Pitfalls and Tips for Leasing Your Rental Property

Posted On Wednesday, 18 March 2020 17:15

As an investment you may have found a great property to use as a rental, but now that you have to manage it, what are the most important things to know when you are a new landlord? There are plenty of sources to give you a general rundown on what to expect as a rental property owner, but what should you specifically be doing to avoid the most common pitfalls? Here are some handy tips and tricks to follow when leasing your rental property.

Obviously, you should include the basic details in your rental application or agreement, but you will also need to specify the things that matter most to you as a landlord trying to protect your investment. Will you allow pets? What kind and how many? Will your tenants be allowed to smoke or vape in your property? What amount of a deposit will you charge? Will you allow subleasing? These issues and any others that are important to you should be specifically spelled out in your landlord-tenant lease agreement.

Here is a brief list of some of the elements that should be included in any lease agreement:

• Legal names of all parties who sign the lease, including all adult tenants
• Terms of the lease, including renewal terms
• Terms of the rent: how much, due date, is there a grace period, etc.
• Notice to vacate. This is the renter’s official notice of their intention to end the lease or move out of your property; you should specify how many days’ notice they need to give and any other details that might be pertinent.
• Number of people. You can restrict the number of people who live in the property, but be careful - you don’t want to violate any federal or state laws by discriminating against any person using prohibited criteria.
• Security deposit. Specify the amount as well as any conditions on how the deposit is to be used and when/if/how the deposit is to be returned to the tenant.

It is possible to write your own lease or find tools online that will write one to your specifications, often for free or for a minimal cost. Again, if you are unsure of the process you may want to consider hiring a property manager to take on this responsibility. At the very least, you need to screen all prospective tenants. Tenant screening is your number one way to get the most reliable renters into your property with the least amount of drama.

You can download a standard lease form from the Internet, but if you write the lease yourself, be sure it includes a severability clause. Although this term screams legalese, it can be the most important part of your lease. A severability clause simply means that if any part of the lease is found to be illegal for whatever reason, it doesn’t nullify the other parts. What this means is that the rest of your lease agreement will still be legally binding between you and your tenant.

When in doubt consult a legal professional, but if you are DIY-ing a lease agreement, just remember that it is a legally binding contract that both sides should take seriously. There’s no point in ruining your investment plan by leaving ANY gray areas in the lease agreement. (On that subject, you also need to be aware that lease agreements and rental agreements are actually two different animals. A rental agreement is usually a month-to-month agreement, meaning that you can renegotiate the terms and the rent amount if 30 days’ notice is given. A lease agreement is for a longer amount of time, say 6 or 12 months, which locks in the rent and the conditions until that lease is up.)

Another crucial tip for new landlords is to get to know your own specific state laws regarding landlord-tenant agreements. If you are writing your own lease or using a standard template, be sure that any issues that are relevant to your particular state are included in your documentation. 

Another issue to watch for on a state-by-state basis is a late-fees clause. Be sure to include a detailed description of the exact amount of the late fee, when they will be charged, and any other details about a late fee charge. How these fees are handled should be spelled out in your original lease agreement because you won’t be able to charge a late fee after the fact. (Some states also have a requirement for a specific “grace period” and may limit how much you can charge.) Again, do your research when building or compiling your lease agreement.

It's your investment income. Be diligent to avoid many of the typical pitfalls by following these few steps when you begin your exciting journey as a new landlord. 

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