Early in my real estate career, I hosted a public open house for a colleague’s listing. I arrived, opened the lockbox, and before I even had the key in the door, I got a whiff of that trademark smell: cigarettes, dirt, and cat pee. I knew it would be a hot mess inside – and it was.
It was a solid house in a nice neighbourhood, quite popular with first-time owners. By the look of the place – vacant, filthy, and in total disrepair – I figured someone had taken years to reduce the place to its current state. Imagine my surprise when a self-described ‘nosey neighbour’ popped in and spilled the beans.
No, it hadn’t taken years to get to this state: it took six months. The owner bought the house as an investment and put some dollars into fixing it up. He rented it out right away (easy enough in Guelph with our historically-low vacancy rate for rentals.) Immediately, the new tenants – who seemed nice enough, said the neighbourhoor – cancelled their deposit cheque and made no further payments. It took the landlord/owner over six months to get the couple convicted. By that time, he had fallen so far behind with his mortgage payments that the house was sold under Power of Sale.
The story isn’t unique and it highlights two potential mistakes that novice would-be-landlords make. First, this investor clearly lacked the cash reserves required to get him through a period of rental delinquency. Second, he most likely did not undertake proper due diligence in the process of screening his tenants.
Here is an excellent article with very detailed advice on how landlords can steer clear of bad tenants.