I think real estate is a great investment, especially in a market which is as consistent as in Nova Scotia. There does not tend to be massive swings in value, making the investment a long-term growth plan. Also, the cost to get into a house in comparison to other markets in Canada is relatively low. Rents on the other hand tend to be on par with many other cities across the country. This might be the reason we see far more apartments being built than condominiums – developers see a higher return on their investment by renting, than building to sell. However, renting your home comes with risk. I’m going to tell you a recent story and some ideas of how to avoid the same situation my clients unfortunately found themselves in.
The investment property
It was perfect. A gem of a single family home in immaculate condition, in a family friendly neighbourhood. We saw the home before it even hit the market and wrote an offer the very same day. Better still, as the sellers were leaving the province, we were able to get all of the furniture included in the deal. It was immaculate, contemporary and when all was said and done, a turnkey rental property.
What happened to my clients?
My clients are semi-retired and wanted to use their investment property to generate a monthly income. This is a great way to add to savings or a pension. After running a Kijiji ad, they were able to find a suitor after a couple of weeks. The tenants seemed perfect and sold a convincing story, painting themselves and their dog in such a way to draw compassion and trust. They signed a lease and were allowed to move into the property after providing the landlords with a personal cheque. The cheques for both the damage deposit and the first months rent bounced. Several false promises later, no money ever came. Worse still, I caught wind through some industry connections that the tenant currently in their house had been convicted of fraud and was due to appear in court. He has done this to 12 different families across Nova Scotia.
This happened to my clients in late October of 2018. After a lengthy process with the tenancy board and the courts, the tenant will finally be evicted this month. That’s four months of heartache, not knowing what condition their home will be in when they get back in and with four months of lost revenue. I feel for them immensely and cannot wait to hear their terrible experience has come to an end.
Renting on your own vs hiring a professional
I’ve always rented my own properties and have (knock on wood) generally had positive success. The only time I ran into an issue was when I pushed my luck with the monthly rent. Demand in the area was high and I had three people interested in the property. Instead of picking the best tenant, I chose the highest bidder and it ended up costing me far more in the long run because they were a complete nightmare to deal with. Lesson learned. I prefer to aim slightly below market value so I can attract several suitors before choosing one who is going to look after my investment. How do I rent them? A Kijiji post and a $50 “Top Ad” accompanied with good photos (extremely important). Success, every time.
If you hire a professional rental agency, you might end up paying a finders fee or an ongoing monthly cost based on the amount of the rent. This is also a completely acceptable option, it will just depend on what rate of return you are looking for. A rental agency should also pre-qualify their potential tenants and this may include:
- Reference checks
- Credit checks
- Job employment status/history
You of course, can also perform these checks yourself and I recommend that you do.
No matter how much someone assures you they are a good person, check their references and do your due diligence. Any reasonable person will expect you to perform these checks and if they object, that should be a massive red flag. Also, before you give possession make sure the money is in your bank account. You can accomplish this through an email money transfer or a certified bank draft. NEVER give possession before you have confirmation of funds. The moment they move in, the process favours tenants and it will take you months to evict them.
Most tenants are respectful and easy to deal with. However, you need to be on guard for the handful who are in it to take advantage of you and everything you’ve worked so hard to achieve.
Chris Perkins, Real Estate Consultant
HaliPad Real Estate Group - It's Your Move
(902) 210 1223