HGTV’s Scott McGillivray Talks Income Property and Becoming a Landlord

Buying a house with an income property is one way to get into the property market. However, just buying a house and expecting to find tenants isn’t as easy as it seems. Scott McGillivray, host of HGTV’s Income Property shares his expert advice with Walletpop and potential landlords.

Think Before Buying

Don’t rush into buying a home with an income property expecting the suite to help pay the mortgage. This is not the best strategy according to McGillivray. “People are getting themselves into trouble buying property,” he says. “I tell people that income property is a bonus. You should be able to afford your home without relying on the money from the income suite.” That way, if your regular income stops, the money from the income property can support you and help with your mortgage until you’re back on your feet.

Consider Your Potential Tenant

As McGillivray says, “The calibre of your rental space dictates the calibre of your tenant.” He says that there is a division in the tenant population thanks to the proliferation of available rental condos in major cities. “Available units are on the rise,” said McGillivray. “Renters have a lot of options and landlords have to bring their units up to the standards of condos downtown.” There are some tenants who want condo conditions in their rentals, while there are some who are looking for deals and will look at units that aren’t as polished. Aiming for the first rental group can get you a higher rent and a better class of tenant.

Budget and Plan

New and potential landlords underestimate how much needs to be done before tearing down walls, says McGillivray. Before any work begins, he recommends that landlords research the cost of comparable units in their area. “Check out MLS,” he says. “Click on the ‘for rent’ button for the units in your area and see what they’re asking.” From there, he says you can estimate how much you can charge for your place and only then should you get quotes from contractors. To see if your investment is a smart one, all you need is some basic math: just divide the quotes by the monthly rent to see how long it would take to earn back the initial investment.

Where to Spend the Money

So you’ve done your research, hired a contractor and are ready to improve your income suite. Everyone knows to spend money on the kitchen and bathroom because that is what sells a space but McGillivray suggests spending money in one other area. “Energy efficient appliances are always underestimated. They save the landlord a lot of money over time and you want to spend money on proper products for a long term investment.”

Choosing Your Tenant

The suite is ready, you’ve advertised it and now you’ve got interested tenants. How do you choose the perfect tenant for your space? As mentioned above, the calibre of your space will determine the calibre of your tenants. But landlords still need to do their research. McGillivray says to do a credit check and ask for the names of employers, references and past landlords. “There are bad people out there, but asking for these things will help prevent that. ‘Rent runners’ often shy away from landlords who do their due diligence.”

If you want to learn more, Season 3 of Income Property begins Monday, Sept. 6th on HGTV.