During the first week of July 2022, SingleKey surveyed 200 landlords across Canada to gain insight into the current state of the residential rental industry. In particular, we were interested in learning about landlords’ experience with tenants and their business strategies amidst a dynamic rental market.
The survey results revealed some surprising trends and sentiments.
First, many landlords are content with leaving their units empty for an extended period to find the right tenant.
Second, many are keen on converting their properties into short-term rentals (commonly known as vacation rentals).
Third, landlords expressed that credit checks are essential to their tenant-screening process. However, many admit they face hurdles in obtaining sufficient background information to vet tenants properly.
In this article, we dig into the survey results and their implications for both new and experienced landlords.
Let’s dive in!
About 27% of respondents said they’d had a tenant default on their rent at some point. While far from the majority, this figure is still high enough to warrant concern among landlords.
Lately, rental fees have been soaring across the country. According to our Rent Report, we found that the average rent for all properties in June was $2,047, driven by a greater rental rate at over 3% in most provinces.
Rising interest rates have made home ownership less desirable, so more people remain in the rental market. Unfortunately, with limited supply of rental units in Canada, this drives up the cost of rent for tenants, whose budgets are already strained due to high inflation.
Should these trends continue, landlords can reasonably anticipate more tenant defaults. As a result, vetting tenants’ finances will become increasingly vital to ensure they can comfortably pay their rent on time.
Twenty-nine percent of landlords at some point opted to leave their rental unit vacant rather than lease it to a subpar tenant.
Rental units have many fixed costs that must be paid regardless of the tenant’s situation. These include property taxes, mortgages, and utilities. Should a landlord sign a lease agreement with someone whose finances are in dire straits, they could end up losing multiple months’ worth of rent.
Landlords also face the risk of tenants willfully damaging their property. If the security deposit isn’t big enough to cover repairs, they’ll have to pay for the cost out of pocket or sue the tenant.
Of course, things can get even worse if a landlord needs to evict a tenant. Carrying out eviction from start to finish can cost a bundle. Typical expenses include court, legal, and sheriff fees if the tenant refuses to leave the property.
It’s no wonder that almost a third of landlords would rather keep their unit empty than rent it to a potentially troublesome tenant!
Unfortunately, for tenants, this preference reduces the number of rental units available, which tends to drive rent prices higher.
About 66% of landlords said they would prefer listing their unit on a vacation rental site like Airbnb or Vrbo rather than take on a long-term tenant. The figure indicates landlords are open to exploring new revenue models to ensure a healthy bottom line.
Despite their growing popularity, vacation rentals require more hands-on work, and maintenance costs are typically higher. Plus, rental income will likely fluctuate throughout the year.
However, for many landlords, it’s far less risky than signing a long-term lease with a tenant who may suddenly stop paying their rent.
Satisfaction with Tenants
Despite issues surrounding non-payment of rent, close to 80% of landlords report being happy with their current tenants.
This figure suggests most landlords take time to screen applicants properly. As a result, they end up with steady rent payments and a solid relationship with their tenants.
Tenant credit checks
Lenders routinely do credit checks to qualify applicants for a loan. But they’re also handy for determining the likelihood of a tenant defaulting on the rent payments.
Most landlords agree, with 82% saying they run credit checks on prospective tenants.
A credit report provides valuable details about an applicant’s financial situation. These include their credit score, the amount and type of debt they carry, whether they pay late or on time, etc.
Common mistakes made by landlords
We asked landlords what mistakes they made when renting out their unit(s). Here are the most common ones reported:
Based on the results, the most frequent mistakes center around insufficient research on prospective tenants. Between one quarter and one-third of respondents answered that they didn’t perform enough due diligence when approving an applicant for tenancy.
Failing to run a credit check and background check was the most common, which brings us to our next point…
Challenges with screening tenants
Over 46% of landlords expressed that collecting the necessary background information about tenants is challenging.
Not surprisingly, a lack of quality and reliable data can result in landlords overlooking or missing crucial details. As a result, they may sign a lease agreement with a tenant that, in reality, is unsuitable.
Obtaining the correct information through a credit and background check can help identify tenant red flags early on.
In Which Province or Territory Are Most Landlords’ Rental Units Located?
Landlords participating in the survey indicated that most of their rental units are located in Ontario, followed by Alberta and British Columbia (BC). According to SingleKey’s Rental Report, Alberta has one of the lowest rental rates in the country at $1,389 per month. Conversely, Ontario and BC have the highest rates, at $2,166, and $2,518, respectively.
Our survey results suggest that many landlords still struggle to find quality tenants who pay timely rent. And with more people rushing into the rental market amid a shrinking inventory of properties, rent prices could increase substantially soon. As a result, tenant defaults could become even more common.
Landlords have responded accordingly, with many opting to delist their properties and wait longer to find a suitable tenant. Others have begun exploring short-term rentals, which offer less risk and more flexibility in rent pricing.
The overall takeaway from the survey is that landlords are seeking ways to minimize their risk by avoiding problematic tenants. And to do so, they require the proper knowledge, tools, and resources.
If you’re a landlord, you know that financial stability is vital to a successful rental business. Therefore, investing in tools that help you identify quality tenants and protect your income is essential.
SingleKey offers a suite of services to help you get on the right track:
- The Tenant Report will help you quickly discern the good tenants from the bad ones. And it’s ready in just five minutes!
- The Rent Guarantee program provides extra financial security for your rental business. Your rental income is guaranteed for up to 12 months up to $60,000 in case of a tenant default.
- The Rent Collection tool will allow you to collect rent online through pre-authorized debit, eliminating the risk of late payments. Say goodbye to cheques forever!