Save My Rental: What You Need To Know About Tenant Selection

 

Rental properties are a recommended way to diversify your assets and to build passive income. But how passive is it? Tenants never treat your property like you want them to. Is it possible to find a tenant who will treat your property like a home?
YES.

SAVE MY RENTAL:
WHAT YOU NEED TO KNOW
ABOUT TENANT SELECTION

rental

TIP 1: Meet with your prospective tenants.

Do you have the opportunity to show your properties and meet applicants yourself? If you are your own property manager (or manage properties for someone else), I recommend showing your properties personally. Make a note of how applicants present themselves. Are their clothes in good repair? How is their hygiene? How do they stand and speak to you?

Not all tenants will present themselves as a confident and educated individual, and that’s ok. You are looking for respect, honesty, and genuine answers. You are looking to make sure they take care of themselves, because if they can’t care for themselves, how will they care for your property? 

 

TIP 2: Make sure to have an application.

I am always interested to see how many wish to take it with them, versus how many want to complete it right there and then. Of the ones who complete it right there, did they come prepared? Did they bring a pen? Do they know their employer’s number? 

If they choose to take the application with them, I would say it’s a one-in-three chance of actually receiving the application, if not less. Take note of the condition of the application when it’s returned to you. Is it still in pristine condition, or are there remnants of yesterday’s breakfast on it?

TIP 3: Ask where they work, and what their income is.

Seems like a “no-brainer” but knowing their income is a great tool to know if they can afford your rent. I like to use the 30-35% rule. 

Example: if their family income is $2,000/month, then 35% of that amount is $700.00. If the asking rent was $700 or lower, then they would be considered. If a family earns $2,000 and they are applying for a $1,000 rental unit, I would not consider them because of the risk. One sick day, a layoff or even jury duty could undo their finances. The math does not work in their favour. 

Secondly, I’m about to let you in on a little secret. How do you check if your applicant works where they say they do? Most phone providers and cell phones have a number blocking option. Block your number, call the employer and ask for your applicant. You are looking for a positive confirmation that they exist. If they ask you who you are looking for, and don’t recognize the name, then there’s a good chance Tommy Jones doesn’t work there.

By blocking your number, you cannot be traced back, and your applicant will not get into “trouble” for receiving a personal call.

Sly Side Note: Ask for “Tommy”. if they say Tommy who, then give the last name. Most people do not call and ask for someone by their first and last name. 

If they ask who’s calling, you will need to be creative. You could just answer with “Stacey, just returning his call.”  It’s also ok to say wrong number if you haven’t used the last name. 

 

TIP 4: Ask for references.

Did you know it’s more important to SEE references than it is to call them? Are their references from work? Good. Friends? Ok. Family or service providers? Nah. 

Not everyone will have a great list of references. However, if they do not have one or two professional references, then my next question would be, why not? 

A service provider will be limited in what they can say, if anything at all. A friend or family member is not likely to speak honestly about the applicant. Work references are more likely to be honest, or at least refrain from commenting on any “bad” stories. 

Sometimes the results of asking for references shows more about the character of the applicant than what the actual references say. 

 

How to pick a tenant: Sometimes the results of asking tenants for references shows more about the character of the tenant than what the actual references say. Click To Tweet

 

TIP 5: Listen to their stories.

Ask questions. Listen. Here’s a little insight to what you will find.

Ask the applicant why they are moving.

A) I’m new to the area. 

  • Ask where they are from, why they moved there, who’s in the area. If they are without any strings, you could be looking at a tenant who might rock a midnight move. If they are not answering any questions, they could be hiding something, and as a property manager or landlord, you do not need drama. 

B) I didn’t get along with my boyfriend/girlfriend and/or mother/father and/or neighbour/etc. 

  • Drama. Tread carefully. This could be a choice to create better boundaries OR this could be a tenant who is always the “victim” of some conspiracy. 

C) I didn’t get along with my landlord. 

  • Pay rent, keep the peace and maintain your unit. There’s not much else that a landlord asks for. What didn’t happen that your landlord “hated” you? Ask more questions. Beware of drama. 

D) Looking for more room/less costly place/somewhere to stay longterm because… 

  • These are more truthful answers, and less based on drama. 

