It’s been a busy lately. I’ve been up to my armpits wiping oven grease, pulling a year’s worth of weeds from the garden, mowing through the backyard savanna, and cleaning up garbage in a house where I do not live. The last residents left a gash in the beautiful hardwood floors and questionable stains on the carpet, matching the even more questionable cat odors. The tenant had departed leaving the keys in the mailbox and empty sockets in the light fixtures. It’s at times like these that I wonder about the wisdom of being a landlord. But then I need to take a deep breath, stop worrying and focus on the long term.
Luckily I’m not alone in this venture. My brother and business partner is a practiced hand with a paintbrush and nail gun, and our realtor is always willing to offer her expertise. Also, we are building our rolodex of cleaning and maintenance services. The tradespeople have been a great source of advice and a friendly ear, since it seems like they have seen it all. Our cleaner helped us to figure out what was more or less important when cleaning the house. You don’t need the same attention in every area. Kitchens and bathrooms are important. Walls and floors should be fresh. Both steam cleaning and sanitizing the carpets makes a big difference, especially if the previous tenants had pets.
It costs both time and money to turn over a rental to new tenants. However, what appears to be a concern may actually be a blessing. When a tenant gives notice, it gives you the chance to find someone who will take better care of the property. Changing tenants also provides an opportunity to evaluate the rent and adjust to fair market values, especially if the tenants have been there for a long time. Lately rents have been outpacing the rate of inflation. For example, in Burlington, Ontario, the month over month rent increase for August was +2.3% for a 2-bedroom apartment (average rent $2,088) and +1.7% for a 1-bedroom (average rent $1,819) (for more information see Rentals.ca August 2019 Rent Report). If you maintain your property well, you can command higher rents and be selective in choosing better tenants.
There are many benefits to holding real estate, but the secret is taking a long-term view. You can afford to be patient as long as the property has a positive cash flow, meaning that you earn more in rent than what you need to pay in expenses. Flipping properties can be dangerous if the market has a downturn, but positive cash flow means you can be patient and reap gains over time. You tenant pays down the mortgage while the property value trends higher, plus you have the power of leverage to magnify your gains (that is, borrowing money to make money). Further, while inflation increases the value of your property, most of your larger expenses such as your mortgage and property tax stay fixed. (For more details on the benefits of investment property, see Why Real Estate Builds Wealth More Consistently Than Other Asset Classes).
So the moral of the story is, “don’t sweat the small stuff”. Even if the hardwood floor is scratched, cats have peed on the new carpet, and you can’t see the garden for the weeds… in the long run it will pay off. Just do what needs to be done and have faith that it will all be worthwhile.
What do you think? Have you ever worried or been frustrated about something you can do nothing about? How to you remind yourself it will work out in the long run?