So you are thinking of buying an income property. Being a landlord isn’t all fun and games – even assuming you have the cash on hand to invest in real estate, managing a property is costly and time consuming, and can be a huge head ache. What should you consider, aside from your cash flow, before you take the plunge and become a first time landlord?
Understanding your regional tenancy laws and regulations is extremely important. There are a lot of myths and half-truths out there about landlord and tenant interactions. One common misconception is around pets, can I take legal action against a tenant who brings a pet into the dwelling despite the terms of our lease restricting pets? The answer is… It depends. In Ontario, the Residential Tenancy Act [s.14] voids all “no pet” provisions in a lease agreement, whereas in most other provinces, you as the landlord can include this provision, and take action towards eviction if the tenant is in violation. You don’t want your newly renovated income unit torn up by dogs and cats, or maybe you don’t mind, either way this is a good one to check out. There are plenty of other legal issues that could affect your decision to become a landlord, you’ve put in a lot of work to get to this point, so be diligent and finish your homework. A good place to start is CMHC, specifically their territorial fact sheets.
If you think it’s going to be smooth sailing, think again. Even a well-constructed or renovated unit will require upkeep and repairs. You don’t have to be Mike Holms, but you do need to know how to patch drywall and replace a fuse. You will be spending time during and in between tenancies on maintenance, otherwise you’ll be paying someone to do it which can take a serious bite into your profits. If you are not a handy person, but intent on making this work, be sure to include a nice buffer in your expenses to cover maintenance. Most repairs and labour are deductible, as long as you’re paying someone else to do the work, it’s always a good idea to speak to your accountant about which landlord expenses are tax deductible.
There are some fantastic benefits to having an income property, you’ll probably be thrilled with your decision most of the time when you’re chipping away at your mortgage and planning that early-ish retirement plan. That said, the most important question to ask yourself after learning about everything from taxes to tenants is, am I ready to handle this type of a commitment? We’re talking mentally and emotionally ready. If you find that your schedule is packed from work, children, pets or school and is enough to cause you some stress, you may not be ready to take on more, and that’s okay. This is a big decision; don’t ignore the most important part of the equation, the health and well-being of you and yours.