Author: Mr. Cheap

This post is part of a five-part series about tenants leaving a condo and finding and screening the new tenants:

• How to screen tenants
• Screening Tenants – Advertising and Showings
• Screening Tenants – Filling Out Applications
• Screening Tenants – Credit Check
• Screening Tenants – Lease Agreement And Repairs

Advertising

I’ve touched on this in previous posts, and on comments on other blogs, but I’m a big believer in free advertising when it comes to renting out apartments in Toronto (other markets may be different, but in Toronto, for apartments, you can get enough applicants on the free sites).  I recommend posting ads on Craigslist (in “apts/housing for rent“) and Kijiji (in “apartments for rent”).  Both sites have filters to prevent you from reposting the same ad in a set period of time, but they’re pretty easy to get around (just make some superficial changes to your ad).  Worst case scenario, if it matches the ads together, take down the old ad and re-post a new one every few days.  The reason why you want to repost (and fight the system to do so) is that people will just look back through a certain number of ads and you want your apartment to be in the part they look through (the first ones!  they’re ordered reverse chronologically).

Kijiji sells “priority placement” and will also sell you the ability to move your ad back to the top.  I’ve never used either of these features (if anyone has and they care to comment I’d love to hear your experience).

In terms of the ad, there aren’t any limits to space (that I know of), so there’s no reason to use the crazy newspaper short forms:  e.g. “2 br, 2 ba, part furn”).  Both sites allow pictures, so it’s well worth including some!  I can never understand why some people leave out information (like the rental price!).  I include EVERYTHING I think might be relevant:  pictures, extensive description, all amenities, map of the area, rental price, nearby stores, etc, etc, etc.

Typically I also make up a website which I can direct people to from the ad (officially you aren’t supposed to do this with Kijiji, but again it’s pretty easy to get around).  I’ll copy and past from the website when I’m re-posting ads to one of the sites.

You may feel more “bound” by the sites’ terms of service than I do, in which case feel free to only post once, don’t link to an external website, etc.

There are a number of other sites, some for pay and others that are free.  I posted on all the free ones I could find, but I still found all my leads came from Craigslist or Kijiji.  Doing a Google search on “toronto apartment rental” will probably turn up most of the other sites if you decide it’s worth advertising as broadly as (freely) possible.

Showings

When showing the unit, at first I felt a bit weird walking around, gesturing grandly and saying “now please turn your attention to the lovely Corinthian banister”.  In part, because I don’t think Corinthian banisters exist, in part because even if they do exist my unit certainly doesn’t have one and in part because that it just isn’t my style.  When I was first showing my unit, my friend suggested that I feel free to point out any nice features of the apartment, and limit my “selling” to that.  I would have a standard walk around the building pointing out amenities, then I’d show them around the unit and do the same thing there.  I learned a few set responses to common complaints / criticisms such as:

• “No, there isn’t central air conditioning, but you’re welcome to put in window air conditioning, and since you don’t pay for utilities, there won’t be any monthly fees”
• “No, there isn’t a dishwasher, but you’re welcome to hook up a portable dishwasher to the sink”
• “Yes, it is an older building.  Typically you either get a new condo with small units and fancy amenities, or older building with lots of space and fewer amenities.”
• “No, there isn’t a second bathroom” (I could never think of a better response to this one”)

I foolishly would make appointments with individual applicants when I rented the first time, and it was madness (I spent a couple weeks constantly running back and forth to the condo).  This time I set out a 6 hour block, and told people that’s when they could come.  People who couldn’t make it, I told them I’d keep their contact info and let them know if I arranged another showing.  I did it over a weekend, got a good applicant, had them fall through (more about that in a future post), then did showings over a 2nd weekend and got another good applicant that stuck.

Two Wise Acres (which sadly has become defunct) has a hilarious post “How to manage prospective tenants efficiently, effectively and without killing them“.  I think I got every one of these other than the murderer (which, if you’re going to avoid one of them, that’s the one to avoid).

