Buying an investment property and renting it out can be a great way to earn extra income or help cover the mortgage. However, many investors are unsure of how to best showcase the home and start the rental process.
Denny and Monica provide step-by-step instructions on how to rent out your property to great tenants at the best price, starting from the moment you get possession of the home to signing the lease agreement.
This episode will cover the advantages and disadvantages of having a property manager, how you can make your rental listing stand out, the importance of professional photography and floor plan to potential renters, which data you should use when finding a realistic rent for your property, the benefits of having a trusted handyman to help with fixes around the home, as well as the steps involved with signing a lease agreement.
Read the Transcript Here
Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.
Denny: Ok Monica, you just bought your first investment property. You’re thrilled. I give you keys and I walk away. What’s next?
I think this is such a great topic and it’s coming from a conversation with a past client, that this exact situation. And we talk a lot about investing in real estate, building wealth in real estate, but not so much about the practical next steps of finding a tenant, of placing the tenant of you know, being a landlord, of answering the phone and having to make maintenance calls and things like that. So we wanted to just share some insight into how to be successful when after you get the keys and placing a tenant in a rental property.
Monica: For sure they’re I mean, right off the bat. They’re two different avenues to take: 1) manager yourself 2) hire somebody to manage it for you.
I highly recommend trying to do it yourself if you can, if you’ve educated yourself enough on the landlord-tenant process. There’s so much information available online. So I really recommend doing a research.
Denny: But just on that point, I think it depends a lot on the property type. If you’re a first time landlord and you don’t want to spend a lot of time on this, and you bought a 1940s home that’s in fairly original condition that potentially could have a lot of phone calls, with maintenance items. Then maybe explore the idea of a property manager. Don’t pick the first one that you talk to. Interview a few and try to understand what they’re going to do for you and what that service is going to be like.
But if you are buying a condo that was built in the last five years, it’s going to be pretty low maintenance, especially if you are selective what type of tenant you are picking. So those ones I tend to steer towards, you know, suggesting people take it on for a year. And if the amount of work that you’re putting into it is overwhelming or not what you want to take on then explore the process of hiring a property manager.
Monica: Right with property managers. It’s like anything you need to ask lots of questions. What are the fees? That’s a big one.The fees are, are pretty different depending on who you hire, and there’s a lot of hidden fees with property managers, so make sure you know what they are and weigh those against your time, to manage the property. They can be a lot, the fees can be a lot so make sure you know what those are. So, setting Property Management aside, you know, if you’re going to go it alone, I highly recommend right away getting your hands on some professional photography and a professional floorplan. These are really, really important, maybe not for the first time you tenant the property but the second time it will definitely be very important to have really nice photos and floorplan. You don’t know what type of tenant is going to end up living in there. And you don’t know when they’re going to move out. But you do know you’re gonna need photos when they do and they need to, they need to look nice. A lot of you that have rented places or thought about it or even looked at real estate photography. There’s a huge difference in non professional versus professional and it makes a difference just like in real estate resale. It makes a difference in tenanting a property.
Denny: If you’re considering hiring a property manager, I would highly suggest one of your questions be: “Show me some previous listings that you posted.”
And then just take a look at what they look like right? Like, our real estate team in resale has built a business on marketing resale homes extremely well. And if you look in, let’s say you bought a condo in Coquitlam and you’re looking in that little area trying to pick what you’re going to post this condo, what you’re going to post the rent at, you’re going to see probably 90% of them taken with iPhones. They are going to be dark. They’re going to be tenant clutter all over the place. The photos are going to be atrocious.
How do you make yours stand out when a tenant, a potential tenant is looking through Craigslist or Facebook Marketplace or Kijiji or wherever they’re looking for a rental and they’re scrolling through listings and they see one with professional photography, which is really rare in the rental side…
Monica: Super rare.
Denny: Which absolutely blows my mind. They’re going to click on that. It’s going to look way better than what they’ve seen before and they’re not going to care if the rent is at $100 or a $200 difference per month. I suggested to a client the other day that professional photography might cost you three to $400. A floorplan might cost you $150. So let’s say $500 all in for marketing. That may get you out an extra two to $300 per month and that cost goes away in a month and a half. Two months.
Monica: And you keep the photos forever.
Denny: Exactly. Oh my gosh.
Monica: For however long you have the investment property. The mindset needs to be when you buy an investment property that this is a business and this is an investment. I know it sounds kind of silly but you wouldn’t open any type of business without some sort of professional you know, logos or things like that and you need to treat this process the same. It’s a business to your investment. Just plan to get professional photography and floorplan done, floorplan is what? $150 bucks or something. It’s totally worth it, especially if you have a detached, especially if you don’t have one from that you can maybe sometimes get one from the listing agent. Ask, ask the listing agent if you can have it what do they care? They’re never see the property again. But get your hands on a professional floorplan it’s a business and you should treat it like it.
