Self-Managing a Condominium Rental: Is It For You?

Self-Managing a Condo

There’s a lot more information out there about what it’s like to be a good Toronto tenant than there is about being a good landlord.  Which explains why, when looking at renting out that investment property, it’s easy to assume that there can’t be much to it—and run into a lot of trouble.  So here are a few questions to judge whether self-managing your Toronto condominium rental is going to be right for you—before you take the plunge.

Do you have the time?

Being a landlord—especially in a condominium, which comes with its own set of rules, needs, and requirements—is a job, full stop.  What’s more, it’s a business, and even the most low-maintenance tenants will require time, attention, and dedication on your part.  Sourcing reliable and affordable contractors, making sure repairs get done as quickly as possible and mediating between property managers, the condo board, and tenant needs as necessary all take time—and they’re all your job.

Doing that job well without spending a pile of money usually means research.  While condominium buildings will sometimes have lists of approved or recommended contractors, it’s by no means guaranteed that they’ll be able to flip you a name for less common but still important issues, such as stove repair—and not every contractor will service every part of the city.  Putting the time into solid comparative research—just like being thorough when you check a potential tenant’s references—is one of the essentials of being a good landlord and getting repairs done right the first time.

If you’re juggling the kind of full-time job that goes in for late nights, raising young children, caring for an elderly relative, or putting the time after work into upgrading your degree, the instant response style that self-managing a condominium rental needs might not be a good fit—or might lead to more resentment than is necessary for the normal wear and tear of a property’s life.

Do you have the regulatory expertise?

When you’re self-managing a condominium, forgetting the small things can have serious legal consequences: For example, if sending that N1 or N2 form 90 days before a rent increase slips your mind, you’re not getting that rent increase this year.  And if you aren’t on-site to tell that contractor that yes, Monday’s a good day to start that sink repair—and didn’t send a notice of entry 24 hours before—they legally can’t start work, and you can’t legally be there.

It’s important to know the laws and regulations around renting—your rights and your responsibilities both—to make sure you’re taking care of yourself as a landlord, not contravening your condo board’s rules, or putting your tenants or any contractors you hire in positions where they can’t do what they need to do.  Not knowing the law makes good tenant and work relationships go toxic fast, and opens you, as a landlord, up to both legal repercussions from the Landlord and Tenant Board and being played by bad tenants.

Renting out your property is one of those situations where good fences—let’s face it, good boundaries—make for good neighbours, and so if you’re not great with low-grade legal language or the small but regular pieces of paperwork the job comes with, it’s worth the cost to get a professional and make sure the law gets what it requires.  It’ll save an intense amount of headache down the road and make sure you never even get a taste of how much paperwork an eviction requires (hint: lots).

Do you have the communication skills?

It’s not a skill set that you’ll usually hear as important for landlording, but just like any liberal arts major will enthusiastically tell you, it’s the soft skills that often make all the difference.  Becoming a landlord is all about communication: Writing and placing a comprehensive and appealing rental ad, getting your expectations across to potential tenants—and making sure you know what their needs are in return— and then acting as a switchboard between your condo’s property manager, contractors, occasionally the City, and the tenants who are paying your mortgage with their rent.

If you’re a great communicator, good at getting tone across in email and patiently building productive working relationships, you’ll sail through this with confidence.  But if communication and management isn’t your strength, then you might find yourself repeatedly running into misunderstandings that drag out everything involved with running your property and put a damper on the whole adventure.

Like any job, setting out to be a landlord is all about knowing your strengths, knowing your trouble spots, and working with them both to make the decisions that get the job done.  If you’re not natural landlord material, or aren’t sure there’s space for it in your already busy life, that’s not a defeat: Sometimes the best decision you can make, as a landlord, is to bring in a property management company, sit back, and know that everyone—you, your tenants, and your contractors—is going to have the smooth ride you all need.

Five Ways to Maintain Your Investment Condo’s Value

Investment Condo

So, life is good: You’ve bought a nice investment condo in a great Toronto neighbourhood, lined up some conscientious, friendly tenants to live there, signed the lease, handed over the keys, and everything is going according to plan.

But since you’re in this for the long haul, how do you make sure everything keeps going to plan?

     1) Make sure your tenants are on your team

One of the easiest ways to make sure your investment condo stays in great shape is to enlist your tenants onto Team Great Property.  They want a lovely, well-maintained place to live, and you want the value of your property to grow, so there’s a lot of ground to work together and keep that unit looking great.

Simple ways to make sure your tenants are looking out for the space itself are to foster a landlord-tenant relationship that thrives on honesty, cooperation, and trust.  This means encouraging your tenants to report issues as soon as they happen, acting fast on both necessary and proactive maintenance, and doing small but vital things like leaving spare air conditioning filters or paint in the right colours in the utility closet, so your tenants can touch up any dings or scratches as they occur.

People like a chance to take pride in their home, however temporary it might be.  Let your tenants do that—and choose tenants whose eyes light up when you say you want a collaborative relationship—and half your property maintenance issues will evaporate right out the gate.

     2) Inspect the property regularly

Make it a ritual when you set an appointment to renew your tenant’s lease or pick up any spare mail that might go to your investment property’s address: take a walk around the unit, check out its state of good repair, and ask your tenant if there are any issues you should look into—no matter how small they might seem.

Property maintenance is one of those areas where putting in a little effort more often will frequently ensure you don’t find yourself dropping everything to bail yourself out of a crisis situation.  Catch small problems now, prevent them from becoming big problems, and you’ll make sure your property stays in marketable, valuable shape.

More to the point, if you develop relationships with reliable contractors—plumbers, carpenters, and so on—before water comes gushing across the floor, you’ll spare yourself the stress of comparing quotes on short timelines and be able to just get ‘er done.

