Why You Need Leases When Investing In Rental Property
When you are investing in rental property, you need to understand both landlord and tenant rights
. Often times, landlord-tenant relations are not regulated by any state agency. State statutes are what define landlord and tenant rights. The rights of each party should be listed is a lease agreement. Below are some of the items that need to be included in a lease.
Security Deposit and Rent Amount
In every state, the security deposit cannot exceed a certain amount of monthly rent. Once you are investing in rental property and find renters, there needs to be an agreement of the amount and when it is due. Included in this agreement is what happens if rent is late. It is illegal for a landlord to take tenants' property for unpaid rent.
Lease Time
There needs to be a specific time listed of how long the renters plan to stay. You need this in case the tenant needs to leave before the lease time is up. Usually, there is some sort of financial penalty if the tenant decides to break the lease early. When investing in rental property, you need time to find a new tenant as soon as possible. It is standard practice that tenants must give 30-days notice before moving out. Make sure you include this in the lease to keep surprises to a minimum.
Pets
You need to discuss your policy about pets with tenants. Many people overlooked including a pet policy in the lease. Whether you decide to allow pets or not is a personal preference.
Inspection Rights
You need to protect your investment when you are investing in rental property. Conducting periodic inspections will help you do that. You need to decide how often you would like to inspect the property for damages. You should also layout the inspection procedures for tenants, so they are not taken off guard.
Payments for Utilities
As a landlord, you will need to decide how the utilities will be paid. Utilities can be part of the rent that tenants pay. You can also waive some or all of the utility costs. Deciding who will pay for the utilities will be up to you.
Having a written lease protects you as you are investing in rental property. Make sure to discuss all items of a lease with the tenants before you both sign it. Without a written agreement, you are leaving yourself open to a wide variety of problems.