Natasha Cultraro is a real estate investor and owner of Investors Choice Property Management company. She shares her recommendations and advice on successful property management in Oshawa and the Durham region.
Alfonso: Real estate entrepreneur, founder and owner of Investor's Choice Property Management. Natasha Cultraro, bought her first investment property in 2006. And through trial and error learned how to become the best Oshawa property manager while developing expertise in several real estate investing strategies, using creative financing techniques to build her portfolio, including investing in vacation rentals in Costa Rica where she's joining us from tonight.
So, Natasha, it's a pleasure to have you on tonight. And I know property management is a skillset unto itself and really important to the success of really every real estate investor. And each area has its nuances. So, we're really excited to have you on. What do we need to know about property management?
Natasha: Thank you so much Alfonso. Thank you so much for the introduction. I've got a property management company and we serve Durham region as well as Clarington. And there are a lot of similarities when it comes to all rental properties in Ontario, because we're all governed by the same landlord tenant board, but there are a couple of differences that I want to share with you today.
When it comes to property management, the most important thing is to make sure that you've got an excellent tenant screening process because when you place good tenants in your property, then property management is just downhill from there, you don't have to worry about problems down the road. And so if there's one thing you can get really good at, it is tenant placement.
Next, I would recommend that you educate yourself regarding the Ontario LTB forums and how to deliver them. For example, a notice of rent increase form. Don't just email your tenant and say, hey, by the way, I'm increasing rent next month as of this date, you have to use the property form, and a notice to end a tenancy early for nonpayment of rent as an end for notice to end your tenancy for interfering with others damaged or overcrowding is an N5. The N5 is a common catch-all complaints form. A notice of entry is a very different form.
So, the reason I lump these together is because these are the most common forms that you're going to serve your tenants. And it's very important that you serve them properly. If you were to tape it to your tenant's front door and you got to court, many months later it would just be thrown away because that's not how you deliver that form.
The notice of entry, however, must be posted on the door. So, just these little things can make it very hard to succeed in real estate, especially with the LTB, more tenant bias than not. And so it's very important to educate yourself and understand these little nuances as well as making sure you serve a certificate of service with all of your forms.
Just recently, the LTB has joined us in the 21st century and is allowing us to serve notices by email, but only if you have an email communication consent form signed with your tenant and it has to be the LTBs form. So, if you go to the LTB's website, you'll not only see all of these here, but you'll also find that consent to email communication form.
If you have your tenant sign it, that makes serving these forms a little bit easier because then you can go and send them through email and they will still be valid. Keeping your property in a safe, functional, and clean state. This is our primary responsibility as a landlord. We don't want any tripping hazards. We don't want tenants living through weeks and weeks of construction. Inspect units and check fire alarms regularly. We check fire alarms twice a year, and we do a full interior inspection every fall.
Establish and maintain good relationships with your tenants and really anyone you do business with. And put everything in writing, because if you're talking to a tenant and you negotiate something and you don't follow it up with an email that the tenant acknowledges and you get to court because something went wrong or there was a misunderstanding. If you can't prove it, if it's not in writing, then it never happened.
And so it's always better to be safe than sorry. Okay. Now, let's jump right into Durham. One thing that's going to be different in every region within Ontario are the different tenant profiles. Now, I like to categorize them into three groups. There are the type "A" great tenants, "B" acceptable tenants ,and "F" unacceptable tenants. And you can see that a large portion is unacceptable.
So, 75% are unacceptable tenants, which means that every response you get to your Kijiji ad or your Facebook marketplace ad for your vacant unit. One out of four of those will be unacceptable tenants that you'd like to place. So, you're making sure that you're weeding out all of the ones that are not meeting your criteria.
Now, it's a little bit unintuitive that we have 16% great tenants and 8% of acceptable tenants with the understandable majority being the unacceptable. And this has changed recently, and I believe it's because of the increased infrastructure and investment in Oshawa and the surrounding areas. And also the higher prices of Toronto are pushing a lot of people and renters out to the Oshawa area.
So, we have a better and greater tenant profile to work with. Those "A" tenants are the ones working in healthcare and education. The acceptable tenants are working in trades. The GM plant is hiring again, which is good. And the unacceptable tenants are really those that are not employed or they don't make enough income. One more thing I wanted to add here is that great tenants, you know what that looks like: good credit, good income, good communication. They take care of the property, but "B" tenants, even though they may have poor credit, will sometimes have a guarantor that will speak for them, which would be great.
