When purchasing a residential rental property, there is a lot of information to learn. How to find and finance the home, by-laws and zoning laws, tenant and landlord rights and responsibilities, insurance coverages, number of allowed tenants and suites, etc. We want to address some of these main concerns. If you are looking into becoming an investor in rental properties, chances are, you will already know the ins and outs of buying a home. If not, you can read our recent blog on “Buying your First Home!”
Searching for properties
Similar to buying your own home, you will want to pay attention to the location, location, location. For example, areas close to a University or College will always attract renters, however, you may be constantly looking for new tenants as graduation arrives and the school year comes to a close.
- Lower Income Property
These types of property may be less expensive to purchase and will be more attractive to more renters, as the price is lower for many starting students, young adults or young families. That being said, sometimes lower rent brings in a type of renter who may not be able to afford rent or repairs, which would be frustrating when it comes to collecting rent and damage deposits. This is where having a property manager comes in handy.
- Higher Income Homes
These homes may bring in renters who have a higher salary and more consistent revenue stream, however, to get into a more expensive rental property will be more difficult to obtain financing from a bank or other financial institution. You will likely need a hefty down payment and your taxes, insurance and other monthly expenses will be much higher.
- Rented Condominium
These will likely be lower maintenance properties, however, they will have additional condo fees (strata) to pay for the fixed costs of the condo association for maintaining and insuring the common areas of the condo. This will cut into your property revenue. Make sure you research your condo association’s bylaws ahead of time to see what you are responsible for. If a claim arises in your suite and damages other units, you may be held liability and a large deductible may be assessed against you.
Managing a rental property
Now that you own the property, you have now assumed the many responsibilities that come along with it. Those responsibilities are:
- Setting Rent
You need to make sure your property is priced accurately to the best overall value. If you are too high, you won’t find renters willing to spend that much, and if you’re too low, you are likely losing out on potential revenue which could be used to upgrade or repair the property.
- Collecting Rent
Every month you will need to collect rent. Many tenants will pay by cash, post-dated cheques, or through automatic payments & e-transfers. You will want to make sure you collect an upfront damage deposit, to protect yourself from unwanted damage to your property.
- Screening Tenants
References, credit checks, background and social media checks will be important to make sure you are bringing in credible and reliable tenants into your property.
- Property Maintenance
If a light bulb quits, the furnace goes out in winter or you have a leak in the bathroom sink, those maintenance issues will be your responsibility to repair or replace. The damage deposit does not extend to these types of maintenance issues. If there is evidence that the tenant themselves, guests or pets damaged the house, only then will the damage deposit be forfeited.
- Budget Management
Owning a property comes with a lot of expenses, as indicated earlier: Taxes, Utilities (may be tenants responsibility), mortgage, insurance, strata fees (if a condo), upkeep & maintenance are now your responsibility. You will have to keep your pencil sharp as you navigate though these re-occuring expenses.
“This seems overwhelming, I’m not sure I’m cut out for this!”
Yes, being a landlord can be a lot to handle, but despite those feelings, you can still be an investor in rental properties. You may just need some help along the way.
Hiring a Property Management Company
This will be the best thing you can do if these tasks seem overwhelming. For a small monthly fee, a property manager will take care of all those headaches for you. If there are major repairs, they may contact you for additional revenue, but the management of finding the renter, screening them, collecting rent, finding contractors to repair the suite and maintaining a balanced budget is all their responsibility. We have some amazing partners who can help you out with this, make sure you check them out.
Becoming an SKLA member
Once you become a landlord, you should likely join the Saskatchewan Landlords Association. This association will help inform you of any changes in the industry and fight for the rights of fellow landlords. When the government recently imposed a COVID-19 law allowing tenants to no longer pay rent, this association made sure they were in constant communication with the provincial government to help take care of the landlords as well. Very important to have an organization like this in your corner.
“Thank you very much for that information, I have now taken care of the management side of things, now how do I insure this rental property? I’ve heard this can be very difficult.”
Yes, insuring a rental property can have its difficulties. Most likely the insurance company has told you that you need “supporting business” to insure the property. Maybe you wanted to insure against “tenant vandalism” and they said “NO! We can’t do that.” Well I’m here to tell you that Mello CAN do that and so much more.
If your home meets our eligibility criteria (which is pretty easy!), you can insure your rental dwelling or condo through our online platform in under 10 minutes. Once completed you will have an insurance policy in your hand with NO hassle of headaches. How easy is that?!
That’s great and all, but what does the insurance actually cover?
Great question! Our rental dwelling policy offers some great options for you to choose from. They include:
- Fully Furnished Homes
Is your rental property furnished? You can select a coverage level for landlord contents and you’ll be covered up to that for replacing things like TVs, couches, beds, and other furnishings.
- Rental Income Coverage
Don’t lose out if a claim happens for your rental property and you are not able to collect rent. This coverage will step in and continue to pay you the rent you would have lost.
- Replacement Cost
We’ll make sure your investment is protected and that your rental property will be rebuilt to the same quality as it was before the claim.
- Tenant Vandalism
Almost all insurance companies exclude this coverage. Here at Mello we understand the need for this coverage. Any small damages can still be paid for with your collected damage deposit, but what happens if the damage is so significant that the damage deposit doesn’t cover it. That is where this coverage comes into play.
We can insure your rental property with its own policy, no need to have any other insurance with us. Of course, we’d love to help with all your other insurance needs too!
- Plus so much more!
Find out even more options by going to our Landlord Insurance page. Feel free to contact a Mello Insurance Advisor to go through what else our policies cover and answer any questions you may have. There is a good chance if you need it, we’ve got it!
When it comes to investing, managing and insuring your rental properties, it can be a lot of work, but it can also be very rewarding. Having an amazing tenant, great property manager and insurance broker can make owning a rental property relatively painless. If you ever need to discuss your options or need more information, please reach out to us at any time! Thanks for reading!
Read our next blog on “Buying your FIRST home.”