Table Of ContentREVIEWER PRAISE OF BOOKS BY DOUGLAS GRAY
Making Money in Real Estate
“Gray delivers the goods. It is all-Canadian, and not a retread book full of tips that are
worthless north of the U.S. border. It’s chock-full of practical street-smart strategies and
advice, pitfalls to avoid, samples, what-to-look-out for, checklists and information.”
—Business in Vancouver
“ . . . provides consumer insights into securing the best deal and avoiding the pitfalls . . .
Gray’s legal background has given him valuable insights.”
—The Edmonton Journal
“Outstanding . . . peppered with practical no-nonsense tips . . . invaluable information
throughout.”
—Calgary Herald
The Complete Canadian Small Business Guide
(with Diana Gray)
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—Profit Magazine
“Excellent . . . geared especially to Canadians, unlike most small business guides.”
—Financial Times
“The most informative and comprehensive guide on this subject matter.”
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Home Inc.: The Canadian Home-Based Business Guide
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and comprehensive.”
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“An absolute necessity for your bookshelf . . . crammed with useful information.”
—Victoria Times-Colonist
The Complete Canadian Franchise Guide
(with Norm Friend)
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tion. A superb guide to buying a franchise. Invaluable samples and checklists. Highly
recommended.”
—Terry and Fran Banting, Franchisees
The Canadian Snowbird Guide
“ . . . an invaluable guide to worry-free part-time living in the U.S . . . . by one of Cana-
da’s bestselling authors of business and personal finance books . . . ”
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the authoritative research skills and knowledge of a fastidious solicitor . . . as practical
as a sunhat on a Tampa afternoon, and that alone warrants it a place on every south-
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The Canadian Guide to Will and Estate Planning
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CANADIAN
E
H
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LANDLORD’S GUIDE
BOOKS BY DOUGLAS GRAY
REAL ESTATE TITLES
Making Money in Real Estate: The Canadian Guide to Profitable Investment in Residential Property
Real Estate Investing For Canadians For Dummies (with Peter Mitham)
The Canadian Guide to Buying and Owning Recreational Property in Canada
101 Streetsmart Condo-Buying Tips for Canadians
Mortgages Made Easy: The All-Canadian Guide to Home Financing
Home Buying Made Easy: The Canadian Guide to Purchasing a Newly Built or Pre-Owned Home
Condo Buying Made Easy: The Canadian Guide to Apartment and Townhouse Condos, Co-ops
and Timeshares
Mortgage Payment Tables Made Easy
The Complete Canadian Home Inspection Guide (with Ed Witzke)
SMALL BUSINESS TITLES
Start and Run a Profitable Consulting Business
Start and Run a Profitable Business Using Your Computer
Have You Got What It Takes? The Entrepreneur’s Complete Self-Assessment Guide
Marketing Your Product (with Donald Cyr)
The Complete Canadian Small Business Guide (with Diana Gray)
Home Inc.: The Canadian Home-Based Business Guide (with Diana Gray)
Raising Money: The Canadian Guide to Successful Business Financing (with Brian Nattrass)
The Complete Canadian Franchise Guide (with Norm Friend)
So You Want to Buy a Franchise? (with Norm Friend)
Be Your Own Boss: The Ultimate Guide to Buying a Small Business or Franchise in Canada
(with Norm Friend)
The Canadian Small Business Legal Guide
PERSONAL FINANCE/RETIREMENT PLANNING TITLES
The Canadian Snowbird Guide: Everything You Need to Know about Living Part-time in the
U.S.A. & Mexico
The Canadian Guide to Will and Estate Planning (with John Budd)
Risk-Free Retirement: The Complete Canadian Planning Guide (with Tom Delaney, Graham
Cunningham, Les Solomon and Dr. Des Dwyer)
SOFTWARE PROGRAMS
Making Money in Real Estate (jointly developed by Douglas Gray and Phoenix Accrual Corporation)
CANADIAN
E
H
T
LANDLORD’S GUIDE
Expert Advice to Become a Profitable
Real Estate Investor
Douglas Gray
Peter Mitham
John Wiley & Sons Canada, Ltd.
Copyright © 2009 by Douglas Gray
All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form
or by any means—graphic, electronic or mechanical—without the prior written permission of the publisher. Any
request for photocopying, recording, taping or information storage and retrieval systems of any part of this book
shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copy-
right licence, visit www.accesscopyright.ca or call toll free 1-800-893-5777.
Care has been taken to trace ownership of copyright material contained in this book. The publisher will gladly
receive any information that will enable them to rectify any reference or credit line in subsequent editions.
The material in this publication is provided for information purposes only. Laws, regulations, and pro cedures are
constantly changing, and the examples given are intended to be general guidelines only. This book is sold with the
understanding that neither the author nor the publisher is engaged in rendering professional advice. It is strongly
recommended that legal, accounting, tax, financial, insurance, and other advice or assistance be obtained before act-
ing on any information contained in this book. If such advice or other assistance is required, the personal services of a
competent professional should be sought.