Denny: If you’re buying new construction too often you have a floor plan so it’s easy to use that and it is shocking how many people don’t put the floor plan in.
Monica: Yeah, it saves your time big time and we know this from experience in resale. If tenants and people know if the property is going to work for them or not work for them just based on the floor plan and if you’re managing the property yourself, and you take somebody to see the two bed plus den and they get there and realize that the den is just not going to work for them as a third bedroom, which they thought it was. And you made this whole like you, you went down, you gave 24 hour notice to your tenant, tenant hated it. You dealt with them. You’ve got the showing in and they walked through the door and they say: “Oh, this den’s not gonna work for us.” Well, they would have known that if you had a professional floorplan. So it’s really, really important. It’s good for yourself and it’s good for the tenants and it’s good for that potential renter.
Denny: Next. The write up.
Monica: Oooh, that’s a big one. Make it pretty guys. Try, try hard.
Denny: I get that this kind of stuff can be overwhelming for people, especially your first investment property. But don’t think you have to do it all on your own. Like you can steal. You can copy and paste from write ups of listings in that building. If you’re renting a condo, right? Look at the last five sales in that building. Ask your Realtor to send you the last five sales in that building and just pick out the stuff in the write ups that you like. If you don’t know the neighborhood that well, that’s totally fine. You’re going to be able to copy and paste two sentences from one of those write ups that says, you know, best community center in this neighborhood, close to one of the best elementary schools in the neighborhood, two minute walk to SkyTrain, whatever, whatever, whatever, right?
But educating tenants, a lot of tenants are moving from other cities and they don’t know all these amenities. And just again, on a flooded platform like Facebook Marketplace, it’s how do you set yourself apart? And the very first thing is catching someone’s eye with very nice photos. And then the second is educating them on that neighbourhood.
Monica: Right and so you need to know your product. You need to know what it is that you’re renting. Make sure you know all the amenities. Make sure you know where they are in the building. Make sure you know where your storage locker is and your parking and everything like that. Definitely if it’s, if it’s a townhouse, definitely know what type of schools are in the area. What levels of schools. Definitely know where the nearest transit is and mention it – a lot of tenants: transit and parking are really important to them. Street parking available. Is there, is there a permit parking on the street, things like that are really important. So just know your product included in the write up.
Denny: How do you pick a rent?
Monica: Ooh, that’s… well I do two things with my investment properties. 1) I look online right away to see what’s available. I look at how much my mortgage is on the property, how much my strata payments are and I, I get my dream price and I get a realistic price of how much other places are renting for and I kind of blend those two together. I definitely recommend if you have time trying a higher price for rent if you can.
Most of the time when I tried a higher price I’ve gotten it. I don’t know if it’s because of my professional photography, an amazing write ups. But you just you should try. If you have time, try a little bit higher.
Denny: There’s so many stories we could share of properties currently for rent on Facebook Marketplace. We post a property with professional photos with a floorplan that looks good, has a great write up. And I rents for an extra three to $500 a month.
Monica: All the time. We do it all the time.
Denny: I’ve even had tenants of my own investment properties, tell me that something down the street that is almost the same is listed six or $700 less. I say, “Ok, cool, go rent that one.” And then, they rented mine.
Monica: Yeah, exactly. It’s weird. It’s again back to the, it’s a business thing. If you treat it like a business, answer the calls when your tenants call. You know make, be professional in your appointments and know everything about the product. It gives people a peace of mind just like any other business. So if they know that you know what it is that you’re renting, it makes them feel more comfortable. And if they like how it looks, it makes them feel more comfortable. And I think when it comes to pricing. Pricing is very important. I mean, all these other things that we’re saying are important. But if you sell yourself short, what’s the point? So I think knowing, knowing the neighborhood, knowing what other places are renting for but also sticking true to your investment and knowing like your worth and what the property is worth is really important.
Just because something rented for you know, some,you heard somebody in that building is renting for $3,000 a month. You don’t know how long they’ve been there. Maybe they’ve been there five years.There’s, is there no other properties like yours available then you get to ask more. It’s just the way the business goes.
Denny: Once you place the tenant. You have done everything we’ve talked about. You’ve taking your professional photos. You have done a floorplan. You have educated tenants on the neighborhood. You’ve shown it to everyone. You have checked references, you have selected this fantastic tenant. What’s next?
And I always tell people like communicate really well with with the tenant, answer the phone when they call you. But even on the day that they’re moving in, go there. Don’t leave a key for them. It’s just like, you want to have them 1) respect you, understand that you are now a professional running a investment company business. But you want them to respect the property. And so I feel like the better you treat them, the kinder you are to them on that like move in day goes a long, long way. So whether it’s like dropping off a bottle of wine and or a six pack of beer or something and with the keys and just saying you know, thanks so much, good luck with your moving day, if there’s anything I can do, let me know. It goes a really, really long way rather than just “Ok, the key’s under the mat. Good luck.”
