Whether you own a property you want to turn into a rental unit or searching for a new property to use as an investment property you need to understand the pro’s and con’s of becoming a landlord. It can be a very fulfilling way of owning a property to help people find a place to live while earning passive income and building equity.

Pros of Becoming a Landlord

  • Someone else paying your mortgage. You can earn passive income
  • Appreciation in property value. Historically the Toronto real estate market averages a 6% appreciation over a 40 year period so your property may increase in value over time. Building equity can also help build your portfolio
  • Expenses can be beneficial to landlords for tax purposes
  • Landlords can select the terms of the lease and who they want to rent to

Cons of Becoming a Landlord

  • Maintenance of the property can be time-consuming if you are doing it on your own and an expense if you are hiring someone to take care of the property
  • Bad tenants is one of the most difficult aspects of becoming a landlord
  • The Residential Tenancy Act is a legal requirement that all landlord’s must abide by
  • A vacant unit can be costly if it sits empty for too long
  • Negative cash flow is a possibility depending on your expenses compared to your income generating from the rent

The Process of Becoming a Landlord in Ontario

Getting a pre-approval to find out your purchasing power should be your first step before looking at property. Your finances will be different if you already own a property then if you are first time property buyer and perhaps want to live in one of the units.

During the pre-approval process you can start researching the market to determine the rental rates, the demand for rental properties, vacancy rates and current inventory. A local realtor can provide the relevant information and stats based on the type of property. Condominiums, Single family homes and Duplex or Triplex’s are the most common type of home in South Etobicoke.

Studying residential tenancy law will help you understand the local regulations to ensure both you and your future tenants are on the same terms.

Once you narrow down how much you can afford and identify the type of home you want to buy, working with a local Realtor, lawyer and mortgage professional will make the transaction process smoother.

Make sure your property complies with all the local building codes and safety requirements. It’s rare for a condo to not comply but a freehold property may require you to follow the local fire codes as well as having any necessary licences or permits.

Whether you are advertising your property via MLS with a Realtor or creating advertisements on social platforms, you want to make sure you have as much exposure as possible.

Have your Realtor screen the tenants or meeting each prospective tenant is important when making a selection. Having the best paperwork doesn’t necessarily make them a great candidate. Having an in person or even online meeting can give you a sense of their character and whether or not they would make the right fit. A completed rental agreement, credit scores, employment letters are some of the documentation to be attached with an offer to lease for you to screen the tenant. Ensure the lease agreement includes all the terms and conditions of the lease including the length of the lease, deposit and other rules.

Collecting rent is typically done via email money transfer. With technology today, it is becoming less common that physical cheques are provided.

Ensure you are managing the property by maintaining it on a regular basis. Being responsible of the maintenance and repairs will make the property last longer and appreciate more. The tenants will appreciate the effort and will often reciprocate.

Always keep up to date with the tenancy laws in Ontario. They are often changing! Rent control, evictions, non-payment of rent and damages are topics the often arise.

 

The Rental Market Stats for South Etobicoke

Below are the statistics for the average rents for 2022 for all of the South Etobicoke neighbourhoods:

  • 1 Bedroom: $2260
  • 2 Bedroom: $3034
  • 3 Bedroom: $3552

The average GTA rents have seen an increase of 21% for bachelor units, 20% for 1 Bedroom, 14.5% for 2 bedrooms, and 10.9% for 3 bedroom apartments.

With vacancy rates of 1.9% in Toronto,  an increase in immigration, higher borrowing costs for home buyers, and low inventory, the rental market will continue to be very competitive.

 

 

We manage over 20 properties for clients in the GTA. If you have any questions about becoming a landlord, or want to become one. Feel free to reach out to Adrian at 416.566.7089!