One thing that is AMAZING to me is how cavalierly people will not show up for appointments, and never call to say so.  My only theory is that it’s a chance for people to “stick it” to a landlord with no fear of repercussion (or maybe people are just ruder than I believe).

Sometimes I’d get phone calls or e-mails from people with INCREDIBLY complex lives and problems, (e.g. I’m moving back to the country and don’t have any rental history, I’m in Edmonton and need you to hold the apartment for me for a week while I book a flight to come see it, I’m going to start school near Casa Loma – which is NOWHERE NEAR the condo you’re renting, but for some reason I’ve decided to move to your part of the city instead).  On other rental issues, Alexandra and Rachelle had each summarized their feelings as “that’s not your problem” when I was asking how to deal with awkward situations with tenants and applicants.  I’m not sure if these people were scam artists or genuine people in a difficult circumstance, but I only went out of my way to a certain limit to accommodate people who had a unique situation and wanted to view the unit.  I think “it’s not my problem” is a reasonable mantra when people start trying to suck you into their drama.

Thanks again to Rachelle and Alexandra ! More details in future posts…

This post is part of a five-part series about tenants leaving a condo and finding and screening the new tenants:

• How to screen tenants
• Screening Tenants – Advertising and Showings
• Screening Tenants – Filling Out Applications
• Screening Tenants – Credit Check
• Screening Tenants – Lease Agreement And Repairs

I recently had my tenants give me notice and had to go through the process of finding tenants for the second time. I initially expected that it would quite straightforward, seeing as I’d gone through the process before and put quite a bit of thought into it at the time. Surprisingly, I found it quite an anxiety-producing experience: I guess I was out of practice after 3.5 years. Luckily, a couple of my favourite Money Smarts commenters, Rachelle and Alexandra, were willing (and very able) to answer questions, and I think the process went as well as could be expected.

I’ll try my best to identify which suggestions were from who. My apologies in advance if I take credit for something that was actually from one of them (I’ll grab any credit that isn’t nailed down).

Why They Left

I gave my tenants a rent increase earlier in the year, and they gave me notice less than 2 months later. Since rent increases require 90 days notice, and terminating tenancies require 60 days notice (and they paid for the last month’s rent when they moved in), they actually left before the increase took effect.

It’s a VERY debatable point with landlords: do you raise rent on good tenants? I remember one place I was living, they increased my rent from $650 to $700 / month and that was the straw that broke the camels back and I moved in with my girlfriend at the time. Their apartment sat empty for 2 months after I left, which obviously lost them a lot of money. There’s some point when tenants will leave, and the rent going up gets them closer to that point. On the other side of the coin, moving is a pain in the butt, and has a number of expenses associated with it as well. If you’re going to pay more than the increased rent over the next year on the move, are you really saving anything? Also, tenants often get distorted views of “market rent”. They think of prices in terms of what apartments cost last time they were apartment hunting, rather than what the current prices are (and are often shocked when they start hunting and everything is more expensive than they remember).

Given that I only raised my tenants’ rent by 2.1% (and this was after 3.5 years), I find it hard to believe this would have prompted them to move. They also had told me they were considering moving, as one of them was going to school in another part of town and it would have been a brutal commute. I acknowledge that this MAY have just been them being polite, and I drove them out (I’m certain that would be the interpretation of the “never raise the rent” crew).

The reasons to raise the rent is obviously a business decision. While a 2.1% increase of the gross rent may not seem like a lot, when it gets added to your bottom line it can be significantly (this would have been more than a 10% increase in my monthly cashflow).

The new tenants ended up paying the increased rental amount, so the market determined this was a fair price.

