Okay, truthfully, we didn’t just rent our home. But it did take a while.
We listed our home for rent in mid-June, and my tenant moved in on August 15th. It was an up-and-down couple of months, as I explained in previous posts.
Once we’d gone through all that and found our tenant, it was time to make it official: create and sign the residential lease agreement.
For obvious reasons, we wanted a lease agreement. An agreement lays out the terms of the contract between us (the landlord) and our renter (the tenant).
An agreement gives both parties something to rely on if there is any question about how things should happen. For example, if rent is going to be paid late, the agreement should explain what constitutes “late”, what the late fees are, and more.
We’ve all heard the anecdotal stories of tenants from hell. While the proper vetting upfront can eliminate most of those problems, a solid agreement will ensure that legally you are protected if your good renter turns bad.
Our homeowner’s association also required our lease agreement. Not only did they need us to sign one with the tenant, but they also gave us some verbiage to include in the agreement.
Lease agreement language will differ from state to state, but they will likely contain some of the same primary data. I picked up my lease agreement from a friend and a local lawyer with a rental property.
He gave me his agreement, and I modified it accordingly. Some of the key elements from my agreement:
- Term – This section defines the lease agreement dates. In my case, the lease runs from August 15 to August 31.
- Rent – This section states that the rent is $1,775 a month. It also states when to pay it, where to pay it, and using what method (i.e. direct deposit).
- Security Deposit – This section explains that the security deposit is $1,775 (or one month’s rent) and it also defines what can be deducted from the security deposit at the end of the term.
- Utilities – This section makes it clear that all utilities are the responsibility of the tenant.
- Animals – I edited this section of the agreement to be in line with my pet policy (i.e. one domestic cat).
- Late Charge – This section of the agreement states that the tenant will pay me $25 a day for each day past the first of the month that the rent is not paid.
- Governing Law – Basically states that this agreement is bound by the laws in Texas.
- Notice – Includes the mailing addresses where changes to the agreement should be forwarded.
Nolo.com has a solid list of ten terms to include in your lease agreement.
Thankfully I had a friend to rely on for free residential lease agreement. If you’re not so lucky, maybe you should reach out to a lawyer to have one written up. Rocket Lawyer has a free residential lease generator that looks pretty handy.
I shared with you guys earlier that I used MrLandlord.com’s tips for vetting tenants. He also has some example lease agreements that could prove helpful. And of course, LegalZoom, can do this for you, starting at around $25. You can also check with a lawyer on Just Answer for more advice about leases if you want.
When I was going through the process of turning our home into a real estate investment, I found that it was good to have the lease agreement ready. In most cases, a prospective tenant wanted to look at the lease to ensure they were comfortable with the terms. Most tenants were concerned with what happens if they had to break the lease.
The lease signing was fairly straight-forward. I met the tenant on August 12th. We reviewed the property and agreement one last time.
We both signed and I immediately photographed the lease and emailed copies to each party. To my knowledge, you cannot legally require the first month’s rent and security deposit until the move-in date, so we did not exchange money when we signed the lease.
My tenant paid both on the 15th, his move-in date (or as the lease agreement defines it – commencement date). I had, however, previously collected a holding deposit of $500 to feel comfortable temporarily taking the property off the market.
Since the signing all has gone well with the tenant. It’s been very quiet. Seems the hard work spent vetting the tenants is paying off. Next post I’ll share how I’m collecting rent and some of the other methods out there.
If you’re a landlord, how do you handle your residential lease agreements?