I know what you’re thinking, and no, I don’t ever get tired of excessive alliteration and lame puns…
Just to pick up on Friday’s post, I’d like to expand on a situation I had with a friend of mine regarding his status as a potential tenant.
I took a serious devil’s advocate approach, but it was a necessary stance to get all the facts on the table…
I had a long, very open, very realistic conversation with my friend last week when he asked for my help finding him a place to rent.
The rental market is very hot right now in Toronto, and it has been for some time.
Just ask my client who rented a place at Chocolate Lofts and had to compete against six other offers!
But at the other end of the spectrum are people that don’t have money coming out their ears, don’t have great credit, and can’t ‘wow’ a landlord with impressive references and employment letters.
I’m going to help my good buddy Ronan find a place to live for July 1st.
He’s been renting an incredible 3-bedroom apartment for $1200 for the last five years, and as the property has changed ownership four times in those five years, nobody has ever raised his rent. I think the actual market value for his apartment has to be around $1700 – $1800.
Ronan is a budding musician and if all goes to plan, you’ll be hearing his band on Edge 102.1 later this fall. I’ve had faith in him since the beginning, and with all musicians, it’s a tough road.
But in a landlord’s eyes, Ronan is not the ideal tenant. It doesn’t matter that he comes from a very well-off family or that he’s going to make it big in the music world in the next half-year. A landlord would never consider these facts when eventually turning down Ronan as a tenant.
Ronan told me that he and one of his current roommates would be looking to rent a place for July 1st but they only want to pay about $600 each. I told him that he’d be best to find two other people, and find a house for $2400/month.
Ronan told me that he needed a “jam space” in the basement, and this is where our problems began.
No landlord in the City of Toronto would allow his or her tenants to rock-out all day and night in the basement of the rental property. Imagine hooking up a few amps and speakers and blowing the roof off a residential property – don’t you think the neighbours would complain?
I told Ronan, “Look man, if I was a yuppie, which I’ll likely be some day, and if I owned a house on a quiet residential street and some jerk thought he would play his electric guitar all day while his friend smashes cymbals and his other buddy shakes the pavement with his bass, I’d call the cops.”
We agreed that a house with a “jam space” wasn’t really an option since he was scraping together cash to get this property in the first place.
Next came the logistics of the rental agreement and the tenants.
I told Ronan that he could only afford $600/month if he got together 2-3 other guys, and he said he could handle that.
He said there was one guy that was in “for sure.”
But now, Ronan would effectively become a tenant AND a landlord if it was his responsibility to rent out the other two rooms in the house! I told Ronan that he’d have to find all three roommates first, and he asked why.
This is where I took on the roll of the devil’s advocate, and asked Ronan to pretend I’m the landlord for just a few seconds.
“Ronan, what do you do for a living?”
“Well, I’m a musician,” he replied.
“I’m not renting to you,” I said. Ronan freaked and asked why, and I replied, “Because you’re a musician. I don’t want to rent to a musician. They’re poor and they don’t make any money. They’ll default on the rent. I’m not a government social program here; I’m a capitalist landlord.”
“Ronan, who else is going to be on title?” I asked.
“I told you,” Ronan explained, “My other current roommate. He’s coming 100%.”
I asked, “So are you guys gay?”
Ronan freaked out again. “What? Of course not! What the hell?” I explained to Ronan that I was just asking what the landlord might ask. What are two guys doing renting together? What for? Who are they? How old are they?
“They can’t ask that; there’s no way a landlord can ask that. That’s discrimination!”
Of course it is, I explained to Ronan. But the world is not a perfect place. Unless you happen to possess a running tape-recorder while your landlord interviews you, AND you find some pro-bono, activist, pro-rights lawyer that wants to run this case all the way up the flagpole, then the landlord gets off scott-free.
“So you two guys aren’t a couple; you’re not together. Are you guys students?” I asked.
“No, we’re not students, we’re just two guys renting a house together.”
“At thirty years old? What does your roommate do for a living?”
“He’s a freelance photographer.”
That’s code for “unemployed.” Anything that is freelance or anybody that runs their own business are huge red flags.
I asked Ronan, “How are you going to show income? How are you going to show the landlord that you make enough money to cover the rent?”
“Well,” Ronan began, “I do a lot of jobs on the side. We do make money as musicians, and I work moving furniture, doing wine-tastings, teaching yoga, teaching piano to students, and a host of other gigs that pay cash.”
Nobody wants an “odd-jobber” with no income. Landlords want to see a pay-stub or a T4. They want to know that you can make your rent payments every month, and they aren’t going to take your word for it.
Ronan explained, “Well I can get employment letters from all the people I worked for.”
I told Ronan, still playing devil’s advocate and not trying to be a jerk, “You’re speaking in past-tense. You said ‘worked’ for; landlords want to see what you’re doing today and tomorrow. They don’t care how much praise your former employers have for you.”
I asked Ronan, “What’s your credit like? Do you know your up-to-date FICO score?”
“Oh boy,” Ronan said. “I’m a bit behind on my credit card payments.”
Landlords don’t want tenants that not only live month-to-month, but also rely on their credit cards as a source of income!
I read countless articles in the Globe & Mail about people that are “up to their necks in credit card debt,” and I wonder WHY? Are these people using debt as money to live off of? Or do they just spend it on non-essential purchases? I’ve never paid anything but the entire monthly balance on my statement, and I’ve never paid a single cent of interest in my life. Why would anybody do any differently unless they needed the money for rent, food, or shelter?
Well, we live in a society where the have-not’s refuse to accept their positions in life, and thus they pretend to be the have’s by spending money that they don’t have! Who the hell pays 28% interest on their credit cards?!?!
If you can actually afford to buy that $120 t-shirt, good on you. But if you can’t, and you’re just charging it to plastic with no real plan on how and when to pay it off, then you are exactly the kind of person I read about in the paper, and you are exactly the kind of person that landlords weed out and never rent to.
If I’m a landlord, I wouldn’t come near a person with a single penny of credit card debt, or somebody who has ever been late making a payment. There’s a difference between possessing credit card debt because you use your plastic as a method of payment and you make the FULL payment every month, and possessing a credit card because it provides you with cash flow to fill in the gaps in your life.
Those “gaps” send off alarm bells to landlords.
I told Ronan, “You need to find a way to come up with about $120,000 of actual, provable income. Whether you make $120,000, on paper, or the four of you guys together make $120,000, you have to be able to show this income to a landlord.”
A $2400 per month house is going to cost $28,800 per year, and a landlord will want to see $120,000 worth of income to cover that rent.
If Ronan only shows $15,000 on his T4 or through his pay stubs, it doesn’t matter what he does “on the side”! You have to be able to prove the income to a landlord, and he’ll still need his other three roommates to show the remaining $105,000.
I love Ronan like a brother and he’s my oldest friend. I told him quite honestly, “I wish the world didn’t work this way, buddy, but it does.” Then I followed that up with, “But at the same time, you know I don’t actually wish the world worked differently, because you know that I’m a landlord as well, and I would never rent to somebody like you.”
Ronan laughed at my back-handed compliment. He and I started in the same place in life but we took very different roads.
The most realistic option for Ronan is to have his father co-sign the lease for him, or just take title himself altogether.
No, the world isn’t “fair.”
But if you were a landlord, you’d be equally as diligent in weeding out the people that can cost you the property, or worse…