind knowing that if anything happened, you’re covered. Your tenant should also get their own content insurance. Make sure you’re protected no matter what happens.
- Rent is taxable… and there are other fees involved as well. Painting, electrical, repairing appliances… these are all issues that landlords face on a regular basis. Which brings up another important point:
- Can you do repairs? You may need to unclog a toilet, change a lightbulb, or be faced with more complicated tasks. What if there’s an electrical short, or a small flood? Would you be able to handle these repairs? If not you’ll need someone on call who can.
- Is your rental unit desirable? Is it sound proofed? Freshly painted (preferably neutral)? To attract a long term, responsible tenant, the place should be nice enough that the potential occupant could see themselves living there for awhile, which is good for you. Having to continually find new tenants is time consuming and costly.
- Be aware of your rights as a landlord. Tenants have many rights, as they should. No one wants to feel like they could be kicked out of their home at a moments notice. On the other hand, a tenant can leave before the lease is up by giving two months notice. Your best bet is to become familiar with the Residential Tenancies Act, which you can find here: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_06r17_e.htm
- Know what your place is worth. It’s beneficial to consider bringing in a real estate agent. For a small commission, usually 1 months rent, they can assist you with the price, marketing your unit on MLS, and making sure that your potential renter passes a proper credit check.
Having a tenant can be beneficial; you can have some extra money in your pocket, the added security if you live alone, and someone who could potentially help you when it comes to looking after the place while you’re away. It’s not unheard of to have an agreement where your tenant could water the plants while you’re out of town and vice versa. However, knowing your rights as a landlord and being prepared for circumstances that can arise is in your best interest.