     3) Stay in touch with your condo board

No, you don’t live there, but the decisions your condo board makes will affect the value of your investment property.  Are they adding amenities, or have amenities been delayed?  Are they making decisions which will raise your condo fees—and cut into the value of the building, as well as your margins?

As an owner, you have a vote on your investment property’s condo board and a seat at their AGM, and it’s in your best interests to use both of those actively.  Knowing the shape of the next year for the entire building will help you make prudent, fiscally realistic plans for your investment property—and know what sorts of tenants you can and can’t attract.

     4) Charge smart rents and take out smart mortgages

The smartest rent isn’t always “As high as you can get away with,” just like it’s not always “Low enough to get that tenant you think is a great fit”.  A good—and dynamic—knowledge of market rates in your area, as well as who tends to rent in that neighbourhood, is a valuable thing when it comes to setting rent for your unit.

It’s also valuable to plan your requested rent in tandem with your monthly condo fees and the mortgage on that unit.  Make sure your rent covers your expenses, with a buffer set aside to cover any repairs which might come up and, more importantly, your taxes.  Property rental income is declarable income, and saving up for taxes will spare you a nasty April surprise.

If you’re uncertain about the area, or if the building is new, a variable-rate mortgage can be a godsend for a new landlord: If, two years in, your math just didn’t work out, you can adjust the mortgage rate to accommodate the rental income you’ve committed to for the length of that lease and make sure that investment property isn’t a hit to your personal pocketbook.

     5) Know your goals

The most important thing about investment property is that it’s not an end in itself; it’s a means to achieve professional and financial goals.  Know, from the outset, what your goals are for this property: Are you looking to rent it for the long term, or just to cover the mortgage while the property value matures for a resale?  Are you holding onto that spot for a family member who’s retiring and downsizing, or graduating and establishing themselves in the city?

If you’re looking to establish stable long-term rental relationships with tenants, then it’s practical to offer two-year leases as a stability incentive.  But if you’re looking to sell that unit when the market is ripe, one-year leases, which you can evaluate year by year, are the better move.  If you’ve got that unit in reserve for a family member, a higher mortgage rate which accumulates equity faster is more beneficial than if this is an income property only.

Knowing what you want out of the investment condo experience—and reevaluating that actively as your life circumstances, goals, and needs change—is the key factor to making sure you make the right decisions to maintain the value you need for the goal you have in mind, and that everything keeps going according to plan.

The New Landlord’s Quick Guide to Tax Time

Tax Time

So this year, you had a great idea: You rented out that investment condo to a great tenant (or two!), built a fabulous working relationship with them, and now that condo on its way to making an income for you while providing someone a comfortable home. Trouble is, it’s tax time. And suddenly your usual T4 and a few charitable donations are just the beginning of the paperwork you’re facing as a landlord.  So, how do you deal with your rental condo when it comes to taxes?

Rental income is declarable income

It should go without saying, but Revenue Canada will be very much interested in the income you’re making from rent.  Regardless of whether you’re renting an investment property or part of your own personal home—a separate unit in your home or just a room in the condo you live in—that money needs to be formally declared as part of your taxes.

But there are a lot of things you can legally write off

Renting your condo unit means you have rental-related expenses, many of which you can claim against your income at tax time.  You can write off rental expenses that occur at any part of the rental process, including:

  • Fees you’ve paid to advertise your condo unit to prospective tenants, including listings with real estate agents, rental agencies, property listing sites, cleaners, and staging companies;
  • Fees paid to any management company you’ve hired to take care of the property;
  • Maintenance and repairs to your property;
  • Office supplies you’ve bought for administering your condo, including small stationery like pens;
  • Property insurance on your rental condo;
  • Property taxes on your rental condo;
  • Interest that accrues on your mortgage while you’re renting the property;
  • Utilities to the rental condo that are included in your lease with your tenants, including condo fees;
  • Your accounting and legal fees;
  • Travel costs, if you’re doing your own maintenance.

That’s just the run-of-the-mill stuff—your current expenses.  You can also write off a whole category of expenses called Capital Cost Allowances—the big purchases—which include any appliances, equipment, furniture, fixtures that you’ve purchased for your rental property.

What you can’t deduct: The principal on your mortgage, land transfer taxes, or your own maintenance labour.

So I hope you kept your receipts

It’s a fundamental: hold on to your receipts for any expenses that relate to income.  Going forward, create a folder for all your rental-related expenses, and hold on to any receipts or proofs of payment that come your way.

Got everything!  Now, how do I do all this stuff?

Pick up a Form T776 from your closest available Internet, and fill it out with all this assembled information.  The number it spits out at the end of that afternoon should be your net rental income, which goes on Line 126 of your personal tax return and factors into your overall total taxes owed.

This is not making all that much sense to me.

When in doubt, ask the CRA.  The great thing about Revenue Canada is that they tend to want you to succeed at your taxes, not fail, so they’re generally quite forthcoming with information and tips—and have a handy guide for everything you need to know about rental income on your personal taxes.  The CRA’s guides aren’t short, but they’re detailed, and they’re full of clear examples on how each exemption and regulation works.

No, really.  I’m lost.

If you still find yourself out of your depth, or start to handle multiple rental properties, it’s a good idea to outsource to a local accountant.  They’re worth their weight in delicious tax credits, know both your obligations and the advantages you can bring to bear on your taxes as a landlord.  And overall, it never hurts to have the peace of mind you get from a professional on the case.

Estimate for next year

Now that you’ve got that done, estimate what your expenses might be for next year—and put that against your expected year’s income.  If you do this right, and set aside what you’ll need to pay in rental income taxes as the money comes in, paying your taxes next year should be absolutely painless.