Oh No! I Have A Marijuana Grow-Op In My Rental Property!

I don’t really, but what better way to get your attention?

As landlords, most of us have heard of that old urban myth. You know the one… a guy who knows a guy, who’s a landlord, who suddenly finds out that the perfectly nice couple who had been renting out the house were in fact running a marijuana grow-op. There are variations on the story as well, sometimes it’s a crack house, sometimes it’s a meth lab. This story — in all it’s incantations — has popped into our brains in some way, shape, or form at some point in time.

This is the reality…

The RCMP estimate that there are about 50,000 grow-ops in Canada. They’re in single family homes, basement apartments, and even in Toronto high rise condos. Most landlords are probably oblivious to this fact — and even more alarmingly — they’re often oblivious to the massive insurance pickle they’ll find themselves in if they end up renting to someone who decides to make their unit a reefer lab.

Read this great article by Ottawa lawyer Howard Yegendorf. Landlords need to be aware that the majority of liability insurance policies have a specific exclusion for damage caused by your tenant’s marijuana grow-op. That’s just the insurance problem. There’s also the criminal enterprise element. Seriously. Have you seen Oliver Stone’s Savages? Property management is hard enough. Having something comparable to a Breaking Bad season in real life is the absolute last thing you or any other tenants in the property need.

So what do you do? Well, here are some tips:

  • Perform tenant screenings. There’s a variety of other background checks your can perform as well, such as a criminal record check and an employment verification.
  • Have an airtight lease that clearly articulates the expectation of no criminal activity on the premises and that the tenant will provide reasonable access to the landlord.
  • Visit and inspect your property regularly. Remember – landlords are allowed to visit their units for routine inspections with proper notice given. You’d be surprised how many don’t do this. Get into this habit.
  • Talk to your tenants. Communicate with them. That’s always a good way to get a sense of what’s going on at the property. If you’re hearing about a lot of suspicious people coming and going constantly that could be a tip worth keeping in the front of your mind. Grow-ops have a tendency to have a lot of runners coming in and out of the place.

Here’s some tips on what to look out for:

  • Look out for any hydro alteration or electrical bypass. Things like holes in the foundation that weren’t there before should be treated as suspicious.
  • Did the renter spend a lot of time viewing the breaker-boxes, wiring and plumbing fixtures? Were they asking a lot of questions about power distribution in the property? Believe it or not, this happens. More often than not, illegal growers attempt to steal hydro by altering how it comes into the unit.
  • Be weary if tenants want to pay their rent in cash. Seriously. Who pays in cash? People who deal with a lot of cash, like servers, even have bank accounts.
  • If a tenant discloses that they plan to have the utilities registered under a different name, that’s weird.
  • Evasive answers and vague information on a rental application. This should set off a flag anyways.
  • Condensation or darkened windows in the unit. Cardboard and blacked out windows foster an effective grow environment. That’s not normal.
  • Tenant unloads copper and/or PVC pipe, soil, halogen lamps, large amounts of black plastic aluminum ducting, and fans.

Have you ever had a marijuana grow-op in one of your rental properties? Know anyone who has? Share your thoughts with us.

When To Consider Selling Your Rental Property

Came across this great piece in the Globe and Mail that talks about a couple who became landlords after keeping the previous residences they had prior to moving in with one another. Robert and Tara are an older couple, and had a financial advisor from RBC assess their goals and how their existing assets – namely two rental properties – fit into the equation taking into consideration a chronic illness that Robert has, a recent job change for Tara, as well as a lifestyle that the two enjoy and want to maintain as much as possible while they to retirement.  Besides the challenges associated with property management, the piece explains that the properties are barely breaking even, and that the eventual rise in interest rates leave the couple exposed to having their retirement plans altered.

Check out the piece in it’s entirety here: http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/as-income-falls-landlords-rethink-retirement-strategy/article6968522/

 

Rethink Your Rental Listings

You have an apartment for rent. It’s awesome. You are going to rent the hell out of it, right? Quickly too! You’re going to hit up Facebook, Myspace, Twitter, Tumblr, every directory you can get your mouse on, and you’re going to print up flyers and put up a sign in the window. You’r aiming for such an overwhelming amount of interest that you’re convinced you’ll have to choose which amazing potential tenant you rent it to. Wait a second.

There’s this company called J. Turner Research in Texas that conducts research specifically for the apartment industry. They released the results of a survey they conducted on over 41,000 people in the multi family market, that aimed to identify preferences that apartment hunters have when finding a new place to live. The results are interesting…you can read the press release here. Keep in mind, this is an American survey, but for the purposes of the point I’m making, it’s pertinent.

a compelling majority (95 percent) of the 41,303 respondents to the initial 29-question survey said they did not visit Facebook or Twitter during their apartment search. However, 74 percent of respondents reported using ratings and reviews sites, and additionally reported on their perception of the trustworthiness of each site used during the search process.