Remember that properties have labels too. 

The amount of rent you charge will also dictate the applicants you receive. The lower the rent, the lower the income of the applicants you will generally receive. The higher the rent, the more diligent you will need to be of higher value properties, but that usually means the applicants are of a higher income stream as well. 

Do not misunderstand the above as taking away from anyone in crisis. That is a different situation altogether, and every effort should be made for those in crisis. Unfortunately, it’s like the boy who cried wolf – too many times, people will use a crisis story for sympathy, and it’s not real. 

 

TIP 6: How did they get to the property? 

Notice the method of how they got there. With a friend/family member? Do they drive? What kind of vehicle do they drive? Is it in good repair? 

 

TIP 7: Deposit/Last month’s rent

How do they want to pay for the deposit/last month’s rent? Do they plan to give you a cheque that is certified or a bank draft? Do they want to give you cash? Some will also ask if they can split it up, and pay it as they go. (The last option is usually an indication of affordability – see #3) 

 

TIP 8: Know your rights as a landlord and as a tenant. 

If you want the respect of a tenant, don’t be a greedy or sneaky landlord. By knowing the rights and responsibilities of being the landlord in your area, you will make better decisions and more importantly, ones that will stand up in court – if it goes that far.  

For example, the following are not allowed in Ontario (in regular rentals): 

  • No pet clauses are not allowed and cannot be enforced  
  • You cannot demand payment by post-dated cheques
  • You cannot require a pet damage deposit 
  • The only deposit allowed is equal to, and represents, one month’s rent
  • Tenants cannot be held responsible for (a lack of) snow removal or lawn maintenance

Remember that respect can go two ways. Be the first to give it, and the good tenants will give it back in spades. (Or at least rent and care of your property!)

TIP 9: Pets 

Ask about pets. You may have a bias towards those who have pets in rentals, but the best advice is to not share it. Ask if the tenant has pets, and listen to the answer. If they have pets, but plan to rehome them, I don’t think I would believe that. 

If they have cats: are the cats declawed? Neutered? Spayed? Up to date on shots? 

If they have dogs: what size? Are they trained? Does someone let them out during the day? Are they friendly? Are they neutered? Spayed? 

 

TIP 10: Insurance 

Lastly, require tenants to show you proof of tenant insurance. It may not be something you can require or mandate in your area, but you can certainly ask and recommend it. 

It’s much like anything in life – the more you respect your surroundings, the more you want to keep things in good repair, insure in case of loss or emergency, and pay to keep a roof over your head. 

Take your time, and show your unit to as many people as it takes to get a good tenant. Waiting an extra two weeks for a good tenant far outweighs the months required to get a tenant evicted. Use your “gut instinct” and don’t be taken in by stories of false loss.

 

Safety First 

Don’t show units alone. Bring a friend or a partner. Have them act as the handyman if you don’t want to be obvious. 

If you are showing the unit alone, leave the door open, and unlocked. Be sure to keep the door closest to you. Bring your cell and have an emergency number on quick dial. 

Show units in daylight hours. If you must show at night, bring someone or your dog. 

Leave a note on your calendar or at the office that says who you are meeting, their contact number, and the time of the meeting. 

Stay alert. Be cautious. Most people are good people, but you never know which one will make you wish you listened to that twinge of concern. 

 

I hope that you find the tips helpful. Please feel free to submit your questions below, as I love answering real estate questions!

 Join me on my email list for notifications and occasional deal alerts – I promise to not spam you, and you are always welcome to unsubscribe. Take care! 

Related Reading:

Mylo: Passive Savings for Massive Results
Real Estate Investing: 7 Questions You Didn’t Know to Ask
10 Simple Steps: Inside Buying and Selling Properties in Ontario
Mandatory Residential Leases in Ontario: Know What’s Changed
Think you don’t need a home inspection? Read this first.

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A Beginner’s Guide to RRSPs and TFSAs

Happy New Investment Year! With the beginning of March, the door closes on the ability to deposit money into last year’s retirement savings accounts. It’s time to contribute towards this year. Let’s de-mystify RRSPs and TFSAs so that we can grow our wealth and reduce our taxes!

