Property Management Tips for your Ontario Apartment Building

I know that there are a lot of apartment building owners in Ontario who face interesting situations every day related to his or her investment property. This should be viewed as a forum to ask questions, leave comments and generally discuss common issues that arise in the ownership of residential multiplexes.

Owning several apartment buildings in Ontario myself, I have learned the hard way, and am happy to share what I have learned with you. Please read below as some of the most common problems in the management of investment properties are discussed.

Q: Should I manage my investment property myself or hire a professional property manager?

A: Poor property management is one of the top reasons that an otherwise profitable real estate investment can quickly turn into a negative cash-flow burden. The answer this question depends on your skills and interests. If you are an investor who is looking to create value by adding a property to your portfolio and would prefer to spend your time looking for the next asset to add to your portfolio, self-management may not be the answer for you. On the other hand, if you are a people person, relatively handy and enjoy a management role, you might fight very easily into the property management position.

Here a couple of rules of thumb: If you have a smaller investment property (5 units or less), it is often more profitable to manage the property yourself. The costs of hiring a professional property manager is not spread over a great enough number of units and you often end up paying a much higher price per unit than you would for a larger building where economies of scale can be realized. In addition, smaller buildings require fewer tenant issues and maintenance responsibilities as well.

Another consideration is the location of your investment property. If your portfolio is generally located in a specific area, but you have one or two multiplexes in unique locations, you may want to contract out the management of these properties, as the travel time involved in overseeing the buildings may not be worth your while.

The bottom line is the following: If you enjoy property management and have some experience (or ambition to learn), are a hands-on learner and view property management as a "job" that you would like to pursue (because that is exactly what it is), I would recommend self-management. If however, you view yourself purely as an "investor", allocating a dollar value to each hour of your day, you will have to determine whether you can make more money doing other things (whether that be searching for future acquisitions or working a day job).

Q: What are the best ways to find new tenants?

A: I have had the best results from placing free online classifieds on sites such as www.craigslist.com or www.kijiji.com. I am always sure to include the following in my advertisements:

1. Highlight proximity to public transit and other amenities (supermarkets, cafes, restaurants, universities/colleges). As a not gym-goer myself, I am always surprised by the number of potential tenants who inquire about the proximity to gyms. If your property is within close proximity to a gym, be sure to mention it!

2. Clean, clear photos. It's always best, when possible, to include photos of the apartment when it is empty and clean, without a past tenant's belongings in the photo to clutter it up. When not possible, try to ensure that the unit is as neat as possible and steer clear of personal items as much as possible. In addition, while photos highlighting the best features are important (deck, backyard, stainless steel appliances, newly-renovated washroom), be sure to be balanced and fair in your representation. If photos exaggerate the good while ignoring the not-so-good, you will end up with 100 potential tenants on your doorstep, yet no tenant after they have seen the unit - this is a great way to waste many of your evenings!

3. Be sure to mention whether there is parking available, a laundry machine (include whether it is coin-operated as it is amazing how many potential tenants will ask about this), and which, if any, utilities are included. Mentioning these things will save you a lot of telephone time.

Some property owners have reported success advertising on www.viewit.ca, however, there is a cost of approximately $40 associated with this option. They are quite well-organized and will send photographers to your property (all included in the price). However, I have found that I have so much success with craigslist and kijiji that I do not need to incur the additional cost of paying to be featured on viewit.ca. I would recommend attempting to advertise units on the free online classifieds first; if you run into problems, you can always pay for a site like viewit after a couple of weeks.

Q: What are some ways in which to add value to an investment property?

A: Here are a few of my favourite ways to add value to a property without spending a lot of money:

1. Paid parking: If your multiplex currently has parking which is not regulated and tenants are not required to pay for their spaces on a monthly basis, transition this into a paid parking system. It is amazing how much even a few parking spaces can add to your bottom line. For example, in Toronto, outdoor parking (indoor is even higher!) can go for anywhere between $30 - $150 per month, depending on location. On an annual basis, this will add $360 - $1800 per space to your revenue.

2. Increase below market rents: While the Province of Ontario has legislation in place limiting the amount by which landlords can raise rent for existing tenants in a particular year (0.7% for 2010), when a tenant moves out, there is nothing limiting the amount by which a landlord can raise the rent. If you have recently purchased a property with below market rents, it is advisable to hike rents to market levels immediately upon having vacant possession of a unit (i.e., a tenant moving out). Of course, if there is a reason that below market rents were being charged, for example if the common areas were falling apart, it will generally be worth your while to spend some money bringing the common areas up to market standards so that market rents can be charged. Year-over-year, you will see the benefit of the initial outlay of money add up in your bank account.

Q: What should I do if my tenant isn't paying rent?

A: Firstly, take action immediately. Contact the tenant immediately and inform him/ her of the arrears. Here are a few tips to help avoid this situation:

1. Implement penalties for any "bounced" cheques or late rent payments. Be sure to include this clause in the tenant's s ignedcopy of his/ her lease. It is often useful to use two types of penalties: i) the first amount is charged immediately upon late or missed payment; and ii) the second is a charge of a certain dollar value per day that the payment is late. In this way, overdue tenants will not simply feel that they have already incurred the initial penalty and that there is no longer an incentive to expedite the rent payment: each additional day that the payment is late adds dollars to what is owed to you as owner of the property.

2. Although the Province of Ontario does not permit landlords to insist on post-dated cheques, there is nothing in the law that precludes landlords from nicely asking if tenants would be willing to submit post-dated cheques at the beginning of the rental term. This can be framed in such a way that tenants feel that you are organizing a more convenient method for their rent payment. With post-dated cheques, you will not have to chase tenants around for rent (only "bounced cheques"!)

3. Include a clause in your lease stipulating that non-payment of rent will be pursued by you, as owner, through every legal remedy available, including termination of the lease and eviction. The rules by which you can enforce termination and eviction are very specific and must be followed perfectly in order to avoid running the risk of a Landlord & Tenant Tribunal ruling against you. As the law is constantly evolving, I would recommend looking at the Landlord & Tenant Board website for specific details: http://www.ltb.gov.on.ca/en/Key_Information/STEL02_111483.html. I can not stress enough how important it is to follow the rules and regulations of the Landlord & Tenant Board when enforcing remedies (including those for non-payment of rent). Tenants may be evicted for non-payment of rent, but notice must be given in a specific way and the tenant has an opportunity to pay rent to avoid eviction for a certain number of days. If required, you can hire a paralegal specializing in landlord and tenant issues. This is generally much cheaper than hiring a lawyer and they will do all of the running around for you, including delivering notices and appearing in front of the tribunal if necessary. Here are a couple of websites for paralegals specializing in landlord and tenant issues:

http://landlordsolutions.ca/

http://www.torontolegalhelp.com/about.html