There are many reasons why some Canadians prefer to rent over buying a home. For instance, being a homeowner can be very expensive, whereas you might find a decent apartment, house or condo for less than you’d spend on a mortgage.
Nonetheless, you can rack up just as many expenses when you’re a renter. Make sure you avoid these common renter mistakes that could cost you money and time.
#1) Not Budgeting Properly
Since it can be cheaper to rent, it’s tempting to buy unnecessary things, instead of saving your money.
Most experts say your rental housing costs should add up to less than 30% of your income. Additionally, you should avoid frivolous spending and use your savings for important expenses, such as your:
- Bills (utilities, credit cards, etc.)
- Rent Payments
- Lease Deposit
- Groceries & Supplies
- Financial Emergencies (car repairs, job losses, etc.)
#2) Not Buying Insurance
Although it may not sound essential, renter’s insurance is worth considering, since you never know what can happen. Actually, many renters don’t realize that their landlord is not responsible for any disasters or damages that occur on the property.
For example, if a fire ruins your possessions, it can be a huge relief to have some way of covering your losses. The price of your policy can vary based on your renter’s history and the value of the rental (most are around $30- $50 a month).
Learn more about what type of insurance you should buy.
#3) Not Having Rent Payments Reported to a Credit Bureau
As of this year, Canadian consumers can have their rent payments reported and therefore help their credit, thanks to Landlord Credit Bureau.
Landlord Credit Bureau (LCB) recently signed an agreement with Equifax, one of Canada’s two main credit reporting agencies. For the first time in Canada, tenants are able to report their monthly rent payments as a credit building exercise, enabling them to build credit for simply paying rent on time.
In turn, you can use LCB’s website to authenticate and rate landlords or build your credit report by requesting that your good payments appear on your credit report. Remember, if your landlord uses LCB, your missed payments will be reported as well.
Check out if you can use your credit card to pay rent.
#4) Not Checking Their Credit
Before renting, get your credit report from Equifax and TransUnion (different versions are held by both bureaus), then check it for errors or identity fraud. You’re entitled to one free yearly copy of your report, which you can request by phone, mail or online.
At the same time, you can pay a fee to see your credit score, which ranges from 300 – 900 (although you have multiple scores at each bureau):
- Good Range (660 – 900) – If you have a clean credit history of responsible debt payments, your landlord may be more inclined to approve you for favourable rental conditions because you’re more likely to pay on time.
- Bad Range (300 – 600) – If you have debt problems, such as multiple missed payments or bankruptcy, chances are you’ll have bad credit. This is a red flag for most landlords, so you have more trouble renting an apartment and a cosigner may be necessary.
Here are some other credit elements your landlord could inspect:
- Credit Rating(s) – All your credit accounts have a rating from 0 – 9 and a letter corresponding to the type of debt (I = Installment, R = Revolving, O = Open). Unlike your score, your rating should be as close to 0 (ideally 1) as possible.
- Employment History – Your credit report also contains a list of your past employers and work periods. If the landlord sees that you frequently change or get fired from jobs, they may not approve you as a tenant.
- Personal/Financial Details – Your landlord must also confirm that you’re eligible to live and work in Canada. Luckily, your report contains details like your name, address, social insurance number, non-sufficient fund alerts, and payment issues.
#5) Not Considering The Rental Environment
Despite the price being a primary concern, don’t forget to consider the environment of the rental property. Here are some important location-based elements to consider:
- Type of Housing – Your rental conditions can vary based on the type of dwelling. For example, houses and condos are normally more expensive than apartments. However, you can reduce your rent and living costs by splitting them with a roommate, partner, or spouse.
- Surroundings – How close is your rental to work, school, and the grocery store? Is the building/property well kept or are there constant repairs and maintenance needed? What about noisy or unfriendly neighbours? Sometimes, a nicer rental is worth the extra money.
- Parking – Private parking can be expensive when coupled with your rent. That said, it may be a huge asset, especially if it’s an indoor spot. Not to mention, finding public parking can be a hassle. Thankfully, this isn’t usually a problem when renting a home with a driveway.
- Crime – Renting in a decent neighbourhood can also be worth the extra money and effort. After all, keep your family, possessions, and yourself safe is important. Ask the landlord about any recent break-ins or other serious crimes in the area prior to applying.
- Transit System – As mentioned, rentals located in key areas are generally more desirable and pricey. Depending on your lifestyle and whether you have a vehicle, you might prefer a rental that’s close to the best public transit routes (bus, train, etc.).
#6) Not Asking The Right Questions
Remember, you could be renting your dwelling for several years. Don’t hesitate to have a lengthy conversation with the landlord beforehand, so you won’t be caught off guard by any unexpected problems thereafter. Be sure to also ask the following questions:
- What amenities are included with my rent? If none, how much do they cost? Basic bills like heating, electricity, and internet might not seem like much until you have to deal with them by yourself.
- Does parking cost extra? What about additional perks/services? A private space can cost several hundred dollars a year (more if it’s indoors). However, nicer units may include access to a gym, pool, or other facilities for no extra cost.