The top three things that the majority of those surveyed looked for were:

  1. The price
  2. A floor plan
  3. What the neighbourhood is like

When asked for the sources used during their apartment search, prospects reported focusing primarily on Internet Listing Sites (65 percent), drive-by (39 percent), and referrals from friends and family members (24 percent) as the top three search channels for finding a new apartment. Interesting. Hold your horses if you’re about to publish your listing to Facebook or if you’re going to tweet it.

So what does this tell us?

Apparently no one cares about social media when it comes to looking for a place to live. They seem to prefer listings sites. It also indicates the importance of really being thorough in creating an apartment listing – whether you’re publishing to Craigslist or using a service like PadMapper or Kijiji. The more quality information you have on there, the better. The better the info, the easier your search is going to be for a new tenant and the easier it is for a potential renter to determine whether your unit is a good fit for them. “Thorough” isn’t just giving the breakdown on square footage or including a crappy photo you took with your iPhone. It’s putting together something attractive and compelling, and one of the main reasons we created our handy listings feature in Renting Well. If you’re using our service – it’s awesome! (shameless plug).

With that said – let me give you a breakdown. What is a “quality” listing? It’s explained quite well at The Rentables, here. It goes into a few things in the post, but there’s a few items that really jump out here….

  1. Images. This isn’t a classified section from the 1918 edition of the National Post. Not having them is going into a showing hopeful that they like the way a place looks – and that’s a waste of time. Also, if you’re not including them, don’t you think that gives someone the impression that the place is probably not very nice? What are you hiding? Include images – and not just one or two. Include specific images of specific spaces. Bathrooms. Kitchens. Bedrooms. You need a solid set of images that create a serious sense of the unit for people to be able to digest. On the same note, don’t inundate a listing with 50 images – especially crappy ones. That’s not a good idea. 10-15 images is a good basis, and they shouldn’t be photos that simply change the angle of the same space. Differentiate – and ensure they’re good shots.
  2. Think about your headline and the body of listing. You don’t have to be a copy writer for a major advertising agency – but the first few words in a listing will be important in making a first impression.  For the body of your listing, avoid empty words, get right to the point, and sell the sizzle, not the steak as the piece says. Don’t use ALL CAPS. You’re not yelling at people, and it makes you look a jerk. Also, avoid using words like “nice”, “beautiful”, and “great”. Those are so overused. Real estate agents use those words about a million times a day. Here’s an example – instead of saying “Great 1 bedroom apartment for rent” – how about, “Spacious 1 bedroom flat for rent”. That sounds more refined and less robotic. Approach the words in your listing with a question about whether it’s distinctive.
  3. Be specific and clear about expectations. If you aren’t ok with pets, say so. If you’d prefer no smoking in the unit, dont be afraid to say it. Do you want interested renters that are well qualified, or do you just want tons of phone calls and emails looking for clarification?
  4. Details. Include them. Amenities. A walk score. The distance to a laundromat. The proximity to a grocery store or a bank. Bus routes.

The point is…start a search for a new tenant strategically. Market your listings effectively. Have pride in what you’re offering, and put it out there in a way that gets the best return on your time and money, versus the quickest. 

1.2 Meter House Gets A Tenant!

Add this to the weird and wonderful file. A 1.2 meter house in Warsaw Poland got it’s first tenant, Israeli writer Etgar Keret, who evidently comfortably fits into the place.

Etgar sleeps in a tiny bed.

Architect Jakub Szczesny said he designed the two-story aluminum and plastic house three years ago to fill a narrow space between a pre-war house and a modern apartment block in downtown Warsaw. Interesting idea. The Foundation of Polish Modern Art and Warsaw Town Hall helped to fund the project, which is unanimously considered a work of art.

The house is just four feet (1.2 meters). At its thinnest, it’s 28.3 inches. Needless to say, dinner parties are probably out of the picture to some degree, however, this apartment probably won’t have any issue being a conversation piece. I’d love to see Etgar going to a Best Buy and telling the enthusiastic audio video guy about the home theater room he’s envisioning.

Check out some pics of the place on Gizmodo, here.

 

Property Investment Project U.K.

Came across this gem of a find, in Property Investment Project. It’s a website/blog dedicated to all of the ups and downs associated with buying, renting (letting as they call it in the U.K.), and managing income real estate. Besides being one of the most informative resources I’ve come across, this is one of the funniest takes on being a landlord I’ve ever found. Seriously. Whether you’re in the U.S., Canada, or the U.K. – there’s stuff to be gleaned here that you can find useful, regardless of the country you’re in.

