The Burn Your Mortgage Podcast: 3 Not So Obvious Tips from an Experienced Landlord with Anthony Molinaro

Full  Transcript

Sean Cooper
Hi, Anthony. How are you doing today?

Anthony Molinaro
Sean? I'm good. I'm happy to be back.

Sean Cooper
Yeah, it's great to be back. We were just speaking off camera or off the recording mic, however you want to call it there. And we were trying to figure out how many times you've been on the podcast, and I believe this is your fourth time on the podcast here. So wow, you're definitely the first four time guests on the podcast.

Sean Cooper
You always provide such great information to the listeners, so it's fantastic to have you back today and looking forward to, as always, another great discussion on real estate.

Anthony Molinaro
Thank you Sean, I'm honored. Happy to be here.

Sean Cooper
And it's so great with your journey. Like when we first spoke, you were just a real estate investor getting started there, and now you work for a real estate brokerage and produce great content for them on their YouTube channel there. So yeah, it would be great to talk about some of the videos that you put out because I'm a big fan of your videos.

Sean Cooper
And yeah, it's just been remarkable your journey there. And yeah, excited to have a great conversation with all the great content that you're putting out on YouTube.

Anthony Molinaro
Thank you, I appreciate that. Yeah, that's the Rock Star Real Estate YouTube channel. And I work here. We're a real estate brokerage that helps investors. We educate investors how to invest in properties and provide one on one coaching and do classes and events. And some of our free content is on YouTube for sure, on our YouTube channel as well as our podcast.

Anthony Molinaro
But yeah, it's just an honor to be able to do those videos and help kind of share some of the knowledge that I've picked up over the years here at Rockstar. Share with the world. So thank you.

Sean Cooper
Yeah, it's great that you go above and beyond to educate clients there. So yeah, the YouTube videos are a great sneak peek. But if you're looking to actually invest then working directly with Rockstar is great. But yeah, this podcast here will be a good kind of preview of how it is to work with Rockstar. And then you can check out the YouTube videos as well.

Sean Cooper
So before we talk about some of the most popular videos there, I just wanted to ask you about, since you're a real estate investor yourself, I just wanted to get your thoughts on the real estate market right now. What's going on specifically, let's talk about I mean, we can talk about the general housing market, but why don't we focus more on rental properties and where things are odd and where you see things going in the coming months here?

Sean Cooper
Because, yeah, it was tough for a while there for real estate and investors with interest rates going up as quickly as they went up, and I don't think anyone was expecting rates to go up that quickly, especially since the Bank of Canada governor said that rates would remain low for a very long time. I mean, I don't know about you, Anthony, but I thought a long time was 3 to 5 years.

Sean Cooper
I didn't think it was like a year and a half or something like that. But nevertheless, I think a lot of people were caught off guard. But yeah, I mean, the good news is rates are coming down and are expected to continue to come down here. And interest rates are the single biggest driver of the housing market. So yeah, I'd just be interested to hear your thoughts of where things are at right now and where do you see them going in the rest of the fall and early next year, 2025 as well?

Anthony Molinaro
Yeah. So I think like the story of real estate, you know, if you go back to, let's say 2000 up till where we are now, 2024, it was kind of, you know, at least up till 2022 was a slow grind up. Then you had the great financial crisis in 2008, you know, which saw interest rates. You know, pinned all the way down, which flooded the market with a bunch of cheap money and easy money and loans to then keep investing in real estate.

Anthony Molinaro
And in Canada, we didn't really have the huge real estate correction that the states had yet. We kind of adopted the same monetary policy and had low interest rates. And what we saw is there is a ton of asset price inflation in the stock market, but also in the real estate market. And it was kind of like a slow grind up.

Anthony Molinaro
From 2008 2009, Canada had a very small blip compared to the US. You know, huge correction of 50% or more in their real estate markets. But we had a small blip with some hesitation from people around that time. And then it just kind of grinds slowly up with a huge basically bull run of asset inflation, including houses all the way up from 2010 to 2021.

