How To Become A Landlord – Property, Financing & Tenants

Being a landlord in Toronto takes a lot of work. Becoming a landlord in Toronto may seem impossible.

But that’s simply not the case. Becoming a landlord is a good way to help pay down your mortgage, generate extra income, or even create your own business. And more than ever people are looking for ways to get into the business. Julie Kinnear, head of the Julie Kinnear Team of Real Estate Consultants says being a landlord has almost become a must in Toronto these days:

Because the market values have gone up so much in Toronto renting out part of your property or home is par for the course. People are looking for that like crazy.

Throughout this guide, we’ll try to break down the temperamental and legal requirements for becoming a landlord.

Questions To Help You Decide What Type Of Landlord You Want To Be

Before you think about financing units, managing properties, and dealing with tenants, it’s important to figure out exactly what type of landlord you want to be.

We separate landlords into two categories:

  • owner-occupied,
  • and hands-off.

Owner-occupied is when you live in the same building as your tenant. This can include everything from a basement suite with a separate entrance to simply renting out a room in your home. Kinnear says these types of properties are generally easier to get financing for.

A hands-off landlord doesn’t reside on the same property as their tenants. These properties have the potential to generate more money depending on how many units there are and how much rent you charge, but Kinnear says they’re harder to receive financing for:

Mainly because, not being owner-occupied, you don't care about the property as much. So the banks don't trust you as much. They also know that you're leveraged elsewhere. So many banks and mortgage brokers struggle with a lower down payment.

It’s important to note too, that the rules for rental properties change dramatically after four units. Once it hits five units a property is considered commercial and are generally managed by corporations rather than individuals.

Another option that’s becoming increasingly popular is short-term rental services like Airbnb. There are pros and cons to this, but it can be possible to make in a weekend or two what one would make in an entire month.

But having an Airbnb business comes with its own necessary skillset - you have to get ratings, the apartments need to be furnished and cleaned regularly and not to mention the many horror stories of rowdy tenants destroying properties.

And for the most part, short-term renting isn’t possible in Toronto condos anymore - most condos buildings have changed their condo rules and regulations to disallow any short-term rentals. That means buying an entire house before you can start renting it out if you’re choosing to be a hands-off landlord!

If you’re buying a property that you plan to live in, this isn’t so much of an issue. But if you want an investment property there can be more hurdles than you might expect. When you’re trying to finance a home banks look at your potential income versus your expenses. It can be difficult to prove how much your income will be if there are no tenants living there already and they're also going to be looking at whether there are separate hydro meters or gas meters.

On the other hand, in properties with existing tenants, it’s generally impossible to raise the rent beyond two percent a year. That can mean some rental properties earn less than market value.

If buying alone isn’t a viable option you can always try to find partners to help ease the cost burden. This situation is fairly common and this kind of partnership can definitely help with the upfront cost, not to mention the responsibilities managing the property. But it does present its own problem:

The big thing with that though is that banks don't like to sell to companies. They want to sell to individuals because individuals are then more individually liable. So there's pluses and minuses to that scenario too.

Factors You Need To Consider When Buying A Rental Property

Now that you’ve decided what type of landlord you want to be it’s time to think about buying properties.

Purchasing a rental property presents a unique set of problems. Regardless of whether you want to rent out the basement of your home or turn a building into four separate units, you’re going to have to jump through extra hoops.

When you set out to find a good investment property, location is your biggest asset. For most tenants, access to transit will be a major deciding factor. Thus, the closer you are to a subway, GO Train, bus or streetcar line, the higher you’ll be able to charge for rent. Even what street the property is on can make a big difference!

There are also great advantages to houses that have already been divided up and have laundry in the building. You can also charge higher rents for parking.

As the city becomes more congested, renters care less about outdoor space, but on the other hand, homes with secondary entrances are a big plus:

If there's a separate entrance through the basement that you don't have to build and dig down already into the foundation that's a plus for people that are looking for a unit to convert.

