Renting out your first property is one of the most consequential financial decisions you'll make — and one of the most legally complex. Unlike selling a stock, becoming a landlord means entering into an ongoing legal relationship with another person that is governed by provincial or state legislation, and where getting things wrong can cost you far more than any rent you collect. This guide walks through the essentials: from pricing your unit and screening tenants, to writing a compliant lease, handling deposits, and managing the tenancy month to month.
Disclaimer: This guide is for general informational purposes only and is not legal advice. Landlord-tenant law varies significantly by province and state. Consult a qualified legal professional for advice specific to your jurisdiction and situation.
Before You List: Setting the Right Rent
The single most important first decision is rent price. Set it too high and you'll sit vacant for months; too low and you leave money on the table — and signal to sophisticated tenants that something is wrong. Start with a market comparison: search active listings for comparable units within 1 km (same bedrooms, similar age, similar amenities) and note the asking rents. Subtract 2–3% from the median asking rent to position for fast tenancy: listing $100 below market in a $2,400/month market costs $1,200/year in rent but potentially saves $2,400–$4,800 in vacancy.
Use the Gross Rent Multiplier (GRM) as a sanity check: divide purchase price by annual gross rent. A property selling for $600,000 that rents for $2,400/month ($28,800/year) has a GRM of 20.8 — typical for Toronto. GRMs above 25 signal that appreciation is doing most of the work, not income. If your GRM is very high, the property may not generate meaningful cash flow at any rent level you can realistically charge, and you should set expectations accordingly. Keep in mind that vacancy between tenancies is a real cost: even one month vacant on a $2,400/month unit costs $2,400. Pricing to attract a strong tenant quickly, rather than maximizing rent, often produces better financial outcomes over a multi-year tenancy.
Tenant Screening: Legal, Thorough, and Fair
Tenant screening is where most new landlords make their biggest mistakes — either moving too fast (accepting the first applicant without checking) or inadvertently violating human rights codes by asking prohibited questions. In Canada and the US, protected classes vary by province and state but generally include race, sex, national origin, disability, family status, and source of income (in some jurisdictions). Never ask about these characteristics in your screening process, on your application form, or in conversation.
What you can check: credit report (with written consent), employment letter and pay stubs (income should be 2.5–3× the monthly rent), and landlord references. When calling references, call the previous landlord — not just the current one. Current landlords may give a positive reference simply to move a difficult tenant along. Ask the previous landlord whether they would rent to this person again; the hesitation before a "yes" can be as informative as the answer itself.
Require a completed rental application from every adult who will occupy the unit. In Ontario, you cannot charge an application fee; in BC, the same applies. Use a standardized application form and apply the same criteria to every applicant — inconsistent screening is one of the fastest paths to a human rights complaint. Document your decision for each applicant, including why a qualified applicant was declined (for example, "selected a different applicant with a stronger income-to-rent ratio"). Denying a qualified tenant for a discriminatory reason exposes you to human rights complaints, which can be costly to defend even when unfounded.
The Lease: What Must Be in It
Your lease is the legal foundation of the tenancy — and in Ontario, you are required to use the provincial Standard Lease form for most residential tenancies. Other provinces have their own required or recommended forms. Regardless of jurisdiction, a solid lease includes: names of all tenants (every adult who will live there), the full property address including unit number, the term (start and end date for fixed-term leases), monthly rent amount and due date, what is included in rent (utilities, parking, storage), permitted uses, rules about guests and subletting, entry notice requirements, pet policy, and smoking policy.
Clauses that violate residential tenancy legislation are void — you cannot waive statutory rights by contract, even if the tenant agrees to sign. A clause stating "tenant waives the right to notice before entry" is unenforceable in every Canadian province. After signing, give the tenant a copy of the signed lease immediately. Many provinces require delivery within a specific timeframe: Ontario requires immediate delivery; BC requires delivery within 21 days of signing. Keep your own signed copy in a secure location — paper or scanned PDF — for the duration of the tenancy and for several years after it ends.
Deposits: What You Can and Cannot Collect
Security deposit rules are one of the most misunderstood areas of landlord-tenant law. Violating them exposes you to complaints, fines, and mandatory return of the full deposit. The rules differ significantly by jurisdiction:
Ontario: Landlords may only collect a "rent deposit" (last month's rent) of up to one month's rent — no separate damage deposit is permitted. The deposit must earn annual interest at the provincial guideline rate and can only be applied to the final period of the tenancy.