Monica: For sure. Be present is a big one. And make the move in experience nice. Make sure the home is clean. If it’s, if it’s the first time they’re moving in, it probably is cleaned from that last person that handed you the keys. But if it’s a tenant to tenant handover, be present, do your walkthroughs and then make sure it’s really clean and spend an extra $100 to $300 bucks making sure it’s really really clean when they move in.
Like Denny said if you, if you show that you respect the property they will too.
Denny: Next. If you are deciding to take this on yourself, not hiring a property management company and you do not have much experience in the trades. You are not a handy person. When that phone call comes. It’s gonna be really stressful or really overwhelming. If you haven’t done a little bit of proactive due diligence in terms of putting together some sort of trades list.
So whenever we’re handing keys to investment clients, we are always saying like: “This is not the end of our relationship. Feel free to reach out to us for whatever you need. If you know you need a plumber contact for something that you don’t know what, what’s going on or an electrician or whatever.” But to be proactive in putting that list together. Even just finding a few companies that have good reputations in that neighborhood and just building a list so that if something happens in a year or six months, you have a phone call to call right away rather than “Oh shoot. What do I do now?”
Monica: Yeah, get a good handyman on speed dial a lot of things that tenants call for. Anyone that’s handy and has some tools can probably handle most of what they usually need. So ask your Realtor if they have a handyman, most realtors have handyman that they have used for years, we do, and an electrician and plumber is a good one to have a really good one to have and answer those calls right away from your tenant and get things fixed right away. That’s important.
Denny: Again, the better you communicate with them, the better you treat them, the better they’re going to treat your property. Which is the investment, which is the goal.
Monica: Totally. Yeah. What’s next? So you follow up…
Denny: That’s all on my list.
Monica: Is that it? What about like contract signing, like tenant signings? Should we talk about lease agreements?
Denny: Sure. Good one.
Monica: Okay,. So, once you find a tenant, it’s time to sign a lease agreement.
Takes some time to get familiar with it. They, like again, all this information is online. The PDFs are online, the Tenancy Board, you can download them, go over them. There’s tons of tips if you go through the website, there’s a lot of tips and tools of how to use a tenancy agreement.
I come across different ones all the time that other property management companies use but I recommend just sticking with the one on the Tenancy Board website. Fill it out completely. And like fill it out correctly and completely go over it a few times if you’ve never done it before, and be really, really thorough with your walkthrough. The tenants will appreciate it. If you note like cracked tile and if you note different things. They’re going to appreciate how well you’ve marked everything but also it keeps everyone accountable. So walkthrough is really important. Get your pen and pad out. Do it with them in person. Don’t send them the walkthrough and ask them to do it and send it back to you. That’s something you can do on the first day that they move in.
Denny: Be specific in their tenancy agreement too with things that are included or excluded by IE a garage or parking or whatever that may be.
Monica: Or bills like internet, electricity, all that kind of stuff.
Denny: Absolutely. The other thing that comes up often in either townhomes or single family homes is like who’s responsible for cutting the grass and maintaining the yard and things like that. And if you are asking the tenant to do that, make sure that it’s spelled out pretty clearly what their responsibility is monthly to maintain the yard or the lawn.
Monica: And make sure they understand what they’re signing and make sure they have an opportunity to ask any questions if they don’t understand and make sure they have a copy. That’s all you can do.
Denny: Damage deposit, pet deposit.
Monica: Oh yeah, yeah.
Denny: So those can be 50% of the first month’s rent. Usually that’s what landlords are doing, are collecting a damage deposit of 50%. You can also ask them for a 50% pet deposit as well So people think allowing pets is scary.
Monica: I think kids are worse in many cases.
Denny: Totally. And understand what neighborhood you are purchasing in. If you are purchasing in a very, very dog friendly, very outdoorsy community. The likelihood of your potential tenants having a pet is extremely high. If you’re, if you’re purchasing in a very urban downtown environment potentially that is a lower percentage. But if you’re, if you’re buying in an outdoorsy community for Port Moody, North Vancouver that a lot of people have dogs and cats. And then you are now writing in your write up when you’re marketing this home “No pets allowed” you’re just cutting out probably 75% or 80% of your potential.
Monica: I’ve always allowed pets and all of my investment properties. I personally haven’t had a problem. I’ve heard a few people that have had problems with tenants with pets. I’ve heard far more than have problems with just bad tenants or tenants with noisy children. They get complaints and things like that. I rarely get complaints about pets. I recommend allowing it for all those same reasons. And the tenants pay more if they can have their pet. So that’s something to remember. Because a lot of landlords just rule out everyone with pets. There’s not really a lot of rentals available out there that allow them so if you can, and you’re comfortable with it, I recommend that. Letting them bring the puppies.
Denny: Good to go?
Monica: Yep. Good luck.
Denny: This is exciting times guys.
Monica: You started a new business, congratulations!