6 Ways to Avoid the Tenant From Hell

 While there’s tremendous success to be had in the world of investment properties, the unsightly truth is that one bad tenant can cause a monumental setback.
It’s hard enough to keep up with wear and tear on your investment property without having to deal with disgruntled residents causing willful and severe destruction to a home. From “Sharpie parties” — where tenants invite friends over to vandalize the home with markers — to “indoor swimming pools,” where renters flood the premises and take a dip, there’s no shortage to the devastation that tenants can create.

Of course it’s not always so dramatic, but the problem of trouble tenants is quite widespread. In a poll conducted by Vancouver-based newspaper The Province, 71 percent of landlords say that they’ve had problems evicting a renter despite justifiable grounds. Late rent payments, broken appliances, and disputes over damage deposits are some of the most common issues that landlords face. The costs involved with repairing damage left by a less-than-upstanding renter, not to mention the time and money that it takes to pursue an eviction, can be enough to strike terror into the heart of even the most seasoned property owner.

The good news is that an ounce of prevention is still worth a pound of cure. While you can’t always foresee issues with renters, there are steps that you can take to drastically reduce the chances of problem tenants gaining access to your rental in the first place.

Having an airtight tenant screening process is one of the best ways that you can protect yourself and your properties from potential devastation. Let’s look at a few tasks that can help you build a metaphoric hedge around your property that helps prevent unsavory tenants from getting in.

1. Require a Tenant Application

The right questions can help you to sift through unqualified tenants at the start. Draft an application form and have it ready for every prospective tenant. Ask each adult to provide basic information, such as name, date of birth, contact information, emergency contacts, and request similar information about any children who live with them.

In addition to asking the date they hope to move in, ask these questions:

• Do you have any pets?
• Do you smoke?
• Have you ever been evicted?
• Have you ever been convicted of a felony?

Be sure to request references, employment information, and a way to contact their previous landlord. Consider asking an attorney look over your form, to ensure both that you’ve covered your bases and that you haven’t asked any questions that could be considered discriminatory or cause legal issues.

2. Start Interviewing

The interview is vital. This is your chance to screen prospective tenants and find out whether or not they’re an ideal match for your property. Good questions to ask include:

• Is your income the same every month, or does it vary?
• Why are you moving?
• Describe your perfect rental space.
• What’s your favorite or least favorite thing about the place you’re living in now?

The interview should give you a good idea about whether or not the prospective tenant will be able to afford the rent and abide by the terms of your rental. This About.Money article, “Ten Questions for Prospective Tenants,” provides a fairly comprehensive list well worth considering for the tenant interview process.

3. Conduct Diligent Research

Always follow through with a check of potential tenants’ references, credit, and possible criminal background. Verify important information that the tenant provides, particularly current employment and previous rental history.

When contacting references, ask how long each person has known the prospective tenant and for their opinion on the reliability and character of the tenant. It’s especially important to get in touch with previous landlords, who may be more likely to paint an accurate picture for you. Current landlords might be desperate for a problem tenant to leave and may gloss over the truth in an effort to get the tenant to move faster.

4. Watch for Warning Signs

Look out for red flags that can alert you to a potential problem tenant. If the applicant makes you feel nervous or seems desperate to move in as quickly as possible, that could be a warning sign.

And watch out for candidates who question every aspect of your rental application process, as this may be an indicator of someone who will be unwilling to abide by your rules when renting. Legitimate candidates understand that it’s important for you to conduct credit and background checks, and most will appreciate the care you take in selecting tenants.

Be sure to compare the application and your notes from the interview to what comes up on the background check. Be extremely wary of any discrepancies.

5. Keep It Legal

Of course, as important as it is to have a solid tenant screening process, it’s also important to ensure that your process complies with the law. While you should watch out for warning signs, never screen tenants based on feelings alone. Be careful to use the same qualifying procedure for all applicants, and treat all candidates equally to prevent accusations of discrimination.

You should also use the same process each time you deny someone, regardless of the reason for denial. A simple e-mail highlighting the reason is sufficient. Doing this properly and in writing can help to prevent any accusations of discrimination. As another legal side note: Be sure to check local laws before collecting application fees or a deposit, as this practice may not be legal in all areas.

6. Get It in Writing

Finally, once you have found a tenant for your property, it’s important to make sure you have a rental agreement in place. This document should contain clear guidelines and will help ensure that you and the tenant are both on the same page, preventing problems from arising later on due to miscommunication. The agreement should include the names of all the residents, occupancy limits, and rental terms, including late fees, acceptable payment methods, and charges if a rent check fails to clear.

While many landlords are hesitant to implement a tenant screening procedure because it’s time-consuming, in the end a solid screening procedure can save time and prevent a world of hassle. You’ll be able to weed out problem renters and save yourself from costly evictions and extensive repairs down the road. Finding a tenant that’s a great match for your property is more than worth the time and effort it takes. You’ll thank yourself later, and your wallet will too. 

by BRENTON HAYDEN, REPRINT

10 tips to help you get the best mortgage

So you’re looking for the best mortgage terms known to humankind. Well, chances are, you won’t find them. Or, even if you do, trust that the search won’t be easy. You will need to do a lot of looking to find rates that are even halfway decent. Often, what happens is this: you end up paying more for the interest than for the full amount of the principal or the loan itself.

