How Real Estate Investors Help Tenants Read a Residential Lease Agreement


4 Jan How Real Estate Investors Help Tenants Read a Residential Lease Agreement

As a property owner, it helps improve your returns when tenants understand everything outlined in their rental lease agreement and follow the rules. Even if you drafted a simple one-page lease agreement, going through each aspect of the contract with your tenants will determine whether they have questions or concerns to address before signing. 

Our real estate investing experts have put together some tips to help you work with renters to read, understand, and sign the lease agreement! We hope you find this information helpful.

What Is a Rental Lease Agreement?

As a seasoned property owner, you may have years of experience with leases and rental properties. However, your tenants may be first-time renters. Helping renters understand the lease and how it works helps develop a good landlord-tenant relationship and prevent potential issues. 

A rental lease agreement is a signed contract between someone who owns a property and someone who occupies that property. The lease provides details regarding the conditions the tenant must follow when living in the rental unit. For example, if a tenant needs an emotional support animal, you may require that they let you know before the animal is brought into the home. You might also have rules about the paint colors tenants are allowed to use. Depending on the information you include in the lease, spending a few minutes walking through the document can be an excellent way to operate rental properties profitability. 

Young African American woman reading documents while her husband

Why Is it Important For Tenants to Understand the Lease Before Signing?

Whether you’re using a long or a standard lease agreement, it’s important to go over every detail of the lease with your prospective tenants before signing. A rental lease agreement is a legal document that both parties must adhere to for the entirety of the lease dates, and not every lease is the same. If the tenant signs the document before understanding the conditions and later realizes they didn’t understand a rule, property owners face potential income loss to correct the issue (or find a new tenant). Plus, real estate investors should help renters start with a positive experience to enjoy better long-term residents and income. 

How to Review the Lease With Prospective Tenants

When you’ve selected prospective tenants to lease an investment property, take the time to carefully go over the following aspects of the rental lease agreement before signing the document.

Discuss Deposits

One of the most important aspects of a rental lease agreement is the money exchanged between the tenant and the landlord. As the residential property owner, it’s your responsibility to collect rent when it’s due. Therefore, you need to ensure renters understand how much money is owed in rent each month, when to pay rent, and how they can pay you. You may require that renters deliver a check or use online payment software. Either way, tenants must understand this essential step when living in a rental home. 

Besides rent, most property owners require tenants to pay a security deposit when they sign a lease. This deposit secures the tenant’s intent to rent the property and care for it. At the end of a lease, the security deposit is returned to the tenant if the rental home is well-maintained, clean, and damage-free. Your prospective rental property tenants must understand the security deposit amount, when it’s due, and how you process it before signing the rental lease agreement. Go over the particular conditions the property must meet for the security deposit to be returned in full.

Other deposits that real estate investors often require include a monthly fee for parking or having a pet on the premises. It’s also essential to go over what will happen if rent or a monthly deposit is not paid on time or in full. Discuss grace periods for late rent and how you’ll apply late fees past that deadline. 

Confirm An Understanding of Financial Responsibilities

Besides rent and required deposits, there are other financial responsibilities the prospective tenants must understand before they sign a rental or lease agreement. These financial responsibilities may include paying the electric, water, and wifi bills on time. If your rental property’s rent includes water and gas, it’s important to have that detail in the rental lease agreement. 

Going over how to set up an account to pay the electric bill may be an additional helpful step to welcome new tenants into your property when signing a lease. Real estate investors can also provide advice about wifi options that work well for the home. This shows that while you won’t be taking care of the electric and Wi-Fi bills as the landlord, you’re willing to help them get settled with these key pieces of information before signing the lease.

Review Who Is Responsible for Maintenance and Repairs

In most cases, it’s a rental property owners’ responsibility to make all necessary repairs for an investment property to comply with local, state, and federal landlord-tenant laws. However, there may be certain things the tenant is responsible for that applies to maintenance and care for the rental home. 

Work with an attorney and a property manager to outline your responsibilities for repairs, including structural, electrical, and plumbing issues. Make sure these details are evident in the document since the lease also holds property owners accountable to renters for delivering these essential services for a safe home. 

However, there are some situations where the tenant could be responsible for repairs and maintenance costs. As you review the details of the rental lease agreement, make sure you go over these situations. For example, if a tenant has an emotional support animal or service animal that chews through a wall, the repair costs would fall to the tenant, not the landlord. Failing to take care of such an issue will also affect the tenant’s security deposit.

Also, make sure tenants know their responsibilities for lawn care, taking out the trash, keeping the property clean, and more. 

Review Lease Terms and Restrictions for the Rental Property

Before the rental agreement is signed, it’s also important to review its key clauses, terms, and restrictions. For example, if a prospective tenant expresses an interest in getting a dog down the line, what size dog are they allowed to have on the property? Are there breed restrictions?

Other lease terms and restrictions you may need to review include:

  • The number of occupants allowed to live on the property
  • The use of the property
  • Whether sublets are allowed and when the landlord must be notified
  • Whether home businesses are permitted to operate in the property
  • How long guests can stay on the property
  • Grounds for tenant termination
  • How and when the landlord can access the property
  • The length of the lease, including the start and end dates

While it’s not necessary to spend a lot of time talking through these details, reviewing these elements helps tenants understand and follow the rules. Once everyone understands the document, be sure to get signatures!

A man reading lease agreement paper, about to fill and sign

Good Leases Help Real Estate Investors Make More Money!

It’s essential to review a standard lease agreement with tenants before signing the document. With a clear understanding of the rules and when the rent is due, real estate investors experience better tenancies and more investment income! When it’s time to find your next rental property, let Privy help. Our software helps property investors spend less time finding investments and instead see better deals, make great offers, and generate better returns. Reach out to learn more about the Privy Advantage!

Strong leases help rental property investors make more money! Get our free resource, “The Ultimate Guide to Lease Agreements."


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