Tenants – Oi!

William from Ottawa asked me the following question today:

Great site and great info.

I have more of a question than a comment. I only have experience in
renting the whole house/condo to an individual, but never dividing a
house up and renting it by the room. Being someone who have never had a
room mate, I will like to find out from your experience how difficult
is it to find tenants, making sure then tenants get along, keeping the
unit clean and tidy, etc.

Any help or suggestion will be much appreciated.

Thanks from a fellow 20 something investor in the National Capital.

First off, thanks for the great question. I've been needing a bit of inspiration lately, so this is just the ticket to get me off my lazy arse and writing a post that I hope you'll find helpful.

1. Legalities

First, let me tread carefully here. There may be legalities in your municipality against student rental properties, or against having multiple people living in a single family zoning area. It would be a good idea to check into local by-laws before trying to rent to students. That being said, rules are often malleable, and in London it is highly common to have 5, 6, 7 and 8-bedroom student rental properties.  Overall, it is difficult for a city to stop student rental homes.  The zoning by-laws typically only prevent homes from being sub-divided.  That being said, I know that London is currently investigating methods of controlling student rental homes.

2. Finding Tenants

Finding tenants has not been difficult for me thus far. I think I can attribute this to the fact that I am easy-going, and I am not trying to squeeze every penny out of my properties that I possibly can. I make a healthy profit off of the properties, and thus, I keep my rents low and am able to offer tenants different things to keep them interested.  The arrangement is mutually beneficial with no party feeling sleighted.

Marketing is the key here. You need to find out what students really want. Guess what, its 2007 now… what do young people want? Super-blazing-fast highspeed internet. Offering free highspeed is a real draw. If you're not an expert in this arena, there are professionals who could wire up your home, or it is easy to get a wireless router and let the tenants worry about the rest.  Again, a caveat, sharing one internet connection is usually against your service contract.  Read it, understand it, and know that there is a chance you could be held liable for illegal actions carried out over a connection that you own.

Utilities included.  I always rent my units all-inclusive.  This can be billed as a benefit because tenants do not need to worry about varying utility costs or setup fees for switching utilities into their own name.  Less hassle.

Discounts in the summer.  Many students return home in the summer months and do not want to pay full price for a vacant bedroom.  You would be surprised how much even a $50 discount in the summer will make a tenant feel better about signing a 12-month lease.  Again, this is win win.  The cost is minimal to the landlord, but the good will instilled in the tenant is priceless.

Some other things to consider that will motivate student renters:  Dishwashers, In-house laundry, a security system, a signing bonus, etc. etc.

3. Policing Roomate Arguments

THIS IS NOT YOUR PROBLEM! Don't feel bad, this is the second time in the last month I've been asked this question. I just plain don't worry about it. Maybe I've just been lucky so-far and people have gotten along ok. I suppose you could have problems if you have one random person in the house who is there to cause trouble, but so far I've rented to decent, cooperative people. I guess it is always good advice to screen your prospective tenants for compatibility with you and the other tenants, and I have had to turn people down from time to time.

The other thing to do is to rent to a group of friends. They are much less likely to have the sort of arguments that require mediation. I'm hoping that I can fill my 2 5-bedroom places with groups of 5 this-year. The best thing is the amount of time you save from showing the property less. These are the groups you need to bargain with as well. People are extremely suceptible to the thought that they are getting a good deal. Only 3 easy installments of $19.95… but you not only get one knife sharpener, we'll throw in a bonus sharpener that you can keep in the garage, or your tackle box…. etc.

4. Cleanliness and Damage 

Now… this can potentially be
an issue. So far, I've been lucky enough to rent mostly to women (who
are naturally more tidy), so I have not had any major issues. General housekeeping is the responsibility of the tenant. I try to go
into the house every couple of months just to address any major issues,
but it is impossible to control the situation entirely.

best thing you can do is hire a cleaning company to clean the house
when tenants change. The carpets may need steam cleaning, and the house
will likely require a top-to-bottom scrub.

This is also something
you can market to your prospective tenants along with some of the items
mentioned above. Even if you were already planning to paint a few
rooms in the house, you can use it as a bargaining chip to let the
tenants know that you care about their well-being, are willing to keep
the place in good order, and are giving them a fair deal. It is a show
of good faith.

Lastly, make sure you are using a comprehensive lease. There are inexpensive leases available online, at Staples, or through your local Property Management Association (e.g. London Property Management Association).  They often have clauses regarding cleanliness and damage.  It would also be a good idea to investigate adding a clause internet use.  Many leases prohibit using the home for illegal activities or for running a business, however it would be useful to extend these clauses to internet use also (always CYA).

Thanks for the great comment William, you've hit on some of the major difficulties involved with renting to students.  I hope I've touched on some potential solutions that you can employ to make renting to students a little easier, and a lot more profitable! 

Comments on REI

There was a lively and interesting discussion over at Canadian Capitalist in reference to a Re/Max press release about the appreciation of real estate over the last 25-years. I had the following comments, but thought it would be better to place them on my blog.