Please note: I am not a financial advisor or a tax professional. Up until recently, I was a prime example of someone who had no concept of what retirement planning involved, or what I should or should not do. Feel no embarrassment or shame if you are like me. Let this be a foundation for learning, and for building on, and I recommend seeking a professional when your situation becomes more complicated. There are different guidelines for spouses, estate planning and other special considerations.

That being said, here’s what you need to know about your retirement contributions.

 

investing in RRSP & TFSA

 

RRSPs and TFSAs

The Government of Canada sets out the limits of your contributions to RRSP (registered retirement savings plans) and TFSA (tax free savings accounts). There is a maximum allowance for contributions per person, and it’s calculated using a few different criterions.

RRSPs

Maximum Contributions

In your first tax filing year, you can contribute the lesser of 18% of your earned gross income in the previous year, OR the annual RRSP Limit. For the 2018 year, the Canada Revenue Agency has set the maximum contribution limit to $26,230.00.

Example: Sarah works at the corner store on weekends and evenings while she attends school. Last year (2017), she made $16,500. This is before any deductions, or taxes. We know Sarah made less than the maximum contribution limit, which means that she would be able to contribute a maximum of 18% of her annual earnings. She can contribute $2,970.00 to her RRSP account this year.

INCOME ALERT: If your annual income exceeds $145,723 per year, then you can contribute a maximum of $26,230.00. (No math for you!)

How to increase your contribution above the maximum

If you did not contribute 18% of your earnings (up to the maximum contribution amount) each year that you earned an income, you can carry forward the remainder. Simply calculated, if your contribution allowance is not met, the difference of what was not used can be carried forward. Your tax return or Notice of Assessment should indicate the remaining contribution limit available.

Things you need to know 

  • Expenses cannot be included in your contribution calculations. Any amounts that you paid as administration fees, brokerage fees, interest paid on borrowed money to make the contribution, and capital losses cannot be considered as part of your contribution amount.
  • Be careful when calculating your contributions! Contributing more than the allowable amount can result in being taxed. You can request special considerations if the situation warrants it.

TFSAs

TFSAs began in 2009 with the intent to provide Canadian residents a vehicle to save money without being taxed on the interest (like investment income and capital gains). You do not need to earn an income in order to contribute to a TFSA. Contributions are not tax deductible, however the income is not taxable (in most cases). Withdrawal from a TFSA does not count as income, nor will you be taxed if you withdraw funds prior to retirement.

Contribution Limits

Again, CRA sets out the annual limits for contributions, but the limits are not dependent on an income. For the year 2018, you can contribute a maximum of $5.500.00, and like the RRSP contribution amounts, you can carry forward unused credit each year.

Cautionary Points

  • Again, watch your limits, as over-contributing can lead to being taxed.
  • Check to make sure your investment is “qualified”. Tax may apply otherwise.
  • TFSAs are only available to Canadian residents.
  • While you can use foreign funds, it’s advised to check out the rules in closer detail if you wish to go that route.

For more information directly from the CRA, you can start here.

I trust that the information above simplified some of the mystery about contributing to your future self. There are other programs that help you save towards a new home, or your child’s education, but we need to start by taking care of ourselves, and then moving on. 

Keep an eye out for ways to save for your RRSP and TFSA limits. In the meantime, take a look at your income amount last year, and figure out your maximum contribution for the year. There are creative and innovative ways to save money, invest in future you and/or pay down that debt!

Be sure to join my mailing list so you are notified of each new post, and to follow me on Twitter and Instagram as XennialBlogger.  I look forward to seeing you online! 

RRSPs and TFSAs Demystified
RRSPs and TFSAs Demystified

MYLO: PASSIVE SAVING FOR MASSIVE RESULTS

MYLO: PASSIVE SAVING FOR MASSIVE RESULTS

Canadians, rejoice!

