“Owning Up” – Confessions of a Real Estate Investor
Managing Tenants: Step 2, Setting the Parameters
The first step is selecting the tenants that best fit your property. I discussed this at length in an earlier post – Profiling Prospective Tenants where I look for specific characteristics for my tenants to optimize, not necessarily maximize, my income. I look to balance longer term tenants with optimal rents. In this way, I hope to create a “low hassle” environment.
Low hassle environment means minimal turnover, rents paid on time in full, and harmony between the tenants. To create this environment, I use the RTA (Residential Tenancy Agreement – found on the BC government website – http://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/forms). The RTA lists the rights and responsibilities of the landlord and the rights and responsibilities of the tenants. I go through the RTA item by item with new tenants so they know what their rights and responsibilities.
Then I go one step further.
Setting the parameters, or stated another way, communicating expectations, is accomplished through an addendum to the RTA. On page 6 of the BC government RTA, it asks if there is an addendum, I check yes and identify the number of pages and items in the addendum. The number of items changes from tenant to tenant due to their specific circumstances but the list continues to grow. It is through the addendum that I further clarify the tenants’ responsibilities.
Addendum Items with Explanations
Listed below are addendum items I include. I have added some discussion after each to provide some background.
- Who will be living at 990 Johnson Street:
Often there are others than just the tenants of record living at the rental, children for instance. I list all the people who will be residing there. I add that if someone is new is moving in, we can do that but it may require rewriting or amending the RTA.
- Pets that will be staying at 990 Johnson Street:
I list all the pets that will be there. I also explain that if additional pets are added, this could nullify the RTA. In addition, I add that if you do not have a pet now but acquire one later on, a pet deposit will be paid at that time.
- All rent payments are due on the first of every month. Payments are to be made using interac e-transfers; cash or cheques are not accepted. Late fees may be charged at $20 per day.
Tenants are already aware of the interac e-transfer rule – this was discussed during the interview stage and they would have already made one e-transfer when giving a deposit. I add that late fees may be charged, I have only charged that once. It is important that tenants give me the heads-up that the rent will be late and we can make arrangements for when it will be paid. I explain – “Don’t duck me, that will just make me angry!”
- Tenants are responsible for respecting the peace and privacy of their neighbours.
With shared walls, noise from one unit can be heard in the next. It’s amazing how many tenants that they can do whatever they want within the walls of their unit.
- Guests are limited to 14 cumulative nights stay per year.
With three bedrooms and a mostly finished basement, tenants are tempted allow friends and other family members to move in with them; “Just until they get on their feet” they say!
- No sleeping in the basement – it is unsafe and illegal to do so.
The furnace is fuelled by natural gas and is located in the basement. Carbon monoxide poisoning is an obvious danger and zoning regulations prohibit sleeping there. I do have smoke detectors and CO detectors but batteries do fail.
- No alterations or painting without owner’s written authorization.
Through the years, I have had many tenants decide to paint the unit. They paint over switch plates and dab spots on the ceiling. And the colour, some ghastly hue of purple seems to the colour of choice. I have found an off-white colour that I can use on both walls and ceiling. All my units are painted in this colour. It helps when tenants turn over – I don’t have to think about the colour and I can get away with painting only some of the walls.
- Tenants are responsible for light yard work including snow removal. Tenants are encouraged to plant a garden. A lawn cutting service will mow the lawns but tenants must ensure that any toys or lawn furniture are moved out of the way.
It has happened that letter carriers have refused to deliver mail because the sidewalks have not been clear of snow and ice. I pay for a lawn cutting service because some tenants won’t do it even though I have provided mowers for them – it’s just easier to keep the complex looking its best.
- Tenants are responsible for reporting any maintenance items. Safety issues will be dealt with immediately. In the case of an emergency, tenants are free to call C.L. – the building maintenance contractor. He is bonded and insured; he has a master key to let himself in if you are not home. His phone number is 555-5555.
I don’t know how often tenants don’t report issues but let them go until they move out. Then I am faced with a much bigger clean up. Just last month, one tenant had issues with both bathroom sinks but failed to notify me because they were brushing their teeth in the kitchen sink! Another issue is leaky taps or running toilets – a single running toilet can add $200 to my metered water bill.
- Tenants are responsible for the behaviour of their guests and for any damage they may cause.
When damage occurs, tenants will claim that it wasn’t them. My point is that they allowed the individuals into their home. If there are repairs bills, then the tenant will have to pay.
I have the tenant initial each item after we have read through it and discussed it. I include a statement at the bottom of the addendum – “I have read and understand all the items of the addendum”. We both sign and date the page.
I try to keep the conversation light, but I want to ensure that the tenant understands what the expectations are and how I will respond to any given situation. My list of items keeps growing as tenants keep finding new ways of bending the rules.
For you, your list might be different. Your rental might be a one-bedroom condo and so some of the items may not apply. Or perhaps, you rental is rural property with a mobile home on it – you might have some additional items.
Getting off on the right foot is important in all aspects of life and starting right with new tenants leads to low hassle management. There is always going to be maintenance issues and tenant turnover, but it’s the emotional toll that does property owners in. Frustration, anger and even helplessness when tenants don’t return phone calls, fail to pay their rent, damage the property and host loud parties.
Low hassle management starts with identifying the best tenant for the property and continues with setting the parameters of the tenancy.