Anthony Molinaro
Of course, Covid hit, pandemonium broke out and interest rates were pinned to zero due to the lockdowns and everyone being at home and the government handing out checks and trying to make it easy on consumers during the lockdown. So basically interest rates were pinned to zero and that poured even more fuel on the fire for the Canadian housing market, because we already had a lack of supply in the market and a ton of immigration as this was all happening, especially as like the liberals came into office in 2015, they really started ramping up immigration all over Canada.

Anthony Molinaro
And that combined with, you know, not building enough homes to keep up with that immigration plus the low interest rates. It was just a frenzy from 2020 up to 2022, with the low interest rates and the Bank of Canada governor Tiff Macklem telling Canadians, you don't even need to worry about interest rates. We're not even thinking about raising interest rates, right.

Anthony Molinaro
And so that caught a lot of people off guard, myself included, who it seemed like the irresponsible thing to do was not borrow money to invest in real estate when they have interest rates at zero and aren't thinking of raising them for a long time. And, you know, assets are just being inflated like crazy.

Sean Cooper
So many people went variable as well when they probably should have gone fixed.

Anthony Molinaro
Yeah, totally. And I mean hindsight 2020, but the variable was the way to go for like 20 years straight in Canada, where it was consistently a lower interest rate and you didn't have this massive spike in interest rates to kind of worry about it. It just didn't really happen for like 20 years. And so that lulled everybody into thinking that's still the way to go.

Anthony Molinaro
And that proved to be wrong, because the Bank of Canada quickly changed their tune and raised interest rates faster and more aggressively than they ever have before. Catching a lot of people off guard, myself included, who didn't quite see that extreme amounts of interest rate rising as quickly as they did. So yeah, that's obviously really cool things off in the housing market.

Anthony Molinaro
It's really quashed a lot of the demand. It's brought prices down, but that hasn't helped with affordability for people because there's just such high interest rates, relatively speaking, from previous years on those same properties. So it's still very hard to qualify. And a lot of people have been kind of crushed by the inflation since 2020 as well. So it's really put a damper on the market from both owner occupied sense and from investor clients, where it's harder to make the numbers work at these higher rates.

Anthony Molinaro
Now we're seeing the rates start to come down, but we're not seeing a huge glut of investors now investing in real estate. What we're actually seeing is a bunch of investors that are holding on to negative cash lying properties. Finally see this as an opportunity to offload some of those properties. And so we're seeing more listings from investors still than we are from investors buying.

Anthony Molinaro
And they see the rates as their final opportunity to kind of offload a property and try to still make some money off of it. So that's what we're seeing right now. But as they keep lowering interest rates, it's only a matter of time before it starts to make a lot more sense. Again.

Sean Cooper
Yeah, definitely. 2025 is the year where interest rates should come down quite substantially and we should get to the new neutral rate. So I'm thinking 2025 is going to be a lot more of a bright spot than 2024. Do you agree?

Anthony Molinaro
I would agree, yeah. Things are definitely looking up. I think we've been through the worst of it. We've been through the storm. It's now rebuilding from the storm, rebuilding your portfolio. If you're an investor, reevaluating decisions you've made, if you're, you know, a first time real estate investor thinking about getting into the market, I think now is actually a pretty good opportunity because I think the worst has passed and I think it's going to get better from here.

Anthony Molinaro
And there's still a lot of trauma, I would say, in the market from people worried about interest rates and not wanting to invest. And if you're going to jump in, now is probably a good time because things have passed. We're on the up and up. Rates are coming down, and will continue to come down this year into the next, not just in Canada, but globally.

Anthony Molinaro
Central banks are now lowering interest rates and it looks like we're in for another cycle of asset inflation after this. And so if you're going to buy, now's the time where there's not a ton of demand but things. The skies are looking blue ahead. So it could be a good time to jump in before demand picks up again.

Sean Cooper
No, that's great here. And yeah, that as the saying goes, hindsight is 2020. And like I mean you know a ton about ten is screaming because you teach a class for rock stars there. But yeah like we learn everybody learns over the years and the knowledge we have today. Like I'm sure we wish that we had it like 2 or 3, 4 or 5 years ago.

Sean Cooper
So speaking on that front, I am curious, like, what are some of the lessons that you've learned over the years when it comes to tenant screening and things you would have done differently in the past that you learned through your real estate journey over the past months and years, as well?