Don’t dig yourself into that trap. Here are some of the best mortgage tips to cut down on your expenses.

1. Supposing all the terms are equal, choose the bank that provides you the lowest spread in interest formula. This results in smaller interest expenses.

2. Pick a fixed rate for the rest of your loan’s life. Do this only after you have found a rate you’re comfortable with. With a fixed rate, you won’t have to worry about ugly surprises or shocking increases down the line.

3. If you feel it’s better to get a loan with an adjustable rate, be sure to reprice quarterly. However, be sure to do this only if you believe the rates will drop lower in the short term and if your bank is offering a rate cap.

4. Increase either your down payment or your equity so you borrow very little. However, if you can invest more at a higher rate, go ahead and put down the smallest equity possible.

5. Lower your interest expenses by shortening your loan term.

6. Go with a declining-balance amortization schedule. The best mortgage experts in the business say this will help you pay lesser interest in the long haul.

7. Pay every two weeks. This may seem tedious to you but there’s a reason for it: it lets you pay off the loan quicker and lets you save on interest in the long run. Or, you can make pre-payments on the principal; this lowers your total interest expense.

8. Consider refinancing the loan if the rates drop. There is a right time and a wrong time to refinance. However, given that rates are lower now than they ever were, it makes a lot of sense to refinance while you can, when you can.

9. Negotiate for some fees to be waived. You may think it’s possible to get some of the settlement fees to be waived but it’s not. Just ask; you will be surprised what a few questions here and there can do.

10. Shop around. You will never find the best mortgage if you do not shop around. Different groups offer different terms. Here’s an insider’s tip to getting your bank to offer you lower interest rates: get the bank to consider the business relationship you have. If you have significant deposits, for example, they just might reduce the interest you need to pay.

There are mortgages, and there are mortgages. Why settle for anything less than the best? Use these 

10 tips to help you get the best mortgage. You won’t be sorry once your wallet starts feeling the difference.

By  Eric  Smith

Should you boost your income or build your assets?

When it comes to money decisions, it can be hard to figure out the right thing to do. Money is about power, emotion, morality and security, among other things. So in this space, we gather a few experts to weigh in on a financial quandary.

The question: Should you focus more on boosting your income or building your assets?

Robert Kiyosaki, author of Rich Dad Poor Dad and Second Chance: “When you work for income via a paycheque — even high and/or steady income — that income stops when you stop working. It’s you working hard for money for a lifetime. When your income — or a part of your income — comes from assets, it’s like having your money work for you 24/7 instead of you working for money and typically paying higher and higher taxes as your paycheques increase in size.

“While there isn’t anything wrong with working for a paycheque, it probably isn’t the best road to creating the wealth and peace of mind that so many overworked, super-stressed and stretched-to-the-max [people] sorely need. Investing in assets, even in small ways, can build wealth and deliver a lifetime of income even if or when you stop working.”

Sheila Walkington, co-founder of Money Coaches Canada: “Your ability to earn an income is your biggest asset, so focusing on boosting your income or at least maintaining your ability to earn a good income and keeping yourself employable is very important. Increasing your income will open up more opportunities to save, pay down debt and to build the life you want.

“But earning more money is not always the answer. Often the more people make, the more they spend, and this can get people in trouble. So the key is to live within your means while also building a financial foundation for a comfortable future/retirement.”

Preet Banerjee, author of Stop Over-Thinking Your Money!: “If financial success was all about increasing income, then celebrities, athletes, doctors, and other high earners wouldn’t have any money problems. Of course you should try to boost your earnings, but the truth is we don’t have as much control over that as we do on what we do with what money we earn.

“Focus on the fundamentals. Whatever you earn, spend less than that. Building assets like investment portfolios and home ownership gives you a base to work from in case any risky pursuit of a higher-income-at-all-costs strategy doesn’t pan out. Once you’ve laid the foundation, then you can focus on expanding your income through less traditional methods. Getting rich slowly tends to work better than always swinging for the fences, with the possibility of striking out.”

by MW Leong Financial Post

Rate shopping sites…tested again.. and failed again.

A few years ago, I published a study on Rate shopping sites.   These sites were gaining popularity with consumers as a  place to go if you wanted to get the best rates.  And they attracted a lot of attention.

You know the sites… they have catchy ads like ‘shopping for the Best Mortgage rates in Canada’ or ‘comparing Canada’s mortgage brokers for the best rates’.
Hey, who doesn’t want the best rate?  These ads work. Canadians were clicking these links to get more info. 

Sounds great, right? Yet, it’s not.

LOWEST RATE OR PAY THE LEAST AMOUNT OF MONEY TO OWN YOUR HOME?

The original study found that consumers wouldn’t ask too many questions. They were too rate focused and didn’t focus on the terms of the mortgage.  Most consumers don’t bother asking any further questions or spend the time required to read the 30 or 40 pages of legal jargon in their mortgage.  And this where it can become a costly experience.

