If you need to move for a job or can’t afford your home, putting it up for lease may get you through a tough time
By Jennifer Brown, Special to The Star
If you’re faced with the prospect of having to move for a new job or because you can’t afford to live in your home – but you don’t want to sell right away – one option is to rent it out. That way you can wait until the market comes back or you find some stability in your own situation.
But how do you begin to go about renting your place?
There is some important research to do first such as finding out what the market rent is in your neighbourhood for a comparable property, understanding tenant rights and rental agreements, the Landlord Tenant Act and how to screen applicants.
When it comes to marketing your property and finding a tenant, the options include placing an ad in a newspaper or online listing or you can lease it through a real estate agent.
Managing the rental yourself can be more economical, if you have the time to handle viewings and vet applicants.
With the housing market in a state of uncertainty this year, leasing has been an option for many people and agents have seen an increase in business from the rental market.
“This winter about one-quarter of our business was leasing,” says Darryl Mitchell, Central Toronto Area manager/broker with Royal LePage.
“Rather than buy a home, people who were concerned about the market were choosing to lease instead of buy.”
In some cases clients listing their property for lease include people working overseas, those who relocate to the U.S. or abroad for a year or more or those who move to another home but don’t want to sell or can’t afford to sell their property because they feel they will lose money.
Agents will place your lease listing on the Multiple Listing Service (MLS), which gives your property exposure to a large group of online viewers including realtors and individuals. They will also draw up an agreement to lease, which is governed by the Landlord and Tenant Act.
They will conduct a market analysis to determine what the rent should be and that means it may not cover your mortgage payment.
“We have had conversations with clients about that kind of thing. It has to be what the market is dictating,” says Mitchell.
Agents will also point out things you can or cannot stipulate in a lease agreement.
“Some people would like to say ‘No Pets’ in a residential unit, but unless it’s a condo, it’s illegal to say that and a good realtor will point that out,” says Mitchell.
Not all agents are keen to be part of the home leasing business as they don’t make a lot of money on the fee, and it can be a lot of work for little return; but many do it to help build relationships with renters who may one day turn into prospective buyers.
“The benefit of going through an agent is we understand the Landlord Tenant Act, we’ll do a background check and a credit report to see if the tenant can afford the rent,” says Jodi Gilmour, a Toronto real estate agent and host of For Rent on HGTV.
Some agents will also deal with the various tenancy issues that come after the lease is signed. “Not necessarily things like fixing a toilet, but I have collected rent for a client who is overseas and made the rent deposit for them or issue past due notices or start the process of termination, if necessary,” says Gilmour.
For an agent’s efforts, Gilmour says the cost of leasing a home is about one month’s rent, which covers the marketing and in some cases the other agent will get half the fee.
Some agents, such as Mitchell, prefer to charge a percentage, much the way they do when they assist a client in buying or sell a home.
“It’s negotiable,” he says.
When it comes to determining how much to charge for rent, Gilmour recommends doing your homework first.
Find out what other homes in your neighbourhood are renting for and what’s included.
“An agent can also tell you what other places have rented for and give you feedback from the showings, as well as make sure a lockbox is always on the place,” she says.
Whether you list with an agent or manage the rental yourself, prior to placing the ad, make sure to do cosmetic fix-ups and make the house presentable and inviting.
“Presentation is huge. Make sure the windows are cleaned – cleanliness goes a long way. Replacing a toilet seat can be a big deal and it can only cost $12,” says Gilmour. “Functionality is also important. Make sure cupboard doors open and close properly and if you don’t have decent closet space, go and buy an inexpensive wardrobe unit.”
Also, if showing the house in the summer, put the air conditioning on if you have it to show the tenant the house will be climate controlled.
Other factors to consider:
Are you renting it furnished or empty? If you feel uncomfortable renting your place out with your favourite sofa, consider splurging on a storage locker.
If there is a mortgage on the property you may have to notify your lender. (This depends on your financing situation. Rental properties purchased for that intent generally require larger down payments.)
Notify your insurance company and inquire about any additional coverage required.
There can be additional costs associated with renting your home such as repairs – consider giving the place a fresh coat of paint – and utilities if you aren’t going to require the renter to pay for electricity, heating or cable/Internet.
If you use a bedroom as an office consider converting it back to a bedroom to make it more appealing to a family.
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Contact the Jeffrey Team for more information - 416-388-1960
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