The author, publisher and all others directly or indirectly involved with this publication do not assume any respon-
sibility or liability, direct or indirect, to any party for any loss or damage by errors or omissions, regardless of cause,
as a consequence of using this publication, nor accept any contractual, tortuous, or other form of liability for its
contents, or any consequences arising from its use.
Realtor is a registered trademark.
National Library of Canada Cataloguing in Publication Data
Gray, Douglas A.
The Canadian landlord’s guide: expert advice to become a profitable real estate investor / Douglas Gray, Peter
Mitham.
Includes index.
ISBN 978-0-470-15527-1
1. Real estate investment—Canada. 2. Landlords—Canada. I. Mitham, Peter James, 1969- II. Title.
HD1394.5.C3G73 2009 332.63’240971 C2008-906008-3
Production Credits
Cover design: Ian Koo
Cover photo: Photodisc/Getty Images
Interior text design: Pat Loi
Typesetting: Joanna Vieira
Printer: Tri-Graphic Ltd.
John Wiley & Sons Canada, Ltd.
6045 Freemont Blvd.
Mississauga, Ontario
L5R 4J3
Printed in Canada
1 2 3 4 5 TRI 13 12 11 10 09
Contents
Preface xix
Chapter 1: Investing in Rental Real Estate 1
Investing in Property 1
Tallying the Advantages 2
Buying Properties to Rent 5
Sizing Up a Home, Sizing Up an Investment 5
Sizing Up Your Goals 5
Learning the Basics 7
Courses and Seminars 7
Helpful Organizations 8
Getting a Grasp on Management 9
Assessing Your Aptitude 9
Matching Skills with Properties 10
Capitalizing on Gains 10
Planning for Success 10
Trading on Success 11
Enjoying Your Success 11
PART I: GETTING STARTED
Chapter 2: Understanding the Rental Property Market 1 5
Understanding Market Cycles 15
Getting to the Roots 15
Recognizing Spheres of Influence 16
Recognizing the Influences 18
Understanding the Real Estate Market Cycle 1 9
Seller’s Market 20
Buyer’s Market 20
Balanced Market 20
Understanding the Mortgage Market Cycle 21
Lender’s Market 21
Borrower’s Market 21
Balanced Market 22
Understanding the Rental Market Cycle 22
Landlord’s Market 22
viii Contents
Tenant’s Market 22
Balanced Market 23
Recognizing Rental Market Influences 23
Chapter 3: Establishing an Investment Strategy 2 6
Assessing Yourself 26
Identifying Strengths and Weaknesses 26
Identifying Skills 27
Determining Your Goals 29
Building Wealth 29
Supporting the Family 29
Funding Retirement 29
Determining Your Likes and Dislikes 3 0
Location 30
Asset Type 30
Buying with Others or “Buy” Yourself? 33
Determining Your Financial Status 33
Calculating Net Worth 33
Drafting a Budget 34
Gauging Resources 34
Carrying Debt 34
Determining Your Future Needs 3 5
Setting the Clock 35
Setting Priorities 35
Setting Limits 35
Knowing the Limits of Financing 36
Developing an Investment Strategy 37
Time Frame 37
Financing 37
Scheduling 37
Know the Market 38
Be Competent 38
Be Professional 38
Chapter 4: Avoiding the Pitfalls of Property Investing 3 9
Avoiding Partnership Troubles 39
Selecting Business Partners 40
Co-tenancy 40
General Partnership 41
Limited Partnership 41
Corporation 42
Joint Venture 42
Syndicates 43
Planning for Survival 44
Goals and Objectives 44
Contents ix
Expertise 44
Liquidity 44
Liability 45
Compatibility 45
Getting It in Writing 46
Avoiding Fraud 47
Fraud for Shelter 47
Fraud for Profit 48
Staying Clean 49
Selecting Advisors 4 9
The Broker 50
The Lawyer 50
The Appraiser 51
The Accountant 51
The Financial Planner 51
Other Professionals 52
Chapter 5: Choosing a Property Type 5 3
Scouting Rental Properties 53
Residential 53
Recreational 53
Commercial 54
Industrial 54
Raw Land 54
Knowing the Formats 55
Residential Properties 55
Recreational Properties 5 9
Commercial Properties 6 1
Industrial Properties 6 3
Raw Land 64
Chapter 6: Choosing a Residential Property 6 6
Principal Residence with Rental Suite 66
What to Watch For 67
What to Ask For 67
Insurance Considerations 67
Second Home for Seasonal, Periodic, or Full-time Rental 68
Keeping a Balance 68
Keeping Up Appearances 68
Residential Property Ready for Rental 69
Renovating and Renting 69
Buying with Intent 69
Renovating with Intent 70
Building a Rental Unit 70
Description:The ultimate resource for Canadian residential landlords.Anyone can become a landlord, but not everyone will be a profitable landlord. Distilling over 35 years of his first-hand experience, Doug Gray, one of Canada’s most respected real estate authors and experts, guides readers on how to become a
