Landlord Fundamentals 101 - you bought a rental property, now what?!

Many landlords make the mistake of thinking that everything else will take care of itself after they’ve bought a rental property. Real estate is a passive investment, right? That was certainly my opinion when I bought my first rental investment property. I was wrong.

Over the years, I’ve learned that there are three components to owing and running  a successful rental investment property;

1. Buying the right investment
2. Attracting and managing tenants
3. Managing/maintaining the physical property

Each of these three areas takes some investigation. Creating processes that allow you to rinse and repeat keeps your rental business profitable, and of course, you can’t possibly learn everything overnight. Building a foundation of knowledge and expertise takes time.

From my 18 years as a real estate investor, I’ve summarized what I believe are the 11 foundations every residential landlord needs to know to run a profitable rental property business.

Landlord Fundamental #1 – Begin with the end in mind

Before you buy your first property, ask yourself what you want your real estate investment to achieve for you financially and personally. Begin with the end in mind and work backward.

Things to consider:

• Management- how much or little managing do you want to do?
• Type of property – which type of rental property resonates with you? Single family, multi-family etc.?
• Tenant – which type of tenant do you like to manage? Professional, blue-collar, families etc.?

Landlord Fundamental #2 – Will your property cash flow?

Calculating the cash flow lets you know if your property will profit.

Things to consider:

• To determine cash flow  - calculate gross monthly income and effective monthly income, then subtract expenses
• Know which operational and capital expenses you can claim on your taxes
• Calculate the ROI = combination of income and change in value during the year

Landlord Fundamentals #3 -  Attract the best tenants

It’s impossible to profit with bad tenants. Vacancies, non-payment or late payment, repairs, and renovations drain your bank account and wear your nerves down to a pulp.

If you want your rental property to profit, you must have quality tenants.

Things to consider:

• Know where to advertise – each city/town has specific platforms where quality tenants seek rental properties, i.e. Facebook Marketplace, Rentboard, Rentfaster, Kijiji etc.
• Learn how to write an effective ad
• Follow the Human Rights Act in your ad and with your business

Landlord Fundamentals #4 – Rent

Properties with similar features usually charge similar rent. Once you know what others are charging, you can set a price. Check out comparable properties on online rental platforms. The more value your property has, the higher you can select your rent.

Things to consider

• Learn and apply the Residential Tenancies Act laws for late charges, raising rent, non-payment of rent, and specifying rent payment date/time

Landlord Fundamentals #5 - Pre-Screen Tenants

Once you post the ad, interested tenants will get in touch with you. Before setting up a showing, have a quick pre-screening telephone call to make sure they meet your minimum tenant requirements.

Things to consider:

• Questions can include number of pets, number of occupants, move in date, length of tenancy, reason for moving, willingness to complete an application with work/landlord references, and a credit check.

Landlord Fundamentals #6 -  The residential tenant application form

Too many new and inexperienced landlords believe they can form a solid impression of a potential tenant from their gut reaction, only to discover they’ve been scammed.

The rental application allows you to collect valuable information that provides evidence of the potential tenant’s identity, license plate and vehicle make/model, current and former addresses, landlord and work references, and permission to run a credit check.

Things to consider:

Request information in six key areas

1. Personal information
2. Landlord references
3. Previous addresses
4. Employment history and references
5. Authorization to run a credit check and, if needed, a criminal record check
6. Documentation to support the application such as government-issued identification, a recent pay stub, or proof of income from a financial institution or accredited authority such as an accountant or lawyer

Landlord Fundamentals #7 - Employer and Landlord References

References give you insight into your tenant’s character and identify common patterns. But how do you know the contacts provided on the tenant application are the real deal?  There are three steps to this process;

• Prepare your questions
• Investigate and validate
• Commit to a phone conversation

Things to consider

• Run social media checks on all references listed on the tenant application – and cross-reference them with their work positions/employers listed on the application.
• Employer questions can include; how long they’ve known the applicant and in what capacity, how they handle conflict, and whether they would rent to them if they were a landlord.
• Landlord questions can include; how long did they rent and at which address, did they pay their rent on time every month, were there any complaints, were they respectful and polite, did they damage the property, did they bring in any unregistered pets or guests, and would you rent to them again.

Landlord Fundamentals #8 -  Maintenance

Nothing lasts forever; everything has a life expectancy. Knowing the lifespan of your home components helps you budget for operational and capital costs and keeps you in control of your maintenance expenses.

Things to consider

• Know the life expectancy of your home components. Home components include;
• Appliances
• Kitchen
• Flooring
• Interior walls
• Plumbing
• Electrical
• HVAC
• Siding and Accessories
• Roof
• Build your maintenance team; plumber, HVAC contractor, carpenter, cleaning company, landscape contractors (snow shoveling and grass cutting), or a darn good handyman.
• Conduct maintenance inspection reports at least twice a year for new tenants, and remember to provide at least 24 hours’ notice to the tenants before entering.
• Set your cleaning standards by including a move-out cleanup checklist and a move-out fees schedule with pricing

Landlord Fundamentals #9 -  Know the Landlord-Tenant Rules – The Residential Tenancies Act (RTA)

In Alberta, the law that governs landlords and tenants is called the Residential Tenancies Act (RTA). The information in it is a critical part of your business.

Under the RTA, both landlords and tenants have rights. The RTA’s rental laws in Alberta include but are not limited to:

• Who must follow the act
• Periodic and fixed tenancies
• Obligations/covenants of landlords and tenants
• Remedies of landlords/tenants
• Security deposits, provincial court jurisdiction
• The Residential Tenancy Dispute Resolution Service  (RTDRS)

For a complete guide to the RTA Handbook, please refer to ServiceAlberta.gov.

Not all tenant issues fall under the RTA – issues such as noise complaints and illegal activity are governed by municipal bylaws. Condominiums have bylaws that outline rules and regulations for their residents.

Landlord Fundamentals # 10  -  Human Rights & Minimum Housing and Health Standards

Do you know the acts that influence your rental property? The Alberta Human Rights Act, the Minimum Housing and Health Standards Act, the Personal Information and Privacy Act, The Public Health Act, and the Condominium Property Act (if you’re renting a condo) all affect your rental property.

Landlord Fundamentals #11 -  Legal Forms; the lease, move-in/move-out inspections, addendums

Whenever you have any kind of legal transaction that involves an exchange of goods or services for money – you need to have legal paperwork in place. The documentation specifies the terms of the contract; namely – who pays what, when payment happens, how you’re paid, who is responsible for what duties, the dates of the agreement, what happens if tenant breaks the lease, etc.

Things to consider:

• The lease – municipal landlord-tenant associations have thorough, easy-to-read leases that include the most recent legislative updates and will stand up in court
• Pet leases – if your province allows pet leases (in Alberta they’re legal), you can specify type, breed, weight, and pet fees.
• Service animals are not considered pets and fall under the Human Rights Act
• Move-in/move-out inspections, always document the condition of your property before and after a move in
• Addendums – document any changes to the lease

‍

When you buy, what you buy, where you buy, who you rent to, what you know, the local and global economy, the market conditions, building regulations, landlord-tenant laws, and your exit strategy are critical factors in determining your profitability.

Before you invest, take the time to do your due diligence and learn your Landlord Fundamentals 101. You stand a much higher chance of profiting by putting yourself in the driver’s seat.

About Nelda Schulte

Nelda Schulte is a real estate investor, who has owned an Alberta property management business, written curriculum for the Real Estate Council of Alberta, and is the CEO of NeldaSchulte.com – a business that supports investors and landlords with do it yourself resources.

‍