5 Things to Know Before You Become a Landlord in Toronto

With some of the highest rental rates and property values in Canada, owning a rental property in Toronto can make for a highly successful investment.

That said, there’s a lot more to being a landlord than simply buying a property and renting it out. In reality, Toronto’s rental market can be complex, making certain elements of managing your investment difficult to navigate. So, there are several important factors to consider before diving in.

In this blog, we’ll look at five things you should know before you become a landlord in Toronto.

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1. You Should Only Accept A+ Tenants

As a landlord, choosing the right tenant will make a substantial difference in the success of your investment so it’s important to choose wisely. A good tenant is so much more than someone who pays rent on time. While it might be tempting to quickly rent out your unit to anyone who applies, taking the time to screen tenants properly can save you a lot of headaches in the long run.

In Toronto, the pool of potential tenants is fairly deep due to a high demand for properties and somewhat limited supply. These dynamics are favourable in some ways, such as elevating market rental rates and making it easier to attract tenant candidates. However, it can make the process of finding the best tenant(s) for your property a little more involved.

Start by creating a tenant screening and application form. This should include information on the applicant’s employment, income, rental history, and references. Always check these references, especially from previous landlords, to get an idea of the applicant’s rental habits. You can also request a credit check to assess their financial responsibility.

While many of these details can be verified by phone or email, always meet with serious candidates in person before having them sign the lease.

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2. Always Price Properly

One of the most important aspects of being a successful landlord in Toronto is setting the right rent price. If you price your rental unit too high, you might struggle to find (and keep) tenants, which can eventually lead to vacancies and lost revenue. On the other hand, pricing it too low could mean you’re not maximizing your income potential.

Because your property is unique, it’s a good idea to consult an expert on what the most appropriate asking price will be. This could be a seasoned landlord in your area or a professional real estate agent.

3. Don’t Be Too Generous With Discounts

One trap that a lot of first time landlords fall into is being too generous with certain discounts – especially if they have a tenant who is a friend or family member.

It’s natural to want to make your unit appealing by offering discounts or incentives, below-market rent or free utilities. While these strategies can attract tenants, being too generous can seriously hurt your bottom line. Let’s say you offer a 10% discount on a $2,000/month unit – you’re effectively losing $2,400 a year at minimum. Multiply that over a 5 year term and you just waved goodbye to $12,000.

Landlords may also find themselves in this situation if they have a tenant who is a friend or family member. Again, offering a discount on rent can be a nice gesture, but it’s likely going to be extremely detrimental to your long term returns. If you do feel obliged to give someone a deal, limit it to just the first few months of their tenancy (maximum 6) and write it into their lease agreement so there are no discrepancies later on.

It’s essential to strike a balance. Offering modest discounts or perks can be beneficial when done strategically, but always calculate how it will affect your annual rental income.

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4. Not All Properties Are Created Equal

Another thing to know before you go hunting for the perfect rental property is that not all of them offer the same profit potential.

For instance, as you scour the market, you may find a property that’s already tenant-ready like a one or two-bedroom condo. While convenient, a property like this won’t offer you the best ROI.

In Toronto, the best opportunity is usually to buy a home as-is, and then convert it into a 3 or 4 unit property yourself. With this route, you’ll see cash flow from day one and won’t pay the premium off buying something turn key.

5. Always Work With a Real Estate Agent

Just like buying a home that you plan on living in, charting a successful real estate investment requires the help of a top performing professional – preferably one who directly specializes in working with landlords. That’s where we come in, Mutch Property Group.

While full of opportunity, the Toronto rental market is complex and constantly changing. As a long serving team of professional experts (and landlords ourselves) we’re your one-stop resource for every aspect of real estate investing.

Taking a full-service approach, we can guide you at every step of the way from finding the right property to making value-add renovations, pricing, sourcing and screening tenants, and everything in between.

Searching for seasoned advisories who can help you make a profitable real estate investment? Call us at 416-903-3695 or send us an email at team@mutchpropertygroup.com.