Renting out a portion of your home or another property can be a great way to earn extra income. If you secure good tenants, landlording can reap large rewards such as more financial security or the ability to pay off a mortgage faster. If you are retired, it is also a good way to supplement your retirement income.
Will Your Rental Suite Attract Good Tenants?
Think about the type of tenant you wish to have live in your suite. Before putting up an ad for rent, here are some questions to ask about your expectations for tenants:
- What is the lifestyle of your ideal tenants?
- Are you looking to rent out to students who are less picky about the suite and simply need a place to sleep and study?
- Are you willing to rent out a one-bedroom suite to two people?
- What is your stance on renting to pet owners?
- Are you willing to rent to a tenant with a young child?
Once you have figured out what type of tenants you wish to attract, take a look at your property for rent to see if it matches the lifestyle that type of tenant would have. If your suite only has a mini fridge and hot plate, what kind of tenant will you attract? Or, what if the bedroom only has room for a twin sized bed? This might limit you being able to rent the suite to two people. Determine if your space needs to be upgraded or renovated.
If you are renting out a basement suite, remember that you must have proper windows in every bedroom to pass fire safety laws. Check with your local fire department about specific regulations. Also, does the suite have a private entrance? If not, you may have trouble finding a tenant. Many tenants don’t like sharing an entrance. Also, keep in mind that with a shared entrance, tenants may then also access to the rest of your house! Despite the costs, strongly consider adding a private entrance.
Remember that renting your suite is a long-term investment, so good quality upgrades are worth it. Don’t bother with fancy upgrades; focus on buying durable products. The trade-off will be a low maintenance suite with a higher rental value. A newly upgraded suite that rents for $1000 per month will earn you $12,000 per year! While there are occasional maintenance expenses, if you manage the income properly it shouldn’t take long for you to start earning money on the rental.
Add Incentives and Deterrents
Try to include some goodies to entice good tenants (e.g., free cable and/or Internet). If you are renting out a basement suite, you could also include utilities. This will increase the rent you can charge for the suite, and steer away the renters who want to pay the lowest amounts. Where it is legal to do so, you could incorporate rules such as $5 per day for late rent payments and $30 for checks that bounce. Such rules, where legal and stated before suites are rented out, will not scare off a responsible tenant, but might scare off tenants who do not pay rent consistently.
You can also deter unwanted applicants by requiring references and proof of employment. If you want to rent to students, keep in mind that they may not have either of those to show you. If you require references, ask for references from past landlords if possible. Current landlords may say positive things about the tenant because he or she wants the tenant to leave the current rental. Past landlords have nothing to gain, so they will likely be honest.
Write an Advertisement to Attract Good Tenants
The key to finding good tenants is to write an ad that is both interesting and professional. Promote your rental, but do not exaggerate. Michael Drouillard, author of Landlording in Canada, emphasizes that it is important to include all the basic information in the ad because it demonstrates that you are an organized landlord. Many good tenants are searching for a competent landlord, and a quality ad is the first indicator. Here are some basic facts that Drouillard says should be included in a good ad:
- Rent amount including whether utilities, cable, or Internet are included
- Length of lease
- Property address (or neighbourhood at the very least)
- Number of bedrooms and bathrooms
- Credit check or reference requirements
- If pets are allowed, how many and what kind of animal(s)
If you are posting the ad online, you should include photos of the suite because many renters will skip ads that don’t include images. Also include details about any bonus features in the suite. Is it an especially large space? Does it have a new bathroom or private laundry? These details help justify your rent amount to the potential tenant(s).
Catering to a specific type of tenant can also be accomplished by mentioning nearby amenities. A young professional who works downtown is likely to be attracted to great transit options, nearby pubs, and gyms. A family may call you if your ad mentions nearby parks or elementary schools. Students will want to know about the travel time to their school. Think about what your ideal tenants would enjoy doing in your neighbourhood.
Once you start receiving applications, take the time to carefully choose tenants for your suite. It is in your best interest to find a good tenant that will require less of your time and money. Once you have found a tenant with whom you are satisfied, keep up your end of the agreement by promptly responding to inquiries, and phoning in occasionally to ensure that everything is okay with the suite. These brief exchanges allow you to address minor issues before they become major ones.
Be an attentive landlord, and choose your tenants wisely, and you will increase your chances of securing responsible long-term tenants!