Anthony Molinaro
Yeah, the tenant screening is huge because the tenant can be a massive risk because if they stop paying, you're stuck with the tenant not paying your rent, and now you're floating that property every month. So learning tenant screening is more in depth. And maybe, you know, I had learned tenant screening when I screened my first tenant, which turned out to not be such a good choice.

Anthony Molinaro
But what I didn't do is maybe run that tenant by some other experienced investors or like my coach here at Rock star to kind of let me know what they think, which could have avoided a big disaster from that first tenant. But since then, I've learned way more about tenant screening and what to look out for big red flags to avoid, and that it's better to be patient and wait for the right tenant to come along.

Anthony Molinaro
And they will, especially if you have the right advertising and screening system in place, and you will be able to screen them and to make sure they're a good tenant. But it's better to wait for that person as opposed to getting anxious about carrying your property, not having income, coming in and just jumping on someone. It's better to be patient because you know a better decision in the short run will make for a way better decision in the long run, even if there's a bit of short term pain waiting for that tenant to come along too.

Sean Cooper
I agree completely. I couldn't have said it better myself. And you touched on a couple interesting things there. So you said keeping an eye out for potential red flags again. Hindsight's 2020, but what would you say are some of the big red flags to watch out for that you've perhaps learned from your experience as a real estate investor that a first time investor might not be aware of?

Anthony Molinaro
Yeah, we could get into the nitty gritty and all the little details to watch out for, but I think the big three I call the trifecta to think about when it comes to tenant screening. The big three things are their credit history, their overall handling of credit. So not just the score, but everything that's contained within that credit report, the amount of trade lines they have, the amount of inquiries, the kind of overall story of their credit, you know, recent miss payments, past collections, bankruptcies, judgments, legal items.

Anthony Molinaro
You want to look at that overall holistic credit report. You know, total debt levels, average monthly debt payments and weigh that against their income and their situation in life. And so that's important. So it's their credit and then it's their income. So making sure their income is a good buffer to aim for is aiming for a total gross income.

Anthony Molinaro
That's a minimum of three times the rent amount. So if the rental on your unit you're charging is 2500 bucks, you want to aim for a total gross or before tax income of $7,500. So three times 2500. And that's a good income buffer so that somebody can still reasonably afford rents in your home and have money left over for the other expenses in their life, like food, clothing, you know, kids, whatever it may be, you want to make sure they have a buffer because if things are a bit too tight and their income is like just scraping over what it needs to pay rents, things are going to be tight and inevitably you're going to get

Anthony Molinaro
A shortfall of rents if something happens to that person, right? So you want to look for a healthy income minimum three times healthy savings as well, ideally a savings balance that can be verified. And then the third thing would be you know how they are as people when you meet them in person. I always recommend doing it, showing in-person, meeting them, asking who they are, finding out their story, cross-referencing everything, making sure it all makes sense, and going with your gut feeling that you've, you know, found a good, trustworthy, honest type of person that has their stuff together.

Anthony Molinaro
So it's kind of like that in-person gut feeling. It's their income levels and it's their credit history. Those are the big three. And there's a lot of stuff within each of those you can do to make sure that you're going to be in a safe position.

Sean Cooper
So that's great advice. And yeah, it's kind of like being a detective on the show Law and Order because, yeah, you're just looking for these signs. Like for example, like you want them to take good care of your property. You don't want them to be hoarders or anything like that. So even if you can see their car, that their car is clean or super messy, that can be a sign.

Sean Cooper
Or if they show up early or they show up late for the appointment, like those are all kinds of signs to how they might be as tenants there. So you kind of learn these things with experience there. But yeah, just trying to kind of read between the lines and find out all of this stuff ahead of time is definitely helpful because, yeah, it's not like the old days where you can just pack up the tenant stuff and ask for them to leave.

Sean Cooper
There's a whole process that you need to go through, so it's so important to do your due diligence ahead of time and invest the extra time because yeah, it could be a real headache later on if things don't end up working out.

Anthony Molinaro
Yeah, 100%. And it's not difficult. It's just learning the right system from experienced people that have done it before. And you're off to the races. There's no need to reinvent the wheel. You can just follow the same system that's worked for others. So just take some education upfront.

