Last summer, Alex, my son’s friend, contacted me with the news that he was going to be transferred to Ajax. It would be a daily return commute of approximately 4 hours so he asked me to find him an apartment to lease. As always, it was my pleasure.
On the drive to view some apartments in Ajax, we caught up on each other’s lives and we also discussed rentals. On the drive back, we continued our conversation and, from his financial situation and from prices of houses in Oshawa, we concluded that it would make more sense to purchase a small house instead of renting an apartment.
I had no problem putting the other agent in his place
After a detailed search, I found a very charming house that I thought would be ideal for Alex. Alex loved it so I immediately went to work and negotiated a great price with a few conditions to protect Alex. During the conditional period, some items related to the area were discovered and I advised my client to wait until we could clarify the situation or at least to the last minute before waving conditions which could be affected. This made the selling agent extremely agitated. At one point, that agent said to me “I don’t know how ‘you people do things in Toronto’, but here we do things by the book” and he continued with threats to report me. My number one priority is to shield my clients, as best as I can, from any foreseeable trouble and within the confines of all rules, regulations and laws of Ontario including moral and ethical obligations. Needless to say, I had no problem putting that agent in his place exactly where he belonged. After satisfying myself with the information received from the City, and not a minute sooner, I then advised Alex to sign the wavers. Now the deal was ‘firm’.
Sound fatherly advice
At this point, you would think my job was done. Not even close. Two days after that contract became firm, Alex called to advise me that he was being transferred back to Toronto. The timing was just awful. If he didn’t proceed with the purchase of the Oshawa house, he would lose his deposit and potentially face a lawsuit. His voice was surprisingly calm so I asked him how he felt about it. He said he needed some sound fatherly advice before he reacted. After taking a moment to absorb that complement, I explained the options available to him.
One of the options was a ‘speech’ on the present Toronto real estate market and how this property could be not only a sound investment, but an excellent retirement tool. The basement had a 3 piece washroom, a separate entrance, full legal height, large windows and roughed-in plumbing which made it easy and relatively inexpensive to add a small IKEA type of kitchen. And if he lowered his downpayment and financed part of the cost of that basement kitchen, he wouldn’t have to come up with any extra funds.
We continue talking while I was plugging numbers on the calculator. I then advised him that if he bought the house and rented the main portion and the basement separately, the rents would not only cover all his expenses, including mortgage payments and property tax, but he should also expect an approximate 8% return on his down payment. Once the mortgage is paid off in 25 years, he would be sitting nicely and collecting rents so this could be part of his retirement plan. I paused and asked him what he thought so far and his response was “you had me at 8%”.
Before the drive home, Alex put away $3,000 in his pocket
Although the offer was firm, now it was time for me to roll up my sleeves and get to work.
When submitting offers on houses with basements that can be ideal for renting, I like to include clauses to not only view the property on at least 2 occasions, but to be able to bring potential renters to view the house. This Oshawa offer included that clause. Alex knew nothing about being a landlord, specially a distant landlord, so I taught him. This is the sort of thing I gladly assist anyone with...at no charge. I showed Alex where and how to place ads and how to set appointments when calls and emails come in.
We arranged the tenant viewings for the same time as the first house viewing. I showed Alex how to show the apartments and how to ask the potential renter to fill out an application and collect a deposit. This is a very crucial moment because although the potential tenant is applying for an apartment, he will not necessarily be approved. In the mean time, I consider the applicant’s present situation, employment and even his/her personality before asking for a deposit. The deposit can always be returned to the applicant if the application is denied.
Before the drive home, Alex put away $3,000 in his pocket from tenants’ deposits and he had 2 very promising applicants for the basement and main floor rentals...not to the mention the $4,500 CashBack Rebate he received from me after closing.
Experience in this field and knowledge
A word of caution for the inexperienced would-be-landlords: at the beginning, work with someone with experience in this field and knowledge on how to select tenants to avoid tenants from hell and to avoid making trips to the Landlord and Tenant Board. Also as important is how to manage rental properties even though it usually only takes a couple of hours a month whether the property is near you or an hour or two away.
Alex is now working on saving for a down payment on another small investment property. With the help of the return he’s making on the Oshawa house, I expect he will be calling me again in about 3 years. If you have questions or some real estate issues you’re trying to resolve, wether they are in Thornhill, Toronto or the GTA, please don’t hesitate to call, text or email me. I’d love to help.
Result is KEY