Owning a rental property means being a landlord, even if you don’t manage the property yourself. As the owner of the rental, you’re a landlord. And therefore, you can manage it yourself, or hire a professional property management company.
- Holding Rentals and Landlording Class: Get an in-depth, 90-minute course on the legal issues surrounding holding rental properties and being a landlord.
- Investor Package of Forms: An entire set of over 20 forms used by landlords and flippers.
SELF-MANAGEMENT: If you choose to manage the property yourself, you’ll need to be aware of a number of legal issues. The first, and most important, is the lease agreement. After you have interviewed and screened prospective tenants, you will put them under contract for the rent and care of the property. Screening tenants should include a background check, a credit check, an employment check and previous landlord check. All tenants will claim they are neat and pay rent on time. But not all actually do! Do your homework.
A good lease agreement will include provisions on the following items.
Tenant Name: Make sure to include joint and several liability clause when there is more than one tenant on the lease.
Term: When the contract ends and you don’t sign a new one, it will continue under the same terms on a month-t0-month basis.
Lease Amount: You should stipulate the amount of the entire lease for the term, and that it will be paid in monthly installments.
Security Deposit Collected: Plus any additional money received at signing.
Payment: You should be detailed about when and how to pay, plus fees for late payments or bounced checks.
Utilities: Be specific about who is paying them and if there are limits.
Premises Condition: You should reference a move-in checklist and make provisions for wear and tear deductions from deposit.
Assignability: Make sure it’s clear if the lease can be assigned (sub-letted).
Liability Waiver: Protect yourself from being responsible for damage to tenant’s belongings.
Eviction: Stipulate what charges tenant will incur if you must evict.
There are many additional clauses and you can download a free, sample Lease Agreement HERE.
LIABILITY is a big issue with holding rental properties. You are liable both as an owner of the property AND as a manager of the property (if you self-manage). This is why all experienced investors put their properties into single-asset holding companies and some even establish a separate property management company that has no assets. You should discuss liability at length with an attorney if you plan to hold and lease real estate.
THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY BEFORE FORMING ANY LEASE AGREEMENTS.