The original study showed that if you asked a borrower whether they wanted the ‘lowest rate’ or ‘to pay the least of money on their mortgage’ , the average person would choose the latter.   And make no mistake, these are two very different things.

My original study revealed that these sites didn’t shop all mortgage brokers or lenders.   The sites listed only a small handful of brokers.  Only brokers that got in early, would be compared….and only brokers that were willing to pay a fee per lead, can participate.   The ‘low rates’ were NO FRILLS products, in most cases…products that carried restrictions, limitations and inflated prepayment penalties.   Hardly a true comparison of ‘All mortgages and All mortgage brokers’.  And hardly unbiased.

Today, not much has changed..  well, that’s not true.   They’ve become worse.  Here’s an update:

• One of these large sites was purchased by another online rate site.  A quick review of their current rate offerings revealed they no longer had competitive rates.  It’s advertising rates well above the best in today’s market.  They seem to just be promoting Banks rates… which are higher than broker rates.
• Another popular site has a BIG conflict of interest, in my opinion.  They decided to start their own mortgage brokerage but are still running and operating their Rate shopping site.  Seriously, it’s true!  This raises the obvious question, ‘how can they remain unbiased and neutral when they own one of the brokerages they are comparing?’  It’s like asking TD Waterhouse or Investor’s Group who has the best Investment Advisors?   Or like asking Burger King or McDonald’s, ‘who makes the best burgers?’.   If I ask Rogers who has the best cell service, I wonder if they will say ?  
• And yet, you’ve see these sites advertised and promoted in our country’s largest newspapers, as unbiased and independent!!   Anyone else see a problem with this.

HOW TO PAY THE LEAST OF AMOUNT OF MONEY TO OWN OUR HOMES

Hey, if you want to compare rates, it’s easier today. Just contact an experienced mortgage specialist.   Ask a friend, your real estate lawyer, your real estate agent or financial advisor for a referral.  

by Steve Garganis

Should you withdraw from your RRSP to buy a house?

Certified financial planner Jeanette Brox says young Canadians still have a good reason to withdraw from their retirement plan to buy a house at current prices.

Ms. Brox, who works for Investors Group, says taking money out of an RRSP is the only way some first-time buyers can scrape together enough for a down payment.

“I think it’s a great idea, because one of the hardest things to do is get a big down payment. If you’ve got a couple with substantial amounts in their RRSP, you can take out 50 grand,” Ms. Brox says.

Canada’s Home Buyer’s Plan allows a first-time purchaser a one-time chance to withdraw up to $25,000 from their RRSPs, with the condition that the money be repaid in 15 years.

“When the program first came out, I wasn’t all that in favour of it,” says Ms. Brox. But when you see the prices of houses, it is getting that much tougher to buy.”

Dipping into an RRSP can help first-time home buyers avoid costly mortgage default insurance, which is required by Ottawa if you have a down payment of less than 20%. That insurance premium can run as high as 3.15% of the value of your loan if you only have 5% down, the minimum amount of equity required by a regulated financial institution.

Ms. Brox says borrowing requires discipline, because suddenly you’re not just saving for retirement, you’re also paying back a loan to your RRSP.

“I think most of my clients are [paying it back], but the bottom line is you are going to have to make some sacrifices. Do you need that extra car?” she says.

Repayment has become a problem for some Canadians, with up to one-third of first-time buyers never getting around to it, said Phil Soper, president of Royal LePage Real Estate Services.

Repayments are due in the second year following the year you made the withdrawal. (If you made a withdrawal sometime in 2015, your first payment would be due sometime in 2017.) Generally, you repay 1/15 of the total amount you withdrew every year until the loan is repaid.

The penalty for not making a repayment for a year is that the amount will be included in your income for that year. Even bankruptcy won’t get you out of repayment; you still have to make the annual repayment.

Mr. Soper says one reason the federal government has probably been loathe to increase the $25,000 withdrawal limit, even in the face of rising prices, is the repayment problems. But he’s still a proponent of the plan because it gets people to that 20% down payment threshold. That makes a $250,000 home, even if it’s a high-rise condo, attainable in most markets in Canada.

Mortgage broker Calum Ross says that at this time of year people have a unique opportunity if they are thinking about buying a home in the near term and have RRSP room. He suggests making a major contribution to your RRSP and simply withdrawing the money shortly thereafter — there is a 90-day period during which it must stay in your account — to buy a home.

“Even if you have to borrow, your debt-servicing numbers will still work,” says Mr. Ross, noting that the borrowing money is just being used for an RRSP contribution. “There are a lot of high-income professionals [who], because of a high barrier of entry into the market in some high-value markets, are still not homeowners.”

Royal LePage’s Phil Soper says he expects the housing market to slow down a bit, which could mean more activity from first-time buyers who see more affordability and are willing to access their RRSPs.

While people are increasingly using the tax-free savings account to save for a home, Mr. Soper says it shouldn’t be compared with the RRSP because it doesn’t allow people to reduce their tax burden and use that contribution to buy a home.

“The TFSA is money you’ve already paid tax on, so you’re not saving anything. It’s just a handy place to have money appreciate,” he says.  
by Gary Marr