The website has a comprehensive list of everything you’re going to want to know if you’re a landlord in the U.K. Everything. Their landlord F.A.Q. is an gleefully exhaustive list of topics and frequently asked questions. The landlord guide is chock full of seriously valuable “how-to’s” on a wide range of things, like finding tenants, pets, and even evicting tenants.

The blog is what sold me on reading this all night last. I literally read the entries for a couple of hours. It’s the equivalent of a George Carlin stand up routine, and really puts a human face on the job of being a landlord. I touched on this in the kick off piece we posted on the blog back on December 11th. Being a landlord isn’t easy – really – it’s not.

I really feel that the misconception about being a landlord needs to change, regardless of what country you’re in, and it’s something we’re trying to do with Renting Well. For every assumption that landlords are rich, there’s a slick marketing campaign advertising “how to get rich in real estate”, with a couple on a beachfront somewhere, clearly retired from all of the multi families and duplexes they bought, who assure you that it’s easy to do it to through their beaming whitened smiles. This kind of drives me bananas. I snicker a bit when I watch a lot of these home improvement shows too. As much as I genuinely love them, sometimes I find they present having tenants in a bit of an inaccurate light. Yes, you can invest 50,000 bucks into having a basement ensuite that looks like it jumped out of a catalogue, and yes, you can have your tenants cover your mortgage ( or a large portion of it) – but there’s a whole lot more to it than that. There’s the job. The landlord job. It gives the goods – warts and all. Definitely worth a read – but to be taken with a grain of salt.

RCMP Warns Alberta Landlords and Tenants About Kijiji Rental Scam

Came across this informative piece courtesy of the Alberta Landlords Association. The RCMP issued a formal warning to landlords and tenants in Canmore, Alberta about a Kijiji scam. I took special notice of this, because this is the kind of thing that gives landlords a bad name.

Culprits posted ads on the classifieds website Kijiji advertising houses or condos for rent, with all money transactions completed through e-mail. The victims were advised that 24 hours before their arrival, they would receive a pin code to enter the property. But in one case, after thousands of dollars was transferred, all correspondence halted before a pin code could be sent. Further investigation found that the properties were never really in fact for rent in the first place (big surprise).

A similar occurrence was reported in Halifax. Check this out. There’s a nice Soundcloud clip of a rundown of how it occurs courtesy of Scott Simpson with the Halifax Regional Police.

Unfortunately, this has become a common thing. Similar incidents have occurred in Montreal, Winnipeg, and Calgary.

Most of the cases involve a landlord out of town, unable to show the unit, who asks for a damage deposit or first and last month’s rent to be wired to them. Sometimes – as in the case in Calgary listed above, someone has the gall to show up and actually conduct showings on a unit, and then ask for money.

The ALA has some valuable tips to share on how landlords and tenants can avoid getting caught up in these kinds of messes. Tenants should ask to see the property before committing anything financially, and receive a receipt for any monies given. Landlords should make sure tenants know who they are, where the property is, and give a receipt for any rent paid.

Hub Pages posted a nice little ditty on how to avoid getting scammed here. Kijiji has also posted some valuable tips on how to avoid getting victimized here.

My Two Cents On Sizing Up A Rental Property Before Purchase….

I’m a strong advocate of approaching property investment as a business first, and as an investment second (a close second) — especially if you’re planning on managing a rental property on your own. These two perspectives are directly associated as far as I’m concerned, but I’ll get further into my point.

Whether you’re renovating a basement suite to have a tenant cover a portion of your  mortgage, or whether you’re looking at a nifty multi unit, understanding what you’re getting into on a management level is a valuable step towards total preparedness in your quest to being an outstanding landlord. If you do a full course of due dilligence, you’re making what is probably going to be a smart move long term — however — just looking at physical condition and expense reports is a very one sided approach in the decision to borrow hundreds of thousands of dollars. You wouldn’t ONLY do that if you were buying an accounting practice right? Or a bakery? Even if you’re using a property manager it’s no different than being an owner of a retail store that you just happen to have a paid fulltime manager working in.

I like to call the examination of some of these finer points — the important details. Assuming something will run on it’s own  — cash flow positive, and with tenants as happy as kittens just because you bought — is nuts.