They still need that good income because no matter what, if they don't have the income and we use a three times rule to rent to income, then they're not going to make your payments. And that's going to be a disaster. Sometimes they do have late payments, these "B" tenants and they do create some wear and tear. And I think the most annoying thing about the "B" tenants is that they can be high maintenance.
So, they'll be calling you all the time, asking you for this and not, and that sort of thing, but they're still good now. Oshawa and the Durham region have different pockets that will attract different kinds of tenants. So, we have a lot of North Oshawa that you will attract those "A" tenants and that's great, and you place them and they're wonderful, but there are some other areas of Oshawa where you're going to have to resort to "B" tenants.
Central Oshawa, South Oshawa, these are harder to place because they're less desirable. And so someone who is going to be a tenant is not going to want to live there. There are a lot of "B" tenants that are available and are looking that we can place in those areas, but be aware of those unacceptable. One more word on bad credit of the unacceptable tenants is that the difference between the bad credit and the acceptable low credit score is a couple of things.
So, with a "B "tenant, you can have a guarantor that will help out. But the "F" tenant usually doesn't have a guarantor. Now, when we talk about credit, it's not just the credit score because we place a lot of people with bad credit that do really well for us that are really great tenants or good acceptable tenants.
And the difference is that we're not only looking at that credit score, but we're looking at the whole credit. And when we do that, we get an idea of what this tenant is like, is this repeat bad behavior that we're seeing? Or is it maybe a divorce or separation that has caused the tenants to the tenant's credit to be damaged? But in the past, they always made their payments on time. And even recently they don't have any payments that are more than 30, 60, 90 days overdue. So, that's a difference there.
Okay. Let's talk about utility management in different parts of Ontario. Different practices are more common than others. So, you might want to consider a non inclusive rent, or you may think about doing the base rent plus utilities on top. And what I will recommend to you in Durham region is to take that utilities on top of the base. Now, let's talk about a couple of examples.
So, a single family home. What you want to do is you want to place the electricity and the gas utilities in the tenant's name. This means you're going to cancel your account on the last day, before the last day of the month or the day before your tenant moves in and give the tenant, the phone number for these utility companies, have them call on the first day that they move in and set up their account. Water is tricky though, because landlords will always be responsible for the water payment.
There is a form in Durham region that you can use called the landlord tenant form. And you put in your water meter number, your tenants name, and you sign off at the bottom. And what this does is, it places this bill in care of the tenant. This is what you want because you want the bill to be mailed to the tenant with the tenant's name on it.
So, they can take that bill and open it and look at it. However, if you're not on top of this and watching what's happening, they may not pay it. And after if you don't pay attention, months and months can go by, maybe a year or so. And if they haven't paid it, that's a huge water bill that the landlord will be responsible for.
Next is duplexes. There are a couple of ways to do it. There are lots of ways to do it and what we would recommend is doing a split. So, if you've got a three bedroom upstairs, two bedroom downstairs, duplex, maybe you want to split the utilities and have upstairs responsible for 60% and downstairs responsible for 40%.
Now, ideally you're going to have these bills in your name. So, you know that they're getting paid. And what you want to do is you want to collect monthly utility deposits. So, this means that the base rent, for example, will be $1,600. And then on top of that, they're paying an additional $200 per month as a utility deposit.
And you're going to reconcile the bills quarterly, and provide the statements to the tenants. And if there is a difference, you're going to either pay them back what their overpayment was, where they're going to pay you anything more that they owe at the reconciliation point every quarter. Now, if you have a larger property with more than three units, they usually have separate meters.
So, take advantage of that and make sure that the tenants are responsible for their meters. And also consider a flat rate for water, a small unit, maybe one or two bedrooms in a building would be about $50 a month for water. And most importantly, make sure that you record it properly in the standard lease. Because if you do have to go to court in a worst case scenario, you want to make sure that how it's written in the lease is what the adjudicator is going to interpret it us.
So, on the second page of the lease, where the rent is laid out, it says base rent. And you're going to put in, for example, $1,600 there. And then you're going to add a utility deposit beneath that. And you'll put in your $200 deposit.
