So your first property is almost paid off, and you think, “Maybe I’ll buy another house and rent it out. The rent can pay for the mortgage.”

Or perhaps you’ve bought your first house and now realize that the market rent is slightly above your mortgage payment. You decide to rent out your new home and make a profit.

The plan is that someone else pays for your mortgage while your equity builds slowly. Sounds perfect, right?

Well, not exactly.

Yesterday I was at the Landlord and Tenant Board for a hearing. Shortly before my case, a distraught landlord appeared for his case. His tenant had not paid rent for the past two months, and, as a result, he was unable to make the mortgage payments. The bank was threatening foreclosure.

Unfortunately, the tenant did not attend the hearing because his presence was required at another court. The adjudicator therefore decided to adjourn. Upon hearing the word “adjournment,” the landlord became somber and could barely restrain himself from having a breakdown in the hearing room. He started pleading that the bank was going to take the house, etc. The adjudicator responded by saying that there was nothing he could do for the landlord under the law.

Trust me, this homeowner isn’t the only one to think he could have someone else pay his mortgage, only to find himself at risk of losing everything. I see individuals like this at the Landlord and Tenant Board all the time. (You can generally tell by the long faces. The big landlords are much calmer.)

In Ontario, residential leasing is highly regulated. A tenancy can only be terminated with the tenant’s consent or by the Landlord and Tenant Board. The law presumes that landlords have more resources at their disposal and therefore imposes strict conditions on the termination of residential tenancies.

Hence, if you lack the resources that the law presumes you have, don’t think about buying a home and making money off rent. Chances are, you’ll be sweating about losing your house whenever your tenant doesn’t pay the rent on time.