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castle built on a rock - Landlord Fundamentals 101 -what do you need to know to own a profitable rental property?

Landlord Fundamentals 101- Part 2 -what do you need to know to own a rental property?

What landlord fundamentals do you need to know to own/manage a residential rental property? Buying a rental property is a calculated risk that comes with many responsibilities. This is the second in a two-part series of eleven landlord fundamentals.

Article 1 covered the first six fundamentals including:

  • types of property and tenants
  • the exit strategy
  • calculating cash flow of a property
  • how to attract the best tenants
  • what to charge for rent
  • how to pre-screen tenants
  • what information to gather on the application form

Today’s article includes the last five fundamentals including;

  • the process of validating tenant references
  • and what questions to ask,
  • the lifespan of home components in your maintenance plan
  • an overview of the RTA
  • Minimum Housing and Health Standards
  • what legal forms do landlords need

Landlord Fundamentals #7 – Employer and Landlord References

References give you insight into your tenant’s character. I’ve found there are common personality characteristics that show up in reference checks. But, how do you know the references provided on the tenant application are the real deal? By doing a little investigation. It’s kind of fun to do and yes, it is time-consuming. In the long run, it’s much less of a hassle than spending months trying to oust a bad tenant who could be trashing your property while enjoying free rent.

Have you ever wondered if your tenant’s references are bogus? Make screening your tenant’s reference checks part of your vetting process. Although it takes a little time, reference checksl save you time, money, and heartache. Following these three tips for screening your tenant’s references will put you on the path to success.

  • 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, and it’s a fact of life that there are maintenance costs for rental properties.

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 to budget for operational and capital expenses. 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 from the start 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 http://www.servicealberta.gov.ab.ca/pdf/tipsheets/RTA_Handbook_BW.pdf.

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 have an effect on your rental property.

Protected areas under the Alberta Human Rights Act include employment, tenancy, goods and services, publications and notices, and membership in trade unions. 

Grounds under the Alberta Human Rights Act include race, colour, ancestry, place of origin, religious beliefs, gender, gender expression, physical disability, mental disability, age, marital status, family status, source of income, and sexual orientation.

The Alberta Human Rights Act “prohibits discrimination in the area of residential and commercial tenancy.” (Source: Albertahumanrights.ab.ca, 2018). As a landlord, it is in your best interests to learn and understand the areas, grounds, and types of discrimination.

Minimum Housing and Health Standards

Before I launch into housing and health standards, it’s important to note that building codes are different than housing standards and they both apply to your premises.

Building codes regulate construction and set the minimum regulations for public health, fire safety, and structure sufficiency. Whereas, minimum housing and health standards regulate the housing maintenance and conditions, supplied utilities, sanitation, use, and occupancy. The minimum housing standards state the owner shall ensure that the housing premises is structurally sound, in a safe condition, in good repair, and maintained in a waterproof, windproof, and weatherproof condition. For example, if your tenants have discovered black mould on a wall in your basement suite, you have a responsibility to repair the leak and get rid of the mould. The foundation is part of the house’s structure, and it must be sound.

The act also states that housing occupants must be supplied with heat, potable water, utilities, electricity, and space for sleeping. Each housing premises must have a flush toilet, washbasin (in close proximity to the door leading to the room with the toilet), a bathtub or shower, and a window or fan for ventilation. The bathroom can’t be served by more than 8 people, it must be in the same building and within one floor above or below where people live. For a complete guide please refer to the Minimum Housing and Health Standards website: https://open.alberta.ca/publications/minimum-housing-and-health-standards.

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 to specify the terms of the contract; namely – who pays what, when payment happens, how you are to be paid, who is responsible for what duties, the dates of the agreement, what happens if the lease is broken, etc. The lease/agreement should be done and the rent/security deposit paid before you release the keys to the tenant.

Although you can get leases in lots of different places including Staples, the Law Depot, and several online rental platforms, I always recommend getting a lease from your municipal landlord-tenant association. Landlord-tenant organizations exist in every province.

Pet leases – Since pet leases are not covered under the Alberta Residential Tenancies Act (RTA), it’s up to you, the landlord to decide whether pets are allowed, what type, breed, weight, and under what conditions, unless you are renting a condo. Condominiums have bylaws that specify whether pets are allowed and if so, which type/breed etc. A pet lease explains the pet rules to the tenant and documents the agreement in case there are any issues. A service animal such as a seeing-eye dog falls under the Alberta Human Rights Act and is not considered a pet, landlords may not discriminate against a tenant with a service animal.

Move-in move-out inspection reports – The Residential Tenancies Act has made it mandatory to conduct a move-in move-out inspection report since it protects both parties in case of disputes. If you don’t complete a move-in/move-out inspection report, you and your tenants have no record of the condition of the property and without proof, you can’t claim damages.

Addendums to the lease – When you make a change to the original lease, you can document the change with an addendum and both you and the tenant keep a copy.

Have you heard the expression “real estate never loses its value?” If you look at the price of real estate over the past couple of decades, you’ll see it’s true. Yes, markets fluctuate, and cycles repeat themselves, but the bigger picture shows that over time (sometimes it takes a long time), real estate holds its value. Unlike the stock market, real estate investing is a tangible investment where you or your tenants live. It can pay you while your tenants are renting and pay you a profit when it’s sold. Low-interest rates and the variety of ways to invest make it attractive to many investors

Just because you buy real estate doesn’t mean you will profit. 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 law, 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, so that you are aware of the risks and are in control of the process. Taking the time to learn the ropes of real estate investing and property management put you on the path to achieving your goals of profitability.

Now is the time to start building your real estate foundation in a way that ensures your success.

What have you done to build your landlord fundamentals 101 knowledge? I’d love to hear about it [email protected]

If you know how to advertise for tenants but don’t know how to screen tenants – sign up for my 5-step tenant screening process now to increase your profits and decrease your headaches.

To take advantage of helpful tips, tools, and educational resources for Do It Yourself landlords, sign up for a membership for Landlord Fundamentals 101. To save even more time and money, combine Landlord Fundamentals 101 with one-on-one coaching to qualify for the Canada Alberta Job Grant. Contact me today to find out how [email protected]

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