Sean Cooper
Yes, exactly. Very well said. And again, there's great videos on your YouTube channel, the Rock star YouTube channel. One of my favorite videos that I saw recently was a video that you did yourself called 20 Not So Obvious Tips from an Experienced Landlord. So obviously we're not going to go over all 20 tips on the podcast here, but, maybe you could go over like your top three tips that aren't so obvious.

Sean Cooper
I mean, you went over a bunch of helpful things like having different folders to organize the documents you have related to the property there. I mean, there were a bunch of helpful tips, but yeah, if you only had time to share the three best tips, what would you say those tips were to somebody who's getting started out as a landlord?

Anthony Molinaro
Okay, sure, I can rattle off a few of them. So install digital keypad locks on your properties, on all your properties. And that way every time there's a tenant turnover, you don't have to change locks to ensure the safety of your new tenants. Simply change the code on the digital key padlock, and that saves you from buying a new lock or paying a locksmith to come every single time.

Anthony Molinaro
So a digital keypad with the changeable code. What I like to do is pre screen tenants, but I actually use Google Forms. It's like Google Docs, Google Sheets, but for making online forms. And I have about 14 preloaded tenant screening questions that I put in that doc. And whenever tenants inquire on Facebook Marketplace, for example, to come see my property because they're interested in it, I make them fill out that online form before they book a showing.

Anthony Molinaro
And what that does is it puts all these leads from Facebook onto a spreadsheet, which I can then keep organized, and then I only invite the people that are qualified based on what I'm looking for. You know, from that set of questions, I only invite the pre-qualified people to then book a showing with, and that just saves me.

Anthony Molinaro
And tenants that aren't qualified to rent the property a ton of time from not doing showings when they're not necessary. I'm only booking showings with people that are already pre-qualified, and then it's just a question of whether or not they want to continue to apply after seeing the property. And eventually you get someone who does. And so that makes screening tenants a lot easier and that initial step and saves you a ton of time.

Anthony Molinaro
Maybe another one is that you could make separate bank accounts for each property that you own with their own email address. Create a unique email address, for example, 123 Queen Street at gmail.com. And then you know when that tenant for that house at one, two, three Queen Street pays your rent every month, they can just transfer to that email.

Anthony Molinaro
But also, having one bank account makes your bookkeeping way easier, because all the income and all the expenses for that property can run out of that one bank account. And then you can set up multiple bank accounts, one for each property you have. So that's super helpful. And those are some of the bigger ones I'd say. The rest are more nitty gritty tips.

Anthony Molinaro
Trying to think if there is anything else. Oh I'll give you one more. Have tenants sign and date a PDF of pictures of the unit in its current condition when they move into the property and sign that lease agreement that way, if there's ever any dispute about damages later on, you have photo evidence documented that they've seen the current photos of the unit once they moved in and signed off on its condition on that moving date, you know, signed and dated in that way.

Anthony Molinaro
Do you have hard photographic evidence of their damage created after they moved in?

Sean Cooper
Wow, those are some great tips. That's kind of like the idea of if you get in a fender bender car accident, like, and it's just your word against the other person who you're in an accident with. Again, it's kind of tough to figure out who was really at fault. Whereas if you have a dashcam, it makes it a lot easier.

Sean Cooper
So yeah, like kind of like the video never lies. That photo never lies. So that's a great tip that I don't think the average person would think of. So yeah, again, you share some great tips in the video and I'll be sure to include a link in the show notes here. But yeah, those were some great tips. And I encourage everyone to check out Anthony's YouTube video because I definitely, if you want to get into real estate investing, have some great advice in that video there.

Sean Cooper
So perfect. And the last topic I wanted to talk about today, then you talk about this a lot on the YouTube channel and you have some great case studies as well. I just wanted to hear your thoughts on student rental properties. We were talking off camera about how you had actually converted one of your properties from, I believe, a single family home into a student rental property.

Sean Cooper
And yeah, how it's a lot easier to get positive cash flow in that situation there. So yeah, I'd love to hear your thoughts on student rental properties, what somebody should know if they're considering doing it. Like I remember last time we spoke about how you said that you wanted to put the parents name on the list rather than the student's name on the list.