Notice to Vacate

I’ve had a very good relationship with the previous tenants, but I certainly wanted to do everything “by the book”. They just wanted to informally tell me when they would move out, but I insisted that they get me an N9 form. They were confused and bothered by the fact that, in Ontario, tenancies end on the last day of the month, but start on the first day of the month. I was sympathetic to this, and thought it was a fair question “where am I supposed to stay overnight with all my stuff?”. Both Rachelle and Alexandra had similar reactions to this and basically said “how is this the landlord’s problem?”. In the end I tried to soften it a little, while holding firm by sending them the following info:

Unfortunately, that is how it works in Ontario (that you need to vacate on the 30th). Surprisingly it isn’t a problem as often as you’d think. Often tenants won’t be in the new unit (they might leave a couple days early from the unit you’re moving into and the new landlord may let you in on the 30th), or the new tenants don’t need the old unit on the first, or the new unit has been empty (like when you first saw the unit you’re in after the renovations), etc., etc., etc. Some buildings have storage they’ll let you use overnight. I once had to move all my packed belongings to a friend’s living room over night (and then move everything again into the new unit the next day). Some people rent cube vans and use them as overnight storage as well as transportation.

They were still unhappy, but in the end, it worked out exactly as I suggested (they were able to move into their new place 1 week early). They couldn’t understand why I wouldn’t let them stay a few days into the next month, but obviously this would have cost me an entire month’s rent.

Another friend of mine who owns and rents a bunch of units says that he will leave units empty for a month for clean-up and repairs between tenants. He acknowledges that this is a big expense, and in part because of this he really looks for very long term tenancies (and has been quite successful in setting up his units with these). This was a higher expense then I was willing to take on between tenancies.

Thanks again to Alexandra and Rachelle! More details in future posts…

I always hear from people that their primary residence has been their “best investment”.  Usually this is accompanied by something along the lines of “it’s worth *8* times what I paid for it!” and a satisfied smirk.  As with many things, I suspect that people with this view are selectively interpreting the data to support the conclusion they want.

The actual return from a primary residence is tricky to calculate.  There is the sale price which can be compared to the purchase price, but there is also a massive amount of expenses that have been paid over the years (taxes, maintenance, utilities, etc).  On the other side, a primary residence lets you avoid paying rent, which must also be accounted for.

Last year, Ramit Sethi had a great post “Be the expert:  What’s wrong with this real estate comment?” where he quoted the following statement:

My father bought our family house in NJ for about $27k in 1964; sold it for $350k in 2000. Home ownership is terrific long-term investment.

and invited readers to critique it.

Erica Douglass, another blogger, gives an excellent analysis (along with other commenters), talking about how the house underperformed the market annually by an average of 4% BEFORE any expenses were paid.  Commenters calculate that the father could have put the money in an index fund, then spent almost $40,000 a year in rent and been in the same finanical position.

We’ve had a distortion in the real estate market over the last few years, and while I don’t think the sky is falling, I also don’t think it’s realistic to expect anything close to the returns we’ve seen over the last decade. This has been an extreme outlier, once in a generation, period in real estate.

Money Pit

People my age (mid 30’s) have never experienced it, but in the past real estate has had long period of no appreciation.  The view at those times were that houses are a money pit that you keep shoveling cash INTO (instead of ATM’s you can take cash out of as we’ve all been doing recently).  Rather than a massive crash where everyone is selling their home for 1/2 what they paid for it, I suspect what we’ll see is a long period of little or no appreciation as we pay for the party we threw last decade.

Rachelle recently posted a great quote from one of Warren Buffett’s letters to investors:

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

Never Buy Real Estate Again?

Am I saying that no one should buy real estate for the next decade?  Of course not.  I’m just arguing that, today, a primary residence should be viewed primarily as a consumer purchase:  something you’ll enjoy owning.  Like a car, it will possess some value, but buyers should be primarily concerned with whether they can afford it or not instead of what they hope the value will be in the future.  Similarly, investment real estate should be viewed based on its monthly net income, with very little expectation of appreciation.

For those of us who have done well recently in real estate, congratulations!  We shouldn’t expect to repeat it…