You’re a first-time landlord finally ready to rent out your new property.
But first, you need to craft a strong lease agreement.
Which policies should you establish for your new rental business? What rules are fair, and which ones should you avoid?
Deciding on your rental agreement policies is a critical step in your real estate journey. These policies will influence the relationships between you and your tenants, any legal issues that arise throughout the tenancies, and the success of your rentals at large.
So where should you start?
Here are six of the best policies for any lease agreement.
#1 Late Fees
When it comes to protecting your investments, there’s no better way than to enforce late fees.
Late rental fees make paying rent on-time non-negotiable. Tenants will think twice about postponing rent a little longer if there is a hard-and-fast consequence for being late.
What’s more, you can even enforce your late fees automatically. If you use property management software, you can enable automatic late fees to apply whenever a tenant neglects to pay rent by a certain date. The knowledge that that charge will appear automatically is all the motivation most tenants need to pay rent on time.
Just remember that there’s usually a legal limit to the amount of the late fee you can charge. This limit is typically between 5-20% of monthly rent, or a flat fee anywhere from $15-$50.
Even if your fee isn’t high, having one is a good idea. Late fees are a worthwhile addition to yourrent policy.
#2 Right of Entry
Another policy you should clearly lay out in your rental agreement is the landlord’s right of entry.
Entry is a fundamental right that every landlord should ensure if protected in the lease. Right of entry allows you to keep an eye on the condition of your properties, show occupied properties to prospective tenants, and inspect the premises for lease violations.
Entry requirements are also dictated by state laws. Many states have no entry restrictions, but some require landlords to give tenants 24-72 hours’ notice before entering. A few states (such as Florida and Vermont) also restrict the time of day landlords may enter occupied units.
#3 Pets
Pets are an often-debated rental policy point. Despite the extra liability they might introduce, pets can be a great addition to any rental community.
There are many reasons to allow pets in your rentals. Pet-owners make up almost 40% of the renter population in the U.S. If you prohibit pets, you’ll lost this entire group of prospective renters.
If you do choose to allow pets, you must carefully consider your rental pet policy. Welcoming pets is often a lucrative decision, but be sure to set standards for each of the following:
- What types/breeds of animals are allowed
- Any weight or size restrictions
- Tenants’ responsibility to care for and clean up after their pets
- Procedures for any injuries or pet-related incidents
- The maximum number of pets permitted in each unit
#4 Smoking
Prohibiting smoking is a common rental policy among landlords, and for good reason.
Smoking can severely damage your rental units. Residual smoke can build up in your units over time and create stains, yellow the walls, or leave lasting odors.
Plus, when a smoking resident moves out, non-smoking prospective renters will not want to rent out their unit if signs of smoking are prevalent.
Prohibiting smoking is the best move for protecting your units in addition to your community’s health and safety.
#5 Repairs and Maintenance
Who is responsible for making which repairs? What is the procedure for maintenance questions, problems, and emergencies?
The answers to these questions should be explained thoroughly in each rental agreement contract you write. It’s a good idea to require your tenants to come to you before making any repairs themselves. This will prevent tenants from attempting to fix problems above their ability and causing further damage to your properties.
Likewise, firm repair and maintenance procedures will ensure problems are addressed sooner rather than years down the line when a tenant moves out.
#6 Guests
Guest policies vary among landlords. Some landlords are okay with long-term guests, while others set strict limit on the number of days their tenants may have overnight guests.
A good policy for guests is to encourage your tenants to come to you if special circumstances are involved. For instance, maybe a tenant is in the process of moving their elderly parent into an assisted living arrangement and needs an extension on your guest policy. Or maybe a new relationship has turned into something more serious, and your tenant would like to add an additional party to the lease.
Instead of fining these tenants immediately, talk to them to find out their specific circumstances and come to an agreement together.
Conclusion
Your rental policies are the backbone of your business. Without them, you couldn’t maintain your properties. By clarifying and establishing firm policies in your lease agreement, you can ensure lasting tenancies for years to come.