How To Screen Tenants

by Mr. Cheap

This post is part of a five-part series about tenants leaving a condo and finding and screening the new tenants:

I recently had my tenants give me notice and had to go through the process of finding tenants for the second time. I initially expected that it would quite straightforward, seeing as I’d gone through the process before and put quite a bit of thought into it at the time. Surprisingly, I found it quite an anxiety-producing experience: I guess I was out of practice after 3.5 years. Luckily, a couple of my favourite Money Smarts commenters, Rachelle and Alexandra, were willing (and very able) to answer questions, and I think the process went as well as could be expected.

I’ll try my best to identify which suggestions were from who. My apologies in advance if I take credit for something that was actually from one of them (I’ll grab any credit that isn’t nailed down).

Why They Left

I gave my tenants a rent increase earlier in the year, and they gave me notice less than 2 months later. Since rent increases require 90 days notice, and terminating tenancies require 60 days notice (and they paid for the last month’s rent when they moved in), they actually left before the increase took effect.

It’s a VERY debatable point with landlords: do you raise rent on good tenants? I remember one place I was living, they increased my rent from $650 to $700 / month and that was the straw that broke the camels back and I moved in with my girlfriend at the time. Their apartment sat empty for 2 months after I left, which obviously lost them a lot of money. There’s some point when tenants will leave, and the rent going up gets them closer to that point. On the other side of the coin, moving is a pain in the butt, and has a number of expenses associated with it as well. If you’re going to pay more than the increased rent over the next year on the move, are you really saving anything? Also, tenants often get distorted views of “market rent”. They think of prices in terms of what apartments cost last time they were apartment hunting, rather than what the current prices are (and are often shocked when they start hunting and everything is more expensive than they remember).

Given that I only raised my tenants’ rent by 2.1% (and this was after 3.5 years), I find it hard to believe this would have prompted them to move. They also had told me they were considering moving, as one of them was going to school in another part of town and it would have been a brutal commute. I acknowledge that this MAY have just been them being polite, and I drove them out (I’m certain that would be the interpretation of the “never raise the rent” crew).

The reasons to raise the rent is obviously a business decision. While a 2.1% increase of the gross rent may not seem like a lot, when it gets added to your bottom line it can be significantly (this would have been more than a 10% increase in my monthly cashflow).

The new tenants ended up paying the increased rental amount, so the market determined this was a fair price.

Notice to Vacate

I’ve had a very good relationship with the previous tenants, but I certainly wanted to do everything “by the book”. They just wanted to informally tell me when they would move out, but I insisted that they get me an N9 form. They were confused and bothered by the fact that, in Ontario, tenancies end on the last day of the month, but start on the first day of the month. I was sympathetic to this, and thought it was a fair question “where am I supposed to stay overnight with all my stuff?”. Both Rachelle and Alexandra had similar reactions to this and basically said “how is this the landlord’s problem?”. In the end I tried to soften it a little, while holding firm by sending them the following info:

Unfortunately, that is how it works in Ontario (that you need to vacate on the 30th). Surprisingly it isn’t a problem as often as you’d think. Often tenants won’t be in the new unit (they might leave a couple days early from the unit you’re moving into and the new landlord may let you in on the 30th), or the new tenants don’t need the old unit on the first, or the new unit has been empty (like when you first saw the unit you’re in after the renovations), etc., etc., etc. Some buildings have storage they’ll let you use overnight. I once had to move all my packed belongings to a friend’s living room over night (and then move everything again into the new unit the next day). Some people rent cube vans and use them as overnight storage as well as transportation.

They were still unhappy, but in the end, it worked out exactly as I suggested (they were able to move into their new place 1 week early). They couldn’t understand why I wouldn’t let them stay a few days into the next month, but obviously this would have cost me an entire month’s rent.

Another friend of mine who owns and rents a bunch of units says that he will leave units empty for a month for clean-up and repairs between tenants. He acknowledges that this is a big expense, and in part because of this he really looks for very long term tenancies (and has been quite successful in setting up his units with these). This was a higher expense then I was willing to take on between tenancies.

Thanks again to Alexandra and Rachelle! More details in future posts…

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