If you want an easy way to make money and grow a business, buy property and rent it out.
It doesn’t matter if you buy a studio apartment somewhere downtown or if you have a sprawling ranch in the country you’re willing to rent out.
If you have property, people are going to be interested in staying there.
Some people can’t afford to pay six figures to buy a home. They’d much rather rent, and the demand is high.
When you search for tenants you never know if you’ll find someone that will stay for a year or live there for decades.
If you want to have a good relationship with your renter and make a good amount of money, there’s only one thing you have to do.
Come up with a solid rental contract.
The importance of a rental contract
The contract you have your tenants sign is going to be your rental Bible.
Every expectation, whether it’s about payment, utilities, the number of occupants, or repairs, is going to be outlined in your rental contract.
Or, at least it should be.
Too many first time landlords make the mistake of making their contracts vague. Their tenants end up walking all over them, and they end up in lengthy legal disputes.
When you’re writing up your contract, make sure you have these important things included.
Names of every tenant
This may seem obvious, but this is something some landlords can forget.
Some tenants may just want one person on the rental agreement for credit reasons, but if you should try to get each adult to put their names on the lease.
In case there’s an issue with rent, you can go to anybody who has a name on the lease for payment.
If you have 3 adults living in your rental, but only have one sign, legally you can only go after one person for delinquent payments.
Explaining this to people that want one name on the lease could help persuade them to get everyone to sign. It helps protect you, and it also helps protect renters.
While we’re on the topic of renter names, we should also mention the importance of something else in terms of occupants.
Number of residents
If you have a two bedroom home, it’s reasonable to expect a couple or perhaps a small family to move in. You’d be shocked if you were to find out that 8 or more people were living in your property.
The scenario may sound crazy, but it’s far too common for landlords that don’t specify the number of people living in the home when they write up their rental contract.
Having too many people in a home or apartment at one time could lead to a lot of problems.
Damages could be more common because of the sheer amount of people in the rental. If there’s a damaging fire, an insurance adjuster could rightfully state that you have too many people living in the home and deny your claim.
Save yourself a headache and make sure that you lay out exactly how many people you plan on having there.
Rules on subleasing
Subleasing can be a very divisive topic among landlords and renters.
On one hand, it lets renters keep their homes for the time being in case a roommate or other occupant decides to break their lease.
On the other hand, it could open up problems for landlords, especially if they don’t have the time to vet the new potential occupant.
That’s why it’s important for the rental contract to clearly layout rules about subleasing. You don’t want to find yourself in a tough situation in case a renter tries to leave.
Weigh the pros and cons of letting a tenant sublease before you agree to lease. Keep in mind that you can set certain restrictions before you allow subleasing.
You could require that you have to meet the new tenant in person before they sublease. Or if you trust your tenant you could leave it in their hands.
Once again, this may seem like something obvious to include. But it isn’t uncommon for some landlords to accidently leave out the actual amount. Some may even purposely leave it out if they’re renting to friends or family members.
Leaving the rent amount off of the rental contract is one of the biggest mistakes you can make.
If a renter decides to not pay rent or comes up short, the rental contract is going to be what makes sure you get what you’re owed in court.
While we’re on the topic of rentals, we should also mention the importance of including…
Deposits and fees
Are new renters required to pay a deposit that includes the first month of rent and an additional fee?
If other people choose to move in during the lease, will they also have to pay for a new deposit?
Are your tenants going to be responsible for utilities like water and electricity, or will they just pay for cable and the internet?
All of these things should be clearly outlined in your rental property.
If certain utilities aren’t paid, the owner of the property could be held responsible for them. If utility payments are clearly outlined in the rental agreement, you’ll have a legally binding document that can help you against debt collectors.
If a dishwasher or other major appliance breaks when a tenant is renting a property, who is expected to take care of repairs?
Repairs should be a part of every rental contract, but too many first-time landlords forget to include it.
Repairs are a part of life when you’re living in a home or apartment, and you want to make sure that they’re taken care of in a timely manner.
Choosing to leave repairs up to the tenant could make things easier on your end, but it could also end up causing problems. What if they choose to repair it themselves and make the problem worse?
If you choose to always handle repairs you could also be left in a tough spot. There may be some days you’re too busy to send out a repairman, and you could be left with an angry tenant that’s missing an essential service.
Some landlords find that it’s easier to specify that they should always be notified of repair issues in the rental contract. That way both the renter and the landlord can figure out the best solution to the problem.
Right of entry
As a landlord, you legally own the property you’re renting to tenants. But that doesn’t mean you can stop by anytime you’d like.
The Right of entry is something that every rental contract needs.
Some landlords say that they’ll give at least 24 hours of notice before they enter the property. Others say that they’ll give tenants 24-48 hours unless there’s an emergency.
This is important in case legal issues occur.
Let’s say that you catch a tenant doing something that violates their lease. They could have more people than specified on the lease, or something more serious.
If you catch them violating their lease when you happen to pop in one day, your eyewitness account may not be able to hold up in court because you didn’t give the tenants enough notice before entering.
If you want to make an investment mistake, rent out a property where you don’t have information about damages in the rental contract.
Damages are a part of home ownership that sometimes can’t be avoided.
Paint could be chipped, carpets can get worn, and things can experience general wear and tear.
But sometimes those damages can go from being minor nuisances to major repairs.
When you’re putting together your rental contract, a clause about damage is important.
Make sure you make it clear to renters about what you accept and won’t incur a charge, and what could cost them extra.
A seemingly responsible renter could end up causing thousands in damages by the time their lease is up. You want to make sure that they’ll be responsible in case anything goes wrong.
Some landlords will never allow a dog or a cat on their property. Others are okay with it as long as the tenant puts down extra on the deposit, or agrees to pay for extra damages.
Regardless of what you decide, pets should be a part of your rental contract.
Some landlords find that it’s easier to ask what pets renters have and to include them in the contract instead of outright denying people with certain animals the opportunity to rent.
It’s also important to realize that pets can go far beyond our traditional dogs and cats.
Rodents, reptiles, and even some exotic animals can be pets for some people.
Make sure that if you include pets in your contract that you specific what kind of animals you’ll allow on your property.
Restrictions on illegal activity
Most landlords will assume that their renters will be law abiding citizens, but that isn’t always the case.
Illegal activity doesn’t always have to mean something serious. The neighborhood the property is in could have a noise ordinance they expect residents to follow.
If there are curfews, parking permits, or other things that could cause trouble for you or renters it should be included in the rental contract.
Is there anything you added to a rental contract that helped you in the end? Do you have any tips for first-time landlords?
Tell us about it in the comments section!