You have your rental home fixed up, cleaned, and it is ready to rent. Before you start marketing your rental home, you need to have your rental agreement ready to go. The Rental Agreement is the biggest contributing factor in whether you are profitable in this business so take care in preparing yours.
I am often asked something like, “Where should I get the wording for my lease agreement?” Another question that I am often asked is something like, “What legal wording should be on my rental agreement?”
The legal conditions between the renter and the owner need to be listed in your rental agreement. The rental agreement is a legal contract between the renter and the owner. It outlines what is acceptable use of your property. The first thing you should decide is if you should rent out your house on a month-to-month lease, or for a fixed term like 6 months or 1 year.
Common lease periods that most property owners use are for 6 months, 9 months, or 1 year with the 1 year lease being the most popular. The lease obligates you and the renter for a set period of time. After the initial lease expires, most leases are written to automatically go to a month-to-month rental agreement.
A lease is good for tenants because it freezes the rent in place for the term of the lease, and it’s good for you because you can count on having a tenant for a set period of time.
Sometimes a property owner will offer a lower monthly rent on a 1 year lease ($25 – $50 a month less) because a tenant on a 1 year lease is not as high a risk of early turnover than tenants on a monthly lease. That is one of the biggest problems owners face is spending money to clean and turn a unit only to have a tenant skip on them after a few months.
You should know that with a 1 year lease, or any fixed term lease, you can not raise the rent or change other conditions in the lease until that lease expires. You also can not give the tenant a boot like you can on a month to month agreement until the tenant has not paid the rent or has violated some other condition in the Rental Agreement.
Landlord tenant laws in almost every state favor tenants. This means that you can not just violate a Rental Agreement but the tenant can and often does. A tenant can walk away from a lease and there is not much you can do. Keep in mind as well that if this happens, you have to prove that you are trying to rerent your home. Also, as soon as you find a new tenant and he pays the first months rent, you must stop charging the previous tenant for violating the lease. You can not get double payment on a rental unit.