Some argue that the BRRRR strategy isn’t possible in Canada because of expensive home prices in populated areas and Canadian banking regulations. But individuals such as Matt McKeever have shown it’s possible. Especially in smaller cities or university towns.

This article looks a bit deeper into the strategy and reviews some of the things you should look out for if you engage in a BRRRR project.

This heated market may make that a challenge or seemingly impossible. But some homes may remain under market value due to severe flaws that regular homebuyers would run away from.

For example, homes with a strong odour or need for significant repair may ward off buyers who don’t want the hassle of finding contractors and renovators. Yes, the house might smell like cat urine, but that’s also the smell of money to real estate investors.

Analyzing the numbers

A successful BRRRR project relies on the numbers working out. If they don’t, you could end up with a loss on your hands or insufficient cash flow to pay bills on time. This could spell disaster.

The numbers include the property’s purchase price and the cost of renovations, utilities, taxes, and more. You additionally need to figure out your property’s rental price and its potential post-renovation value. The renovated property value ultimately determines how much cash you can squeeze out of the property through a refinance.

Rehab

The rehab portion of BRRRR is usually the most intense. It comes with substantial costs and the management of various contractors and other stakeholders. As a result, delays to your renovation can ultimately throw a wrench into your project.

Areas that provide the best return on investment

Properties that need the most repair are often the best to purchase. The following areas are some of the best rehabs to increase the property value of an old or wrecked home.

• Roofs: Installing a new roof can provide a solid return on investment when it comes to a home appraisal during the refinance stage
• Kitchen & Bathroom: Renovating these two home areas usually increases the home’s value the most. These renovations can benefit your home value appraisal and make your property more desirable to future tenants.
• Adding additional bedrooms or bathrooms: If you’re accustomed to home listings, they’re commonly based on how many bedrooms and bathrooms are in the property. If there’s reasonable space to add a bedroom or bathroom, you could substantially increase its market and rental value.
• Turning a single home into a duplex: This can be a substantial renovation that often requires complex city approvals. But if you turn one house into two, it can mean substantially more rental income too.

Be careful what you take on

You may find some properties at a severe discount due to issues such as mould or damage to the foundation. Although it might seem like a good buy, these issues can often take substantially more effort to repair. If you don’t have significant experience in these areas of home improvement, it’s hard to properly project your costs, which means analyzing the numbers will be challenging.

Rent

If you’ve completed the proper renovations to make the property livable and desirable and the location is good, it shouldn’t be hard to find a great tenant. In addition, renting out the property provides cash flow to pay off mortgage and interest payments. Thus, allowing you to build equity in the house.

However, being a landlord is a job on its own. It involves screening and selecting tenants and responding to maintenance requests. While many may consider being a landlord as “passive income”, you need to be ready to unplug a toilet at 2 AM.

Alternatively, you could solicit the help of a property manager, but this ultimately eats into your profits and could hurt your project’s cash flow.

Refinance

Equity sitting in your investment property is not valuable. However, if you can turn that equity into cash through a refinance, you can invest this cash into another property.

When you head to a lender for a refinance, they’ll usually require a home appraisal. A home appraisal helps you and your potential lenders understand the value of the renovated property in today’s market. A lender may then let you borrow a certain percentage of the appraised value, which is capital you can put to work on your next deal.

Lastly, due to the nature of the loan and the risks that come with a BRRRR project, significant banks may not provide a refinance. However, it’s still possible to refinance through a B lender or private lender in such a case.

Repeat

If you’ve successfully refinanced your BRRRR property, it’s time to look out for your next project and complete the whole process over again.

Overall, the BRRRR strategy is a great way to develop your real estate portfolio. Just ensure you sufficiently analyze the numbers, choose an undervalued property, and proceed with the proper renovations. This will allow you to find quality tenants and obtain a favourable refinance.

The post Using the BRRRR real estate investment method in Canada first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

In a blog post by the Ontario Landlords Association, however, the group claimed that this standard tenancy agreement “…put[s] small Ontario landlords at risk for big problems and huge financial losses”.

So, as a landlord in Ontario, what should you know about this standard lease? This article covers how to use the new Ontario standard lease agreement and what happens if you don’t. This post also goes over some, but not all, the provisions of the standard lease, including Section 15, which lets you add in additional terms; how to evict your tenant; how much rent you can charge; as well as some information on guests and pets.