- Do you have rent control? If not, when and how much can my rent go up? Be careful, because your landlord may increase your rent while your lease is in effect. Check your tenancy agreement thoroughly prior to signing it.
Tired of renting? Consider a rent to own program.
- Do you plan to paint? Am I allowed to? By making any improvements to your unit, you might break your rental agreement. If the space is unfinished or if there are serious signs of wear and tear, you’ll have to wait for your landlord to fix the problem.
- Do you allow pets? If so, what species? Sadly, some landlords don’t permit animals, particularly ones that could cause damage or complaints. If that’s the case and you plan to live with a critter, it’s probably safer to find another rental.
- Do I need to have the rental professionally cleaned when I leave? Your landlord may ask you to do more than a basic cleaning when your lease ends.
- What are your policies on overnight and long-term guests? While overnight stays aren’t always an issue, your landlord may not allow anyone to regularly share the unit unless they become a tenant and follow the right procedures.
- Does my rental include additional storage space? Most people don’t realize how much stuff they own until they try to fit it into a small apartment. When that happens, having a free or low-cost storage locker can be a lifesaver.
#7) Not Inspecting The Rental Unit
Another mistake many renters make is failing to do an inspection of the unit. Don’t get fooled by what’s on the surface, as your landlord could force you to pay for any damage or non-permitted modifications, even if they were done by previous tenants.
Before signing your rental agreement, do a walk-through of the dwelling with your landlord and confirm that everything works. Here are some key elements to inspect:
- Heating & Ventilation (thermostat, furnace, etc.)
- Hot & Cold Water (sinks, bathroom, etc.)
- Electricity (lights, circuit box, etc.)
- Appliances (stove, refrigerator, etc.)
- Windows & Doors (locks, moulding, etc.)
- Floors & Ceilings (paint, insulation, etc.)
- Storage Spaces (closets, garage, etc.)
Your landlord may ask for a lease deposit in case anything happens to the rental unit while it’s in your care. The size of your deposit typically depends on how large and valuable the property is but can be at least a few hundred dollars.
#8) Not Knowing What Happens After a Missed Payment
Although damaging your unit can cause problems, breaking your rental agreement is even worse. Here’s what your landlord could do if you miss any rent payments:
- Be open to negotiation – If your landlord is understanding or you’re a longtime tenant, they may not penalize you for one or two missed payments, as long as you inform them in advance and negotiate a solution.
- Report your missed payments to the LCB – Remember, your credit score could take a hit if you don’t make rent on time. Not to mention, any defaulted payments will stay on your credit report for multiple years.
- Take you to court to seek compensation – If you miss so many payments that your landlord takes legal action, the subsequent penalties can be severe. If the case is solid enough, the court may even garnish your wages.
- Order you to move out – Squatter’s rights don’t apply during an official lease agreement. If necessary, your landlord may contact the provincial or territorial government, who can order you to vacate the premises.
- Evict you – If multiple payments are missed, your landlord has every right to kick you out. Depending on the provincial/territorial rules in your area, they may even be able to evict you after a single missed payment or 3-day grace period.
#9) Not Knowing Who’s Responsible For Repairs & Maintenance
Unfortunately, some renters also don’t realize what their landlord is responsible for. While there are some provincial/territorial regulations that can apply, your landlord must repair and maintain the following amenities (if they’re included with your rent):
- Appliances (stove/oven, refrigerator, etc.)
- Common Areas (lobby, hallways, etc.)
- Pool, Gym & Laundry Facilities
- Garbage & Recycling Areas
- Elevators & Security Systems
If they weren’t your fault, your landlord may also responsible for:
- Water Damage (leaks, floods, etc.)
- Emergency Repairs (heating, sewage system, etc.)
- Health & Safety Hazards (defective appliances, faulty wiring, etc.)
- Basic Wear & Tear (small stains, outdated furnishings, etc.)
- Snow Removal & Yard Care For Multi-Unit Buildings
Are you a landlord? Check out why you should get landlord insurance.
On the other hand, tenants are responsible for:
- Small Replacements (lightbulbs, smoke alarm batteries, etc.)
- Large Damages (broken windows, torn carpeting, etc.)
- Snow Removal & Yard Care For Single Unit Homes
#10) Signing The Lease Without Properly Reviewing It
Thrown off by a need for housing or how nice a unit looks, some renters make the unfortunate mistake of signing their lease without looking it over properly. Here are some of the main elements every good rental agreement should feature:
- Names & Contract Info (tenant & landlord)
- Rental Unit Address
- Monthly Rent Amount & Due Date (with or without amenities)
- Lease Deposit Amount (when applicable)
- Term Length (start & finish date)
- Rent Increase or Control Conditions
- Penalties of Breaking Lease
- Landlord & Tenant Responsibilities
- Restrictions (smoking, pets, etc.)
All this said every lease is different. If the terms of your agreement seem unfair, speak with a financial advisor so you don’t get locked into a rental that you’re unhappy with.
Renting a Property in Canada?
If that’s your goal, it’s best to start researching, so you can find a unit that suits your personal and financial preferences. Who knows? By renting an affordable place, you might be able to save enough for a house someday.