Most developers are looking for duplexes, triplexes and fourplexes that have already been converted. Similarly, the life of a new landlord becomes much easier when kitchens and bathrooms for individual units are already in place.

The banks tend to look at one thing: the income the property will generate versus how much it will cost to run. This usually means that properties which already have tenants get financed more quickly:

If it's currently rented it has cash-flow. So the banks are more friendly towards that then guessing how much it's going to potentially rent for.

Also, if you’re not an owner-occupied landlord, the banks don't trust you as much and they know that you're leveraged elsewhere. Similarly, if you want to turn to Canada Mortgage Housing Corporation or GenWorth to help assure the banks, that’s not quite possible for investment properties, since you have to qualify with a downpayment of 25 percent:

So you're lucky if you can find a bank that does 20 percent.

How To Love Your Tenants

We talked about many important factors, but at the end of the day dealing with tenants is the primary job of a landlord.

So if you’re thinking about getting into the landlord business remember that, in Toronto, tenants come first. This can cause some headaches, but people will always need a place to live. Toronto’s vacancy rate is 1.3 percent, which means there isn’t a lot of spaces but a lot of competition. So there are good tenants to be found, and good relationships to be built. You just need to do the work.

You have to keep in mind the tenants' rights - if you decide one day to sell your property, having a tenant can cause setbacks and it can affect the market value of a property because you can only make the rent go up one percent a year.

Also, you can’t break a lease, so if the landlord has the property rented for the next year and they sell it, the new owner has to take on the tenant. The only exceptions to this are if the new buyer or their immediate family member plans to personally occupy the rented space.

About choosing the right tenants, many landlords don’t like pets for the sole fact that they create more wear and tear on the property, but pet owners make actually good tenants:

To me, it means they're more caring people who are actually responsible. They have to be home and they take care of their valuables, just respectful generally speaking.

Also, couples usually make good tenants, but then again the old stereotype that single women make the best tenants is often true.

You should also be looking for tenants who will stay as long as possible. If you have no plans on selling the property in the near future, having a tenant who doesn’t want to move can be great.

Past landlords are your best resource. Talk to them about your potential tenants to see how long they've been in one place or another. See how loud they are, ask about parties, hear the complaints.

Also, families who come from overseas often have cash-in-hand, which may mean larger deposits, but not knowing their history can be worrisome, so you do have to do your homework.

Yet, there are no hard and fast rules. There are always exceptions and many times it comes down to the feel you get from an applicant:

We've had one situation where we had a revolving door of students but it actually worked rather well. It was just one guy after another that would rent it to his friends and his friends would take over the lease and that actually worked!

Taking care of your property can save you money (since you’ll be charging a 10-15 percent cut of the rent and charging for any expenses), but it can also take up a lot of time and energy.

There are two ways to deal with this. Hiring a property manager or doing it yourself. There are pluses and minuses to each. Doing the work yourself can save you money, but it can also take up a lot of time. On the other hand, property managers can charge a lot, but they leave you free to pursue other interests. Ultimately, it’s about deciding what works best for you.

Up-And-Coming Neighbourhoods

Kinnear says it’s difficult to know which neighbourhoods will attract people in the near future, but she’s particularly fond of Mimico and South Etobicoke right now. According to, the average price for a home is $609,400.

What's good about Mimico is there's a GO train station so it's easy to access. Same with Long Branch. So instead of having the subway, the next best thing is to be near the GO Train.

The average price in Long Branch will run you $602,900.

Queensway West, near Royal York, also looks like a good investment these days according to Kinnear:

It doesn’t have a real name yet. Any neighbourhoods that don't have a real name yet that's a pretty good rule of thumb. They're not really well known.
There are other areas of the city that typically have higher crime rates, but that means properties there are more affordable. And Toronto is a city that changes quickly these days, so an investment in a less-reputable neighbourhood now could pay off in the future.

It used to be very common for people to rent out rooms in their homes and from new homeowners to people who have lived and owned in the city most of their lives, becoming a landlord is increasingly necessary. Fortunately, it can also be a rewarding experience, so don't be afraid to go for it!


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