Sean Cooper
But yeah, I love to hear your thoughts on the current market for student rental properties, things people should know, and anything else helpful you wanted to share based on your experience?

Anthony Molinaro
Sure, yeah. Just on that note about the lease. So I would still put the student tenants names on the lease and I would actually do a separate documents, which I would call a parental guarantee document, and that I would have the parents of each student sign basically guaranteeing that any damages or missed rents on that property due to their son or daughter, that they're liable to cover, that if their son or daughter is unable to do so, just an additional kind of guaranteed document that you can have them signed to cover your.

Anthony Molinaro
But in case there is ever any issue. But what I can lay out right now is, you know why I think student rentals are actually the perfect solution to today's current market conditions, based on a number of factors. And I would say, you know, there's a number of obstacles right now for real estate investors in Ontario. One is the higher interest rates making cash flow numbers harder.

Anthony Molinaro
It's harder to earn positive cash flow on a monthly basis on your properties, because your expenses are higher. If you have a mortgage, because the interest rates are higher. So it's tougher and tougher to find cash flow. So a huge advantage of renting to students is that you rent out the house by the bedroom and not by the full house like a single family home.

Anthony Molinaro
And so you're actually able to squeeze a lot more income out of these single family homes by renting by the bedroom than you are renting to one single family unit. So for example, I have two seven bedroom houses in Saint Catharines that I rent out to Brock University students, and they're paying about 650 a room on average for those seven bedrooms.

Anthony Molinaro
So that's 45, 50 a month of income on those houses, versus if I were to rent out those houses to one single family, I'd probably generate 28, 2900 tops.

Sean Cooper
Wow, that's a huge difference.

Anthony Molinaro
It's a huge difference. Now, it's not the full picture because I am covering utilities in the case of the students, whereas with the single family they'd be paying utilities. But still you can subtract about 3 to 400 bucks for utilities on those homes a month. And I'm still much further ahead. I'm still clearing 4000 a month versus the single family options right now.

Anthony Molinaro
Also, there's rent controls in Ontario that for older homes built before 2018 or at least rented before 2018, you're going to be capped at a 2.5% rent increase. That's this year. Every year changes next year might be 2%, 1.5, 2.5, generally around those numbers, which doesn't actually keep up with your expenses on that property, which you're going up at a much higher inflation rate, with all the inflation we're getting.

Anthony Molinaro
So to counteract that with long term rentals, you don't really have much choice unless the tenant decides to move out, in which case you can reset rents at whatever price you want. There's no rent control there when a home is vacant and you're renting it out. However, with students, they're only going to be staying every 2 to 3 years maximum because of their school programs.

Anthony Molinaro
So that means every 2 to 3 years max, you get to reset your rents at market rents, which allows you to keep up with the actual much higher rent inflation that we're actually seeing in the market. So you're able to keep up your income at a much higher rate over time, because every 2 to 3 years the students are moving on.

Anthony Molinaro
So it's better cash flow. It's better to increase your rents over time and deal with the rent controls. And the third thing in Ontario is investors have to worry about a long term tenant not paying rents or damaging the property because of the wait times that the Ontario landlord tenant boards since the pandemic are horrendous. There are like six months to get a hearing and then it can be a further eight weeks to get a sheriff to go through with the full eviction.

Anthony Molinaro
Should it go to that point, which can be eight months. So that's a 5 to 8 month process. You're looking at anywhere in that range these days. And so with students, I've never even heard of a student of a landlord having to take a student to the landlord tenant board. These aren't professional tenants. These aren't people trying to work the system.

Anthony Molinaro
These are people trying to go to university, get their degree and kind of get out. And not only do you have the students on the hook on the lease, but if you can get the parents as well, you essentially have a backstop for every student as well, and it's very unlikely you'll have to take them to the Ontario Landlord Tenant Board.

Anthony Molinaro
So you avoid the Ontario Landlord Tenant Board entirely. You get much higher cash flow in that property without having to do a crazy renovation, like a duplex conversion, adding a second unit or putting a guard in Sweden. So it's a lot lower capital to kind of set up a higher cash flow investment, and you get to keep on top of market rents.

