As a landlord, finding a good tenant can make the experience of owning an investment property a painless experience. However, what most commonly comes to mind when beginning your search for a renter is the inverse scenario that can occur when due diligence is forgone in favour of getting a tenant in place quickly. It’s no secret that a bad renter can result in a significant loss of money, sleep, and time further down the line.
The process can be stressful especially if you are a new landlord, but thankfully there are some ways to minimize risk before listing your property for rent.
Click directly on the links below to navigate to each section:
What makes a good tenant?
Get prepared and be informed
Set expectations upfront
Conduct a comprehensive tenant screening
Maintain mutual respect to retain good tenants
Hire a professional
What makes a good tenant?
Like any sound investment decision, choosing a tenant should be based on objective facts rather than subjective opinion. When approaching your tenant decision, keep an eye out for the following characteristics:
A healthy rent-to-income ratio
Stable income earnings
Strong credit history
Good references from past landlords
No prior history of eviction
No criminal record
With these guidelines in mind, here are 5 steps to finding (and keeping) good tenants for your investment property.
1. Get prepared and be informed
Before you begin the process of locating that perfect tenant, it is important to acknowledge that how you choose a tenant and how you advertise a property in Ontario is regulated by the Ontario Human Rights Code. Some valuable resources exist to help guide you, including the Ontario Human Rights Commission website, and the Landlord and Tenant Board website. Be sure to familiarize yourself with the basic rules and regulations before you post your ad.
Intuitively, to attract the most desirable tenants, you generally need a desirable property. To that end, be sure to address items that need repair, consider painting between tenants where necessary, and consider sending a professional cleaner when required. When it comes to updates, it is generally best to stick to cosmetic updates versus large scale improvements unless truly necessary. Ultimately, keeping your rental property in good shape will attract the best tenants and will also help set the expectation for how a new tenant should treat your property.
Pricing is one of the most important tools to find and attract the best tenants. Performing a formal market analysis is the best way to make sure that your property is priced to draw a crowd, while also maximizing revenue potential.
Now that you have prepared your property for rent and priced it to perfection, it's time to bring your property to market. The focus here should be to cast the widest net possible to draw in the most candidates. Some great sites are out there to help you advertise your space for free, such as Facebook Marketplace, Zumper, and Realtor.ca. But, before you list the home for rent, you're going to need photos. Here, we are strong advocates of professional photography: a good photographer can really make your listing shine, and you can reuse the photos the next time the property is available for rent.
Don't forget to share your listing with your own network! Just like when you are trying to find a good employee (or a date), your friends, family, and sphere will often produce the best candidates.
3. Set expectations upfront
A well-written ad will not only be compelling, but will also serve as a pre-screening tool to filter for the type of tenant you're looking for. One effective way to attract the the right prospects is to set expectations in your rental listing. Some examples of criteria might be: your ideal lease term, occupancy date, smoking rules, and pet preferences,* amongst other important considerations when putting together your listing.
Your first meeting with a prospective renter is also a great opportunity to set expectations. Use this time to get to know people. Some examples of probing questions might be:
How many people will occupy the rental?
Why are you moving?
When are you hoping to move in?
Do you have any pets you are bringing with you?
Keep in mind that the tenant is screening you and the property as well, so establishing whether or not the property is right for them is also important. If it sounds like a prospective renter is a good fit, you can proceed with having them complete the rental application and begin the screening process.
* It is important to note that no-pet provisions are void in Ontario lease agreements subject to some uncommon exceptions. That said, indicating a preference for no pets can often help dissuade people with pets from applying. It is worth noting that a recent IPSOS survey found that more than 63% of Americans own either a cat or a dog. If we assume similar numbers in Canada, you may be weeding out a significant part of the population, and possibly some of the best candidates. Responsible pet owners often make responsible tenants.
4. Conduct a comprehensive tenant screening process
Conducting a thorough background and reference check is one of the most crucial steps in choosing a tenant. Even if you have a great feeling about a tenant based on your first meeting and their application, there may be issues behind the scenes that you can uncover with a bit of due diligence. The best starting point is to call references and ask some probing questions about the tenant. Employers and previous landlords are great resources, and they can provide valuable insight. To help ensure you get a complete picture, it's generally advisable to draft a list of questions in advance. You can find a great list of questions for previous/current landlords, employers, and personal references here.
In addition to reference checks, you will also want to obtain the following from the tenant:
Identification (2 pieces of ID is generally best)
Proof of employment (job letter, offer letter, etc.)
Proof of income (recent pay stubs)
A credit check
Credit checks can be obtained via Transunion, Equifax, or the tenant's bank. When instructing the tenant on this one, be sure to request a full credit check, which includes a statement of the tenant's accounts and any delinquencies.
Additional paid screening tools can be helpful for picking the right tenant. Naborly and Transunion SmartMove are two good options, though they come at a cost of around $25 per screening (current to the date of publishing).
5. Maintain mutual respect to retain good tenants
Once you have found that perfect tenant, building a good relationship with them can be your biggest asset. Like any relationship, a good place to start is by putting the rights and responsibilities of both you and the tenant down on paper. Similar to producing a clear and accurate listing, your Residential Lease should also clearly define what is expected from you and your tenants. The Ontario Standard Lease Form does a good job of covering the basics, but you may want to add some additional clauses based on your own preferences or experience.
Some examples include:
Tenant to replace HVAC filter regularly
Tenant insurance requirements
If there is damage from pets, the tenant is responsible for fixing it
Again, be mindful that some of the provisions you might want to include as schedules to an agreement are void under Ontario tenancy law, so make sure you are aware of what is permitted and what is not.
A good landlord/tenant relationship is a two way street, so to keep a great tenant, you also need to be a great landlord. This means being responsive when issues arrive and keeping up with maintenance and repairs in the home.
Consider hiring a professional
If the process of finding a great tenant seems overwhelming, a good property manager or Realtor can be an excellent ally. Most real estate professionals have a great deal of experience managing the process and have a strong sense of what to look for in a prospective tenant.
If you are interested in using our services, please reach out! We would be very happy to help you find your next tenant.