Before you decide to invest in a rental property, it’s important to note that, although it can be an excellent investment that provides you with regular cashflow, it isn’t a passive investment like a mutual fund. As a landlord, you are running a business and dealing with all of the complexities it entails.

1. Find and buy the right property

As a landlord, the type of property that you own will determine how much revenue you can expect. List some locations and the kinds of properties you desire. Research the average rent in the neighbourhoods that pique your interest to determine how much you can ask for. Consider how far you want to live from your rental property. Having a property that’s located close to you will simplify showing the property to prospective tenants and make dealing with maintenance issues less of a hassle.

If this is your first rental property, you may want to start small. There will be unforeseen expenses that you’ll want to be able to accommodate comfortably.

2. Have a business plan

Being a landlord is much like running a business. To generate a profit, your expenses must be lower than your income. As the property owner, your costs may include mortgage interest, taxes, ongoing maintenance, potential legal fees, and other expenses related to owning the property.

Start by setting an accurate expectation of what you can ask for in rent by looking at similar properties in the neighbourhood. Then determine what your costs are. Call up your bank to discuss mortgage rates and speak with your insurance provider to get a quote on landlord insurance. Having accurate numbers will avoid disappointment down the road.

3. Read the landlord-tenant laws and write a lease

As a landlord, you will have new accountabilities and expectations. Try to learn the landlord-tenant laws that apply to your jurisdiction. Each province will have its own unique set of rules. A quick search online will help you find provincial resources to assist you as a new landlord. It’s also a good idea to reach out to your municipal government to confirm that the property complies with municipal bylaws and regulations.

The lease should spell out the duties and responsibilities of the landlord and tenant. The lease is important in case the relationship between you and your tenant becomes sour. There are standard lease contracts available online that you can adapt to your requirements. In the lease, be specific about your expectations of your tenants. Will you allow pets? Is it a strictly non-smoking unit? Are there parking restrictions? This is your opportunity to define your expectations.

4. Pick the right tenants

Your tenants can make or break your experience as a landlord. A good tenant will be a pleasure to deal with and respect you and your property. Be sure to screen potential tenants by having them fill out an application. You may request information about the tenant’s current residence, rental history, and employment history in the application.

Remember to always ask for references from past landlords and current employers and get a credit check through an agency like Equifax or TransUnion.

5. Maintain your property

As the landlord, you are responsible for the maintenance of your property. Before the tenants move in, make a record of the condition of the property. Be sure to conduct regular inspections and inform your tenants how often you’ll be doing them.

It’s essential to make yourself available to your tenants in case of an emergency. Provide them with multiple contact points where they can reach you.

6. Research your insurance coverage

Look into insurance for your rental property to make sure you have coverage as a landlord. Your policy does not cover your tenant, and you may want to recommend they secure renters’ insurance. It’s affordable and will give them peace of mind.