  1. Has the landlord been diligent with applying rental increases? You’d be surprised how many landlords are not. You buy a place that someone has been living in for 10 years, with zero increases in rent, and you’re walking into what can be a very difficult situation if you have expectations to get market value.
  2. How rentable is the property? Historically, how has the current owner fared with renting the units? Is the unit in an end of the city that attracts potential tenants naturally or is it somewhere that’s going to require a little more effort? Location matters, and knowing the chances of getting the new tenants you require when units become available helps with determining the amount of time you’ll spend in marketing vacancies or potentially even sitting on them. Also, finding out how the existing owner marketed available units is a good thing to know. Some landlords are old school, and they sit on  an empty unit for longer than they should.
  3. Meet the tenants if at all possible. This isn’t easy admittedly in the midst of negotiating on the sale of a property, but if you can swing it, do it. Are they happy? What kind of relationship has the current landlord had with the tenants? Knowing that there’s been a venomous relationship with the existing owner is reason enough to get the whole story – and to determine if there’s anything relationship wise that can be salvaged and what you’re prepared to deal with. I personally love sharing the story of when I bought my first rental property, and the seller characterized the main floor tenant as having “a good job and being quiet”. After the sale, I met him for the first time, and he cynically let me know how much he disliked the last landlord, and that there were about 20 different things the previous owner hadn’t delivered on with respect to repairs and maintenance. He called the previous owner “the king of unkept promises”. After 6 months of dealing with him, it became clear the previous owner was a huge flake.
  4. Are the leases legal? Are they month to month? What kind of history have they had with the existing owner or property manager and vice versa? What utilities are they obligated too? What incidents have popped up during their stay? Who’s easy to deal with and who’s not? Get as many details as you can.
  5. Meet your neighbours. I’m not referring to the presentation of a freshly baked apple pie situation with a formal intro. Take the initiative and try to find out what your neighbours are like. Are they difficult? Are they reasonable? Do they have a bad relationship with the existing owner or were there any disputes or conflicts that existed? You’d be surprised how much this can affect you – especially if there are any shared components to a property – like a lane way or common area.

Gauging how well the “business” of the property has been managed is essential in my view, and gives you a much fuller view of what you’re jumping into. Owning an income property is already a lot of work and the time spent goes by fast. Getting a sense of any relationship or management health is equally important as knowing that the rent roll and the expenses are accurate.

Coin-Operated Laundry For Tenants

Whatever you’re doing… stop. We need to talk about something important.

Laundry.

Everyone does it. Some of us are ashamed by it. Some of us do it in private. Whatever way you do it, it’s essential to both you and those that rent from you. The greater point I’m making here is that planning to put coin-operated laundry into a rental unit is a good idea, but don’t do it with an unrealistic expectation of on the immediate return-on-investment. Before you delve into the double-barrelled goodness of laundry machines that run on spare change, consider a few things…

Coin-operated laundry machines are best suited for multi-family properties — as in technically a duplex or more — but in my view they’re really much better suited to 4 units or more. You’re not going to put one into a single family unit because that’s tacky (think about it for a second). That kind of tackiness can put tenants off. Would you raise your eyebrow a bit if you were looking at a single family unit and noticed that the landlord had a coin-operated washer and dryer IN the unit? It kind of gives a bit of a weird and cheap impression. Common laundry rooms are better — areas that can be accessed by multiple tenants, with a likelihood of heavy use, and ideally on a separate meter from the rest of the units (it’s easier to manage and observe the utility expense).

On-site laundry is a convenience for existing and future tenants, and should be considered a feature when marketing the property and when you’re considering investing in one. Laundry facilities count as one of the most popular amenities renters look for, so adding one to your property is generally considered a positive long-term investment. It makes marketing vacancies a little easier, increases the chances of finding the tenants you’re looking for, and adds appraisal value to your property (as a result of the added amenity and the added income).

With that said, there’s an ongoing cost associated with running them utility-wise, and they can obviously breakdown and require repair. It’s possible you might not see a positive cash flow vs. the monthly expense if only two or 4 people are using the machines. The utility costs could outweigh the revenue you have coming in. That’s why I suggest 4 units and above as there’s a higher likelihood you’ll have the laundry volume and revenue — which in turn increases the likelihood of a positive cashflow on the investment and improves the chances of recouping on the machines sooner. However, numbers aside, even if you don’t enjoy positive cashflow from a laundry room it’s still a good idea to have the facilities on-site.

One other thing – it doesn’t have to be coin operated laundry. There’s a variety of alternative laundry solutions that you could consider as a landlord as well, like card operated laundry machines. 

Have you invested in a laundry room? Share your stories with us.

 

Landlord Fumes Over Tenant Damages in Sarnia

Came across this piece in the Sarnia Observer. A local landlord got burned by tenants who had been evicted. I think this really emphasizes the necessity to inspect a unit prior to a tenant leaving as it becomes very difficult to obtain any restitution with the LTB once they’re gone. You can read the article here:

http://www.theobserver.ca/2012/10/18/landlord-fumes-over-tenant-damages

As most Ontario landlords know (or should know), once a tenant vacates a rental property you can’t make an application for damages to the Ontario Landlord and Tenant Board. Jean Guy Lecours, the victim in this case, now faces the only option he has left, which is to pursue damages via small claims court – which will undoubtedly cost a small fortune.

Do you have a story like this? What are your thoughts on Ontario’s landlord and tenant laws?