The time has come! We finally have an app that does what the coveted Acorns app does for the people south of us. It’s called Mylo.
Mylo is a Montreal-based FinTech startup that has created the only app for Canadians that mimics the old-fashioned change jar….with a twist.
From their own words: “Mylo is a mobile platform that automatically rounds up every purchase that users make and invests the spare change. Then, once plugged in, Mylo uses its proprietary user transactional data and artificial intelligence to provide personalized insights and recommendations so that users can make better financial decisions. Mylo helps optimize users’ insurance coverage, reduce interest payments, maximize travel points and more.”
Mylo is a program that runs only on your smartphone. The program will monitor your spending on both purchases and payments. It then rounds up the amounts based on how you direct the program to proceed. For example, you pay $42.38 for groceries, and you set up the program to round to the nearest dollar. This saving machine will deduct $0.62 from your account, and deposit it into an investment account. Not only does it invest your funds to increase the value of your savings, the program will also let you know how far along you are on meeting a goal, like saving for a vacation or retirement, and there is never a time that you are not able to access your money.
  

USE CODE BENDNEVERBREAK TO RECEIVE $5.00 FREE WHEN YOU TRY MYLO TODAY

NO MINIMUM DEPOSIT TO START

   mylo

What does that mean and how does it work?

It’s actually pretty simple. If you head to the app store on your phone, you would need to download the Mylo app. It’s free to download, of course, and available to both iPhone and Android users.
Big picture: How much you have saved. Congratulations!
MYLO
See ahead of time what is being transferred. You can also choose to deposit extra to build up your account.
Get the breakdown of where you spent your money.

Step One:

Open the Mylo app, and follow the prompts. It takes about three or four minutes to set up your preferences and to answer some questions about your investing background. It’s good to know how much risk can you tolerate, are you a new or seasoned investor, and a few other risk related questions that will help the program and your investment advisor select the right investments to maximize your dollars.
(Don’t forget to add promocode BENDNEVERBREAK to get your first $5.00 free. Click on Account, Settings, Got a Code and enter BENDNEVERBREAK to collect your reward.)
See how far along you have come, and how much more you need.

Step Two:

Choose a goal for your account, like Vacation or Home Purchase, and the goal amount. You also establish the desired achievement date for that goal.

DONE.

Mylo monitors your account for transactions, and rounds up the transaction amount to the nearest dollar. Similarly, where you would have change in your pocket, the program automatically plans to transfer the change to your new account at Mylo. If you signed up after May, 2017, there is a fee of $1 per month.

What if I have a limit on transactions coming out of my chequing account?

Mylo only transfers once a week, regardless how many transactions you have made. Also, all round-ups will come from one account, even if based on multiple accounts or credit cards.

Wow, now what?

Here’s the best part. Do nothing.
The funds transferred each time are minimal, so you don’t need to budget a set savings amount. The program checks to see if there is enough to withdraw the funds that week, so you do not go into overdraft. Therefore, money flows bit by bit into your savings account, and is invested.

MYLO: MY PERSONAL EXPERIENCE

I have been using Mylo for about two months, and I have been more mindful about purchases lately. Just by paying my bills and other transactions like grocery purchases, gas and debt payments, I have already amassed $45.00 in my account.
If you only use Mylo for the most basic purpose of saving spare change, you will be in for a surprise at how easily and quickly you can save money.
You can transfer lump sums into Mylo, and soon the company hopes to open up more options, like offering registered retirement savings plan (RRSP), and tax-free savings accounts (TFSA), to name a few.

Wait. So my nickels and dimes collect into this account, it gets invested to make more money, and I don’t have to do a thing?

Correct.
Financial advisors still recommend having a portion of your income go directly to savings, of course, but this is a great way to put away money pain-free.

How do I know my funds are safe?

Mylo features complete advanced bank-level security. It’s backed by Canadian ShareOwner (owned by WealthSimple). Your funds are insured up to $1,000,000.00.

Why are you telling us about Mylo?

You all know I am on a journey to save more, spend less, want less, have more… and this is just one tool that I have added to my personal resources. I hope this helps you out too.
MYLO
FEED ME!

Update: Feb. 2018: I am still using this great program! There were a few hiccups when I switched from a major institution’s bank account to a credit union’s bank account as my primary account. As soon as I reached out to the service team, they responded to my inquiries quickly. I was so impressed with how fast and simple it was to work out the wrinkles, especially when using a lesser-known credit union. I still recommend Mylo to everyone!