Tenants, who want to become property owners, have an often-overlooked opportunity to improve their situation on two levels at once by simply becoming good at what they do.

Tenants who learn how to become savvy renters can gain financially when negotiating leasehold relationships and in advancing their real estate ownership goals.

Through your provincial Residential Tenancy Office -- online and off -- learn tenants' legal rights and responsibilities, as well as those of residential landlords. Since no comparable protection is afforded commercial leasing, inquiring minds can extrapolate to consider the pros and cons of becoming a commercial landlord.

Generally, residential leases are considered to favour the tenant and commercial to favour the landlord. For instance, residential rental is gross rent with legislated increases, while retail renters pay what-the-market-will-bear rent plus their portion of building maintenance and their portion of property taxes, i.e. triple net rent.

Whether tenants eventually buy income-producing real estate or not, these wanna-be-owners can learn how to gain the advantage when renting either their residence or business premises. At the same time, they'll discover a lot about owning revenue property. The knowledge acquired also serves as an introduction to real estate jargon and related economic principles, which should lower many of the mental barriers to acquiring ownership. A paid stint as an apartment superintendent may provide valuable experience and a financial boost.

Tenants with a driving ambition to improve their financial status will learn that otherwise unaffordable real estate may be within reach if they are prepared to take a different perspective on home and ownership. Buying income-producing property can leverage their purchasing power. Revenue real estate options may include:

• A single family home or cottage which is rented out until the mortgage is reduced to manageable levels so the owner can move in. (In a hot market, this approach may have tax implications by compromising principal residence status.)

• A house, semi or condominium which is shared with boarders to cover monthly mortgage payments and other carrying costs until the owner can afford to go it alone.

• A duplex, or two-unit building which can legally house two families, and could materialize as a purpose-built structure, a renovated older house, or as a house with a legal secondary apartment where the owner takes the lesser unit.

• A triplex or small multifamily building.

Feasibility will depend on location, available financial options, market conditions, and how much "sweat equity," or do-it-myself property management, can be contributed to balance the equation.

The value exchange related to flexibility of location may also increases success. For the price of a downtown condominium or house, buyers may be able to purchase a multifamily rental building in a good suburban or rural location. One buyer bought a 30-unit multifamily building on Vancouver Island for the price of the upscale, view condominium they initially considered in Vancouver. Another, who could only afford a tiny condominium unit in that city, bought an income-producing duplex in downtown Nanaimo with lower monthly payments.

How are practical, achievable goals set to avoid ending up in a real estate nightmare?

According to British Columbian Moe Lessan, who holds dual real estate and mortgage broker licences, and the CCIM or Certified Commercial Investment Member designation: "Obviously, there's the monetary factor. If you own it, how can you back it up? A seasoned investor, if the vacancy rate goes to 25 percent, can carry it. Others may have all their eggs in one basket ... . It is a process of learning and my recommendation is to choose good professionals."

Lessan, who is currently President of the Western Canada Chapter of The CCIM Institute, explains that "good" may not always be good enough. An experienced residential broker is not automatically good at commercial real estate. Commercial real estate professionals specialize in specific types and locations of properties, so buyers must match their buying profile with a professional's skills and knowledge. To make sure the professional is 'good' for them, buyers should search for someone with experience and training in the specific type of revenue-generating real estate and the locations they are considering.

The CCIM Institute confers the CCIM designation and is an affiliate of the US National Association of REALTORS® (NAR).

Lessan suggested two-income professional couples may be able to weather a wider range of vacancies and downturns, but that selecting the right property means factoring in possible negatives to create risk minimizing strategies. For instance, mixed-use rental properties can provide financial flexibility. Residential units tend to rent more quickly, minimizing vacancy costs for owners. Retail tenancies may be more lucrative, but months of vacancy are common.

Arranging financing is a project in itself. Residential mortgage lenders offer preferred residential rates, but set unit maximums -- perhaps 4 or 6 -- for lending. The percentage of rental income included as gross income for mortgage approval also varies. Commercial lenders specialize in property types, uses and locations, and financing is generally more expensive.

That's where mortgage brokers come in.

"It is all driven by the income of the property -- actual or projected -- and based on that, the debt coverage ratio has to work for the lender," said Lessan who stresses that using a mortgage broker provides consumers with a grocery-store variety of lenders and financing options. "The first thing to look at is the property as the property pays, and then at the buyer and [his/her] credit, which will determine the loan to value."

These financial professionals shop the market using the borrowers' criteria, so borrowers do not jeopardize their personal credit rating gathering comparable lending offers themselves which may be interpreted as denied credit by someone running a credit check. The considerable volume of mortgage lending that each mortgage broker represents enables rate and term negotiations that a consumer arranging one small mortgage cannot achieve.

Owning revenue property is not without its headaches, but being a tenant is not stress-free living either.

Published: September 23, 2008

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Futurist and Strategist PJ Wade is "The Catalyst" -- intent on "Challenging The Best Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life. Author of 7 books and more than 1600 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy... Your Choice! (CatapultPublishing.com), which is filled with suggestions and insight on protecting and using home equity. Her new business book, "What's Your Point?," which identifies 7 common mistakes professionals unknowingly repeat to their detriment, will be published in 2009. As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors -- and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking -- a talent she regularly demonstrates in this column. For more on blogs, books and topics, visit TheCatalyst.com.