At the very bottom of that page, the total lawful rent will be calculated and automatically adjusted to $1,800. And then on the next page, we're talking about the responsibility of the utilities. And so what you want to do here is say the tenant is responsible for say, it's a duplex, upper 60% of the gas, electricity, and water bills. And the tenant will pay a $200 deposit every month. The landlord will reconcile. And any difference will be paid out by the end of that month. So, make sure you put it all in there. It's really important.
Next is the property maintenance contract. No matter where you are in Ontario, it's very important to have a property maintenance contract outside of your lease. And the reason for this is very simply, it's liability protection. Let me backup a bit. Sometimes, people are not sure what property maintenance includes in our verbiage here.
When I say property maintenance, I'm talking about lawn care and snow removal. As a landlord, you have the responsibility of maintaining that property. The reason that you want a contract outside of the lease is because you want somebody to take responsibility for this liability. Really it's liability responsibility, think worst case. If you've got a property with a sidewalk and it wasn't salted somebody slips and falls. The next thing you know, you've got this letter and you're being sued by someone who was walking on the street and slipped. That's why you need this property maintenance contract.
You can do it with your tenant, or you can do it with a third-party professional, but it must be separate from the lease. And the reason for that is because if it's within the lease and there's a worst case scenario, and you try to say I told the tenant and the tenant signed here in this lease that he will be responsible for snow removal and salting, that would go to the LTB and it would be thrown out because the LTB does not govern this. That's why it has to be outside of that. You would be responsible in that scenario.
Let's talk about a couple of things that need to be included in this property maintenance contracts, include the date and the address obviously, include the fee to pay your contractor. If it's a $0 contract, it will not hold up. You have to put something in there. I would like to put a hundred dollars. And the reason I do that is because when I pay my tenant a hundred dollars to maintain the property, I offset that in my lease.
If their rent was $1,600, for example, It's now going to lease. I'm actually going to sign the lease at $1,700 and the tenant will essentially, with the difference of the two contracts, actually pay $1,600 per month.
What this means is that if the tenant can no longer do the property maintenance services, they are forced to pay the additional $100. You get the full $1,700 in rent and you can use that a hundred dollars to hire a third party provider. There are different ways to do the accounting and the bookkeeping here and the best way, although it isn't some additional work and bookkeeping is to have the tenants send you $1,700 in rent. Then when they send a picture of your property with all of the maintenance completed, then you each transfer them back the $100. That is the most safe way to do that.
It's also important to include the applicable city bylaws. Make sure you understand which bylaws in your city or town that your property is relevant to the property maintenance. So, in Asheville, we've got the Boulevad bylaw and the property standards bylaw and the snow and ice removal bylaw. If worst case, somebody does try to sue you to say, hey, you didn't clean the ice and I slipped and fell. You can pull up this contract and say, look, according to this bylaw, this person is responsible for this and it's this person's liability. It's this person's accountability. It's really to protect you in the end. Make sure you itemize what regular maintenance includes.
Make sure you say cutting grass, trimming hedges, collecting leaves, raking leaves making sure there's no debris. Where are they removing the snow from? Is that the driveway, the walkway, the stairs? Where are they salting? Is it just the stairs? Is it just the driveway? All of that stuff needs to be very clear and lastly include who is to provide the equipment and supplies. I like to have the tenant to be responsible for that because a lot of times, lawnmowers break and they're expensive to fix. If the tenant can provide their own lawnmower, then you're not responsible for the manager, the maintenance of that machine.
Sarah: Amazing. Thank you so much, Natasha. Do you have a pre-made, and I don't know what the answer is to this. I truly don't, but you have a pre-made contract that is for purchase or that somebody can get off of you that's got all the items that you just went through?
Natasha: Yes. And I have it for a couple of different places, the ministry, the municipality of Clarington, Oshawa, Whitby. And if someone sends me an email, I'd be happy to send it to you.
Sarah: I will probably take you up on that one as well, because I think that is genius. That was like some really important nuggets of information to protect ourselves. What areas can you just review the areas that you cover from a property management standpoint?
Natasha: All of Durham region, which is Pickering to Oshawa. And we also service Clarington from Bowmanville to Newcastle. We are opening up to Peterborough. We do have a couple of properties that we're managing in Peterborough. In the near future, we're going to open that up to the public as well.
Sarah: Do you have any midterm for term or is it just more long-term types of tenants?
Natasha: Definitely, long term in Ontario.
Sarah: Thank you so much, Natasha.
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