Overview of the new Ontario residential lease agreement

As of April 30th, 2018, Ontario now has a standard residential lease agreement that most tenants and landlords must use. This standard lease agreement was developed by the Ontario government to outline the rights and responsibilities of both the landlord and the tenant in a rental relationship. And this Ontario rental agreement is mandatory for the following types of properties:

• Single and semi-detached homes;
• Apartments;
• Condominiums, and;
• Secondary units, such as basement apartments.

The government mandated this standard lease to help offset some of the confusion that many tenants and landlords have in the property rental process.

“Renters told us that their leases were often confusing and contained illegal terms. Landlords, especially smaller ones, say a standard template makes it easier for them to do business. The new form we developed helps balance the interests and responsibilities of both parties.” said Peter Milczyn, Minister of Housing and the Minister Responsible for the Poverty Reduction Strategy, in a news release from earlier this year.

How to use the new Ontario standard lease and what happens if you don’t

To simplify the process, the standard lease only collects the most essential information from both the tenant and the landlord. Only information such as names, the address, total rent and its due date, and the rules and terms of the rental unit or building is collected.

If you don’t provide the standard lease for your tenants, he or she can require you to provide one within 21 days. Else, the tenant is allowed to withhold one month’s rent. Additionally, if you still haven’t produced a copy of the standard lease after 30 days from when the tenant started withholding rent, they don’t have to pay that rent at all. The tenant can also end their tenancy in advance if the standard lease isn’t provided. After the 21 days, the tenant can provide you with a 60-day notice to terminate the tenancy.

However, any lease signed before April 30th, 2018 is grandfathered, and tenants cannot request the standard lease unless there’s a new negotiation.

Section 15 — Additional Provisions

While a lot of the provisions seem to favour the tenant, Section 15 allows the landlord and tenant to negotiate additional terms for the contract. Anything goes as long as it contradicts neither the standard lease agreement nor the Residential Tenancies Act. Any terms that do conflict with these two documents are void and cannot be enforced. Therefore, terms such as late rent penalties or mandatory move-out dates cannot be used.

Evictions

An eviction can only happen under situations set out by the Residential Tenancy Act, and this includes cases where the tenant does not pay full rent when due, causes damage to the rental unit, or interferes with the enjoyment of other tenants or landlords. And in these cases, you will need to fill out the proper forms from the Landlord and Tenant Board website.

If you provide an end of tenancy notice, the standard lease also states that the tenant doesn’t have to move out until the landlord applies to the Landlord and Tenant Board to hold a hearing. Only when the Board decides that the tenancy should end, can a Court Enforcement Officer enforce the eviction.

If you, as a landlord, don’t follow all these procedures, then you can face fines of $25,000 if you’re an individual or $100,000 if you’re a corporation.

However, landlords can still evict tenants if they need the property for personal or family use. But due to an additional protection added in September of 2017, the landlord is required to give the outgoing tenant equivalent to one month’s rent. If in this scenario, you end up renting the unit to someone outside of the family or you demolish or convert the unit within one year, it may result in a $25,000 fine.

Rent Increase

The standard lease adheres closely to the rent increase guidelines set out by the province of Ontario. The guideline states that you, as a landlord, can only increase rent 12 months after a tenant first moves in or 12 months after the last rent increase. You’ll also have to provide a written notice to the tenant 90 days before it comes into effect.

How much you can increase rent by depends on Ontario’s yearly guideline. For 2019, the rent increase guideline is 1.8%, which means if you’re currently charging $1000 rent in 2018, you can increase it to $1018 in 2019.

An exception to the guideline is made for special circumstances that are approved by the Land and Tenant Board. Some examples of special circumstances are recent major repairs or renovations and increased costs of security or municipal taxes.

The standard lease also states certain circumstances where you will have to reduce your rent. Circumstances arise if municipal property tax decreases by more than 2.49%, if recent renovations or repairs have been fully paid for, if services have been removed without a reduction in rent, or if a promise upon contract formation was not kept.

Guests and Pets

In essence, the guest section of the standard residential lease agreement states that you cannot stop the tenant from having guests over or force your tenant to provide notice for having guests. You also cannot charge them an additional fee for guests.

The pet section is similar in the sense that you cannot stop your tenant from having a pet. If you want to evict a tenant who does have a pet, you need to go to the Landlord and Tenant Board and prove that the pet makes too much noise, damages the unit, causes allergic reactions to other tenants, is a dangerous breed, or that the condo simply doesn’t allow pets.

This standard lease by the Ontario government, although great for tenants, creates some issues for landlords. Make sure you understand your rights and use Section 15 to advocate for your needs.

The post What a landlord should know about the new Ontario residential lease agreement first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.