The gain in real estate value over time is really only important to the average Joe who only owns their primary residence, and even in this case, most people are unlikely to use the capital appreciation in the property for any real purpose because they will likely hold the property for a long time. Also, if they do sell, it will likely be reinvested into another property which has also appreciated the same amount over time.

Now, for someone who is investing in real estate, I also think that these numbers do not mean much. The real value of real estate transactions is that they are a business, they can generate income and cash. I think of it this way, I have one rental property that only cost me $10,000 investment. After all expenses are deducted from rents, my net income on the place is roughly $7,000 / year! Therefore the property is netting a 70% ROI.

These returns are not typical of all investments, but there are some good deals to be had, and some specific market segments where you can generate a tidy return.

The big players tend to invest in commercial properties, or large complexes. In these cases, again, the focus is on your net income, not on the appreciation of the assets.

Also, even for the average Joe, there are a lot of advantages to investing in real estate:
1) capital can be withdrawn if necessary, when renting your money is all lost
2) appreciation does beat inflation, so it is a relatively safe investment (historically). You aren’t likely to lose your shirt.
3) it is a kind of forced savings plan. Most people don’t think about how much equity is in their homes. If something catastrophic happens, the money is there and can be used for health care expenses, etc…. as long as the person is willing to sell the house or take on debt (bad idea).

Just my 2 cents. I generally don’t even think about the increase in property values… it just isn’t money that I can easily use.

Featured on a few blogs

Little old Bring the Cash Flow is growing. I’m happy. My little pet project has now seen over 5,000 page views from an unknown number of unique visitors (Blog Top Sites estiates almost 2,000 unique visitors).

This-week the site was featured on JD‘s roundup of Finance Blogs from Around the World.

Last week I was featured on Canadian Capitalist‘s roundup of Canadian Blogs.

Thanks to both of the authors for their endorsement and the associated increase in traffic and feed readership. I hope the new visitors are enjoying some of my previously published content. I will have some more interesting posts ready to go in the near future. Right now I’m just getting adjusted to a new home, so life is hectic.

For new readers, please check out the FeedBurner feed linked on the sidebar.

Yes! 1/2 rented for next-season!

Well, last night I signed 5 students up to live in my first rental property!  Now with it fully rented, I can focus in on the second home (also with 5-bedrooms).  Unlike years past, this lease signing means I will not have to scramble to find renters for the summer.  Previously we’ve only been able to secure 8-month leases, but this is a 12-monther (with a slight discount over the summer months), so I’m free and clear!

The nice thing is that two of the tenants in the 1st property might be interested in switching over to the other one, so then I would only be looking to fill up 3 bedrooms!  Sweet!

I think the main benefit to tenants is that were are quite flexible.  We offer a summer discount, we include all utilities, and our rent is actually fairly low or near average.  Plus, these two houses have free laundry, which is a big plus.


In my next post, I’ll show you my plan for using word of mouth to attract tenants faster, and how I hope to encourage present tenants to stick around another year.

Tag, I’m it.

My good buddy Kenric over at Live Learn Invest tagged me the other day.  He provides a great description of what this tagging phenomenon is really all about, and likens it to a viral infection.

That being said, the idea is that each blogger must state 5 things the community might not know about them, and then pass the contagion along.

1.  I’m a cynic…  sometimes other people misunderstand cynics, but I find cynicism is a source of humour in my life.  It is really my way of poking fun at life.

2.  I have a 2-year-old Golden Retriever named Jackson.  He’s named after a winery in the Niagara Pinninsula…  I stand by the fact that he is the best dog in the world.

3.  I drive a 2003 maroon Saab 9-3 (Merlot Red… to be exact).  I love the car and hope it lasts at least 5-years without needing too much work.

4.  I bought my first house just before 2nd year of university, we rented out two bedrooms in the house, and both my wife and I graduated debt-free.

5.  I am obsessed with egg nogg.  I have a compulsion to buy it when I see it at the store, which is very frustrating for my wife who is a dietician!

Now, who to tag?  Hmm…  Canadian CapitalistMillion Dollar Journey, Getting Finances Done.

PS:  I’m taking a small break from blogging as I have some more important matters to sort out.

iiProperty Site Goes Live

I finally went live with an iiProperty website for my rental properties.  I liked the interface, and the ease of adding properties to the “web flyer” as they call it.  It takes a matter of about 5 minutes per property to add photos, descriptions, basic information and your contact info.  The output is somewhat basic by some web standards, but given the time investment, I think the look is adequate.  It doesn’t look out-dated, the main downside is that you can’t customize the placement of information on the page.

In my review of rental tracking software, I mentioned that iiProperty enabled direct posting to CraigsList.  I was unable to verify this feature because iiProperty does not have the ability to accept Canadian addresses in its CraigsList advertisement form.  To me this isn’t a deal breaker, but it sure would have been a nice feature.

Have a look a the site if you get a chance.