Anthony Molinaro
So it's a perfect way to counteract the obstacles we're seeing in today's market conditions.

Sean Cooper
Know that sounds great. Like certainly you have to do your homework and like a lot more screening with tenants there. And just make sure that you're getting responsible like student tenants who aren't going to like, throw parties or do damage to your place. But if you end up getting to responsible students, it definitely sounds like a great way to counteract the higher interest rates and actually earn some decent cash.

Sean Cooper
And yeah, like you have a couple student rental properties now, correct?

Anthony Molinaro
Yes. Three of them.

Sean Cooper
Oh, wow. I guess you've learned a lot over the years. And it's like, how do you get responsible students as opposed to students that throw crazy parties and the neighbors get called and police get called? Like, what would you say is your top tip to avoid a situation like that? Because that would probably be people's biggest fear that the students are not going to take good care of the property and throw loud parties, like, how do you avoid a situation like that?

Anthony Molinaro
Yeah, that's when the gut feel is super important with tenant screening for students in particular, because you're not actually qualifying credit scores and income for students because they generally don't have much income. And the credits, they might not even have credit scores. It's just not really a factor. With student rentals, it's more so you're looking for like one group of students to sign one lease at the house.

Anthony Molinaro
And so typically a group of friends is your ideal scenario. You're not like renting per bedroom out in a perfect world, you're getting one group of friends to sign one lease agreement. But in terms of finding a group that aren't going to be huge partiers and destroy your house, that's typically it goes by your best judgment. When you meet them at the property, you can kind of get a feel for who are the cool party kids, and who are the kids that are there to study and just get their homework done and go to school.

Anthony Molinaro
And so obviously I would towards picking the kids that aren't going to be the huge partiers. Now, if you set up parents to sign as parental guarantors, you have some added assurance there as well as you have some added pressure from the parents on the students to tell their kids, hey, don't mess around because you're going to be on the hook.

Anthony Molinaro
I'm not paying for this. You're ultimately paying for this now that I'm on the hook for that. So you guys better not mess around. So I like that added pressure as well, but getting one group of friends on one lease is the ultimate student rental hack, because that way if one tenant doesn't pay rent, you can file eviction for nonpayment of rent to the full house to everybody on that lease agreement, which puts a ton of social pressure on all the friends to tell their one friend that didn't pay, hey, you better pay up.

Anthony Molinaro
Otherwise we can all kind of lose our place here. So that's super helpful. And then if one student decides to leave mid-semester, drop out of school, whatever, you're not on the hook for filling all these vacant bedrooms as they come up. It's on the group of friends to either fill the bedroom themselves or cover the missed rents from their friend, leaving the house.

Anthony Molinaro
So kind of counteracts a lot of things as well. And then I'm sure, as you know, Sean, refinancing student rentals or financing them in the first place can be a bit of a challenge. So having one lease agreement on the property is a lot more helpful when trying to get financing for a property as opposed to having, you know, seven different leases, for example.

Sean Cooper
Great. Well, yeah, it sounds like you've learned a lot over the years and you're just getting started in this student rental space. So yeah, it'd be great to try it again in the future and see how your properties are going. But yeah, as long as you do the proper due diligence, it definitely sounds like student rentals could be an interesting opportunity to explore there.

Sean Cooper
So perfect. With that, we can end the podcast here. So thanks again Anthony, it was great to have you on the podcast again for your fourth appearance, and I look forward to hopefully having you on for your fifth appearance at some point in the future and hear how everything's going and hopefully some positive things in the future here as we head into 2025 and improving lower interest rates as well as an improving real estate market.

Sean Cooper
So yeah, thanks again for your time today. It's always a pleasure to speak with you.

Anthony Molinaro
Yeah. You too Sean, always good to catch up. And yes, things are looking up. Stay positive.

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Sean Cooper  

Thanks for listening to another episode of the Burn Your Mortgage podcast. Besides being a podcast host, I’m also an independent mortgage broker. If you or anyone you know, family, friends, co workers or neighbors could ever use any unbiased mortgage advice or a second opinion, feel free to reach out. Email me at sean@burnyourmortgage.ca or call or text me at 647-867-3711 for a free mortgage consultation.

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