The leasing process is something every landlord has to go through when they have vacant properties. It's necessary to fill every rental unit to generate rental income, but there is a proper way to handle and create a lease agreement, especially since it is a legally binding contract.
Leasing Mistakes Landlords Should Avoid
Poorly Written Rental Agreement
Creating lease agreements takes a lot of work since you have to include an abundance of necessary information such as financial obligations, rental property maintenance, lease terms, and other crucial agreements for all parties involved. Through all that, you also have to avoid breaking any state and local laws. If you're unsure about how to draft a lease agreement, you can hire a property management company like us to guide you.
Housing Discrimination
You cannot refuse an applicant based on certain factors like race, color, sex, national origin, family status, or disability, as per the Fair Housing Act. Violating landlord-tenant laws will likely land you in legal trouble, and it will damage your rental business's reputation. Among all the common mistakes landlords make, an unlawful one is the worst-case scenario.
Inadequate Tenant Screening
The tenant screening process is the first step in leasing. You have to know who your applicant is before letting them live in your rental property. Not covering all your bases in a background check can lead to renting to a tenant who makes late rent payments or violates the lease agreement rules. Apply the criteria most property owners and property management companies use when screening tenants such as:
- Credit Score
- Criminal History
- Eviction History
- Debt-to-Income Ratio
- Employment Verification
- Calls to Previous Landlords
Unreasonable Restrictions
Having restrictions set in your lease agreement can be good for your rental property. Some of the fair rules include no excessive noise or pets, depending on your rental agreement. However, there are restrictive rules you might not want to include such as limitations on decorations or appliances they can use.
Lack of Professionalism
While it is imperative that you ask questions and discuss the lease agreement with the tenant, mind the lines you cannot cross. You can ask the potential renter about their reason for moving in, preferred lease term, tenancy history, and more. You cannot ask deeply personal questions like whether they intend to have children, what their religious affiliation is, or if they have any disabilities. Remain polite throughout the conversation, even if they say something you don't like.
Neglecting Documentation
Another common mistake landlords make is failing to document the leasing process. Other than the written documentation of a lease agreement, you may also record your interactions with the tenant with their knowledge, which can become useful when legal action is pursued. This way, you can have proof that the tenant agreed to arrangements like the security deposit amount, when they should pay rent, rental unit responsibilities, and more.
Excessive Fees
A comprehensive lease agreement mentions all the potential charges a tenant may pay such as late fees, security deposit amount, rent amount, and more. One of the most common mistakes landlords make is charging tenants without mentioning the costs in the lease agreement, which can lead to disputes and legal issues for violating landlord-tenant laws.
Benefits of Following Proper Leasing Practices
Getting Good Tenants
Renting to good tenants who follow the lease agreement will not only increase your rental income, but you’ll also have an easier time with rental property management. Tenant communications won't be difficult since most of the terms are already mentioned in the rental agreement which they agreed to.
Better Reputation for Your Investment Property
When you're fair with your leasing practices, the word can get around and benefit the reputation of your rental property, which helps you find more tenants. You can even use this advantage to find more real estate investors if you intend to exit the rental business down the road or purchase more investment properties.
More Lease Renewals
When tenants see that the leasing process is uncomplicated and that you have a fair lease agreement, they are more likely to renew their leases for long-term tenancy. This stability is something that landlords dream of, as tenant turnover and the eviction process can be taxing for property owners.
Avoiding Legal Trouble
This is especially true for new landlords who are still learning the ropes and are still unaware of local and state laws for rentals. Hiring a law firm or property management company is advisable at this stage as both will have the needed expertise to prevent landlords from making mistakes. This applies to potential unethical practices as well.
Maintaining Property Value
Finding the right tenants can ensure that they do their maintenance responsibilities, pay their rent, and follow all the rules in the lease agreement. These can all contribute to the retention or even increase of your property's value. This lets you implement fair rent increases in the future, as long as you also consider market conditions and rental demand.
Smoother Business Operations
When both parties know what their roles and responsibilities are in the rental property, you can expect more efficient business operations. Property management is already a lot of work for a landlord, and the stress of having to enforce lease terms due to unclear instructions just adds to the already difficult job.
Details That Should Be Included in the Lease Agreement
- The tenant's and the landlord's names
- Rental property address
- Start and end date of the lease term
- The rent amount along with its due dates and late fees
- Security deposit amount
- Pet policies (if applicable)
- Maintenance responsibilities
- Notice details
- Dispute resolutions
Should I Hire a Property Manager?
While that can depend on how much assistance you need, many landlords can tell you that hiring a property manager can make your life significantly easier.
Between marketing and evictions, companies like Wave Property Management can handle them all professionally. You'll live a stress-free life and earn passive income at the same time, and it starts by contacting us to learn more about what we can do for you.
