It sounds simple enough. Buy a place. Rent it out. Get the cash. But despite how easy it sounds not everyone is cut out to be a landlord.
So, how can you tell if property fiefdom is right for you?
Well, you can do it the hard way, like my dear, dear friends. We’ll simply call them Micaela and Don.
Micaela and Don bought a lovely brick bungalow in Toronto’s east-end, just on the edge of trendy East York and just north of the Danforth strip (known for its Greek food, wonderful community feel and mish-mash of post-war bungalows and beautiful brick homes).
After 18 months of raking leaves, shovelling snow, unclogging drains, replacing the eavestroughs, and other minor repairs, both Micaela and Don said enough was enough. That’s when they came up with a plan: buy a condo that included a few luxuries (such as on-site pool, workout room and sauna), rent out the bungalow and use the cash to help pay down their new, larger condo mortgage. For me it was a gold star moment: using one asset to pay for another asset — always a good strategy.
But just because a plan looks good on paper, doesn’t mean it’s the best option. Pretty soon Micaela and Don had to admit: they hated being house owners—having to deal with maintenance and repairs—and they hated it even more when they were doing these tasks for another person.
A few months later they sold the bungalow. Sure, they lost a $363,000 asset, but they also got a huge chunk of money that they used to pay down their condo mortgage. (Micaela and Don were judicious about paying down their mortgage and had over $80,000 in equity in the bungalow when they sold it.)
Of course, there are other, perhaps easier ways to find out if you can hack the vermin-killing, rent-collecting, general go-to-gal role that is the ancillary landlord.
One way is to talk to people who’ve done it before. This is what I did — partly because it’s part of my job description and partly because I really wanted to know what it was like to be landlord.
You can also read the experiences of other landlords in various forums. Good sites include: Canadian Money Forum’s real estate forum, the Ontario landlord forum, the Landlord Association (based in Pennsylvania, but lots of info including newsletters and a discussion group).
Or you can read a book on being a landlord and extrapolate whether or not it’s a role you’d relish. A quick search on Amazon will give you at least a couple of options, including a rather detailed and technical book by Douglas Gray and Peter Mitham (The Canadian Landlord’s Guide). Another resource was written by an Alberta nurse turned real estate investor. Shannon Pineau started to research real estate investing 10 years ago, but didn’t jump into the market until 2005. Now, she owns two properties in Red Deer, one in Calgary and recently purchased a commercial complex. “Being a landlord gives me a real sense of security,” said Pineau when I spoke to her last month. “I have something to fall back on.” Find her step-by-step guide here.