British Columbia: A security deposit of up to half a month's rent is permitted, plus a pet damage deposit of up to half a month's rent if there is a pet.
Alberta: A security deposit of up to one month's rent is permitted.
United States: Rules vary by state. California limits deposits to two months' rent (unfurnished) or three months' (furnished). Texas has no statutory cap. Many states require deposits to be held in a separate trust account and returned within a specific number of days after the tenancy ends, with an itemized deduction statement.
Always issue a written receipt for any deposit collected and keep meticulous records. Most jurisdictions allow you to deduct for damages beyond normal wear and tear, but you must document the condition at move-in with a signed inspection report and photographs — without this documentation, proving a damage claim is extremely difficult.
Move-In: Inspection, Keys, and the First Month
The move-in process sets the tone for the entire tenancy. Do a thorough move-in inspection with the tenant present, using a room-by-room checklist that documents the condition of every surface, fixture, and appliance. Both you and the tenant sign the checklist; each party keeps a copy. This document is your primary evidence if there is a dispute about damages at move-out — without it, proving that a hole in the wall wasn't there at move-in is nearly impossible at a tribunal or in court. Photograph and timestamp every room from multiple angles.
For keys: keep a log of how many keys, fobs, and access cards you issue and to whom. If a tenant loses a key that provides building access, you may be entitled to charge for rekeying under your lease — but check your jurisdiction's rules on what costs can be passed to the tenant. On the first rent payment, confirm the tenant's preferred payment method — EFT, e-transfer, cheque, or your property management portal — and send a rent receipt within a reasonable time. In some provinces, landlords are required to provide receipts on request; doing so automatically builds trust and creates a clear payment record from day one.
During the Tenancy: Maintenance, Entry, and Rent Increases
Three ongoing obligations define the landlord's role during a tenancy.
Maintenance: Landlords are legally required to maintain the rental unit in a good state of repair and in compliance with health, safety, and housing standards — regardless of what the tenant agreed to accept. You cannot contract out of this obligation. Set up a simple maintenance request system (even a dedicated email address) and keep written records of every request, your response, and the resolution date. Emergency repairs — no heat in winter, a water leak, a broken exterior lock — require urgent response, typically within hours, not days.
Entry: You cannot enter the rental unit whenever you wish. Most Canadian provinces and US states require a minimum of 24 hours' written notice, stating the reason for entry and the time window. Exceptions exist for genuine emergencies — fire, flooding, gas leaks — but using "emergency" as a pretext for routine access is not permitted and constitutes a violation of the tenant's right to quiet enjoyment. Keep records of every entry, including the reason and date.
Rent increases: In most jurisdictions you can only raise rent once every 12 months, must give advance written notice (90 days in Ontario; 3 months in BC), and cannot exceed any applicable rent increase guideline. Keep a simple spreadsheet of each tenancy: start date, initial rent, every increase with the notice date and effective date. Missed guideline increases do not accumulate — if you skip a year, you cannot double up the following year.
When Things Go Wrong: Late Rent, Disputes, and the Eviction Process
Most landlord-tenant problems fall into a small number of categories: late or non-payment of rent, complaints about noise or behaviour, damage to the property, and lease violations. For each, the first step is documentation — written communication, ideally by email, so there is a timestamp and a paper trail. A conversation in the hallway solves nothing legally; a politely worded email that you've kept a copy of can resolve a dispute at a tribunal months later.
For non-payment in Ontario, serve an N4 Notice to End a Tenancy Early for Non-payment of Rent once rent is even one day late; the tenant has 14 days to pay in full or vacate. The N4 is not an eviction — it is a prerequisite to applying for an LTB hearing. The N4 must state the exact amount owing; any error in the amount can invalidate the notice. Do not accept partial payments after serving the N4 without getting legal advice on how that affects your position, as partial payment can void the notice in some circumstances.
Across Canada and most US states, you cannot change locks, remove the tenant's possessions, or cut off utilities to force a tenant out — these "self-help evictions" are illegal and expose you to significant liability, even when the tenant is clearly in the wrong and clearly violating the lease. The legal eviction process is slow and often frustrating, but it is the only legally defensible path. Budget for the possibility that a contested eviction could take three to six months from first notice to enforced sheriff's order, and plan your cash flow accordingly.