Managing finances through tough times

There are a variety of things that can go wrong when you are a landlord, and they can have an effect on your finances. So, how can you avoid those pitfalls and what can you do if they arrive?

When someone becomes a landlord, most people imagine it being plain sailing; 100% occupancy, tenants paying on time, no damage to the property, and so on. In reality, these things can happen and sometimes can be frequent. Worse still, your property can be hit by elements out of anyone’s control, with the current covid-19 pandemic being a perfect example. So, what can you do to prepare and mitigate these potential problems?

Thoroughly vet your new tenants

A good tenant is a dream for a landlord. Someone who takes care of your property, helps with ongoing maintenance, pays rent on time, and doesn’t actively cause damage. Furthermore, someone who enjoys and respects your home is also more likely to remain there for the longer term, reducing your vacancy rates and maintaining a steady income stream to boost your finances. It means less stress and work for you, and helps to avoid tough times with finances.

Bad tenants do the opposite and end up costing you additional money. Whether it be damage they cause, neglect that leads to problems in the property or simply not paying rent, tenants can cause plenty of financial head aches for you.

This explains why it is important to thoroughly vet your potential tenants. You want to know that they are likely to pay bills on time; something you can learn form either a credit report or a guarantor on the rental contract. You want to know what type of tenant they will be, so references are a good idea where possible. In short, you want to find out as much as you can, within reason and legal limits, in order to help you determine who you might be renting to.

Keep up with inflation

Ontario has guidelines for how much a landlord can increase a tenant’s rent by each year. For properties that fall under the Residential Tenancies Act, a landlord can increase rent so long as written notice is given at least 90 days in advance and the date of the increase is at least one year after the rental contract was originally signed or the last increase was made. A guideline rate is set for the maximum increase allowed and this is calculated each year based upon the Ontario Consumer Price Index (CPI), meaning it is roughly based on levels of inflation. Any increase up to this amount is allowed automatically; if a landlord wishes to raise the rent by more than the guideline rate, they must submit an appeal explaining the reasons for the increase.

For 2021 a special exception was made for covid-19 and increases were frozen, but things will be returning to normal in 2021 with a 1.2% guideline rate. That means, legally, you can raise rent by 1.2% so long as you provide written notice to your tenant.

To ensure your finances stay healthy, you want to make sure that you increase rent each year in line with the allowed amounts. if you don’t, the effect of inflation will mean you are effectively renting the property for less money each year.

Ensure ongoing maintenance

All properties need to be taken care of. If you don’t, you’ll find you will have major problems later on. For example, if you don’t replace your shingles when necessary, you could face more serious and more costly water damage in the future. By investing in maintenance now, you save yourself money later on. As an added bonus for you, a well-maintained property can generate greater returns as there will be great demand to rent it and potentially higher rent as a result.

So, make sure that your property is taken care of. Whether that is with regular scheduled inspections by yourself or by arranging for professionals to assess and fix small problems, you should always make sure to keep on top of maintenance issues.

Take out good insurance coverage

Even with the best tenants and maintenance schedules, accidents can happen both inside and outside the property. That’s where a good insurance policy comes in; if there is a big issue in the home, you want to make sure that it isn’t going to leave you struggling financially.

Shop around for the right policy and make sure it has a cost and level of coverage that you are happy with. You want to know that you will be covered for most potential issues. Consider it an upfront investment in your peace of mind and a safety net for potential problems.

Trim the fat from your finances

Whether you have one property in your portfolio or several, there are usually expenses that you can cut back on. The circumstances of each landlord are different so there isn’t a general rule to follow here. Sit down, take a look at what you are paying and see where savings can be made. It might be that you can use energy efficient appliances to reduce hydro costs, or combine services across multiple properties to get a better deal. There are many different ways to save money and they can only be found with a thorough and honest assessment of your current expenditure.

Let someone else do it

If you’re looking to save money, paying for a property management service might seem counter-productive at first. However, with a company like Living Properties, paying for property management could help you save money overall. We can do all the above for you; our expert team has many years’ experience in trimming landlords’ budgets, negotiating with third-party service providers, managing ongoing maintenance, ensuring tenants pay on time, and vetting tenants before they sign, among other things.

We can find efficiencies for you that would save you more money than if you do things yourself. Our hard work also gives you more time to focus on other priorities and your other income streams. Want to know more about our services and the ways we can save you money? Use the contact form below to get in touch with us today.

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