Creating a Rental Agreement
If you are a residential landlord, it’s important to provide a rental agreement that outlines your renters’ responsibilities as well as your own. Keep it in a file that is easy to access.
Rental property can be very profitable if managed wisely. That being said, it is a challenging task to manage your own property as a landlord. Repairs, vacancy, and rental fees are difficult management tasks, but a well-written rental agreement goes a long way to outlining your responsibilities and smoothing the process.
Rental Agreement Basics
A rental agreement is a contract between you (the landlord) and your tenants. It includes:
- The address of the residence that you are renting
- The monthly rent to be paid by the tenant(s)
- Any deposits required, to be paid by the tenant(s)
- Dates rent is due to landlord
- Penalties for late rent
- Services provided by landlord
- Length of the lease
- Restrictions on use and related deposits (e.g. pets/pet deposit)
It’s important to include any details that affect your property, to ensure that you are legally covered in case your tenant tries to sue you. For example, if your tenant refuses to pay rent and you try to evict him, without a clause in your agreement that specifically says you have the right to evict him, you may not have a legal leg to stand on.
There are other things that you may want to add to your standard rental agreement, based on each unique situation.
In your agreement, you can specify which utility services you pay, if any, and what the tenant is responsible for. And while you probably have homeowners’ insurance to protect your property in case of damage, you should make it clear that this insurance does not cover the tenant’s personal property.
Stick to the Agreement
Many landlords find it difficult to be strict with tenants, enforcing every tenet and codicil listed in the rental agreement, but doing so will ensure that the tenant pays you on time and respects your property. Do not be lenient regarding rent due dates and the like, and always charge a late fee if you receive payment after the due date and grace period (if applicable).
Finding Reliable Tenants
As a landlord, you are always looking for the ideal tenant, one who pays on time, respects your property, and rents your property consistently for years. Unfortunately, most tenants do not fit the aforementioned parameters. That being said, do your best to conduct proper due diligence, allowing you to locate the best tenants for your property.
Consider requiring a credit check for prospective tenants. Studies show that tenants with higher credit scores tend to be more responsible than those with poor credit histories. Research the range of credit scores to determine which credit score will be your cutoff.
Talk to prospective tenants when they come to view your property. What do they do for a living? Do they have kids? How long did they live in their last home? Can they provide references? Information is power, and knowing a bit more about a prospective tenant’s history will go a long way toward qualifying their ability to properly rent your property.