The Ultimate Guide to Lease Agreements for Real Estate Investors


28 Dec The Ultimate Guide to Lease Agreements for Real Estate Investors

Many real estate investors find fulfillment in making excellent deals and selling properties based on the market. However, one of the most natural transitions for an investor to make is becoming a landlord. As you acquire properties at times when the market is more suited to buyers than sellers, you likely need to hold onto those properties until you can make a profit by selling them. In the meantime, leasing them to tenants provides essential streams of income.

Don’t let a lack of experience in being a landlord stop you from making the most of your investment properties. With a bit of education and support, you can leverage your properties via your tenants just as well as you can leverage the market to find great investments.

One of the most essential aspects of renting a residential property is creating a lease agreement. Your residential lease agreement should protect you and your investment property as well as your renters. It is a cornerstone of profitable property management. This ultimate guide can help you craft a lease agreement that is legally binding and supportive of your interests as both a landlord and a real estate investor.

Money bag and blocks with the word Leasing

Lease Agreement Must-Haves

Laws around rental properties are known to favor renters strongly, but that doesn’t mean they’re not on your side too. It’s essential to ensure your rental agreement adheres to all of the landlord-tenant laws in your area. These laws typically apply to factors like rent prices, security deposits, occupancy limits, property maintenance rules, and late fees for rent payments.

For example, some states require landlords to offer a grace period for late rent payments before charging late fees. This grace period is typically five days long but can vary based on your location. Laws about security deposits sometimes limit the amount you can require a tenant to pay. Property maintenance laws often draw clear lines between landlord and tenant responsibilities, including the standard of maintenance required to deliver safe rental homes. Many investors work with a property manager and real estate attorney to learn state requirements in these areas. 

Beyond abiding by landlord-tenant laws when creating a residential lease agreement that keeps you on the right side of the law, you also need to ensure that your agreement contains all necessary information. For example, it should contain clear lease terms with any necessary addendums, the names of the parties involved in the agreement, and renewal information. Including all of these essential pieces of information will help you ensure that your lease agreement is legally binding.

Essential Clauses Real Estate Investors Can’t Forget

A lease is a binding document between a landlord and a tenant. Therefore, a lease clause is a specific agreement within that document. As such, there are essential clauses that allow a standard lease agreement to function properly as a binding arrangement between you and your tenants. Although some non-essential clauses or addendums may be added to a lease agreement, some are simply unavoidable.

Your lease agreement should contain clauses covering liability for rent payments, access and usage rules for the premises, automatic lease renewal terms, sublet rules, maintenance rules, hold-over policies, and disturbance policies. These are all critical aspects of the lease agreement that your tenant must abide by as stipulated by state landlord-tenant laws and local bylaws. They are designed to ensure a clear working relationship with your tenants.

With these clauses in place, investors experience better tenant relationships due to a clear understanding of when and how to pay rent, how to continue their tenant relationship with you after their lease expires, and where the flexibility in their rental agreement lies via sublet rules and hold-over policies. Your renters will also be set up for living peaceably on your property without disturbing their neighbors or causing undue damage to your investment. 

Customization Options for Your Lease Agreement

The bare-bones residential lease agreement you can create with essential clauses can’t offer you the full range of protections and clarity you may want as a landlord. To get the most out of your lease, adding optional clauses and addendums might be necessary to customize the document. In addition, these terms can be fluid across different lease agreements—if you want to offer a more flexible lease to a high-value tenant, you are free to remove or adjust optional clauses at your discretion. You can also change these clauses on a property-to-property basis to adjust the rental lease agreement you offer for single-family homes versus apartments.

Custom rules that typically don’t break landlord-tenant laws include smoking rules, pet deposits, rent amounts, payment methods, co-signer requirements, move-in dates, maintenance requirements, and renters insurance requirements. The terms included in these clauses allow you to make your lease accommodate your preferences and add additional protection for your investment property. As long as you become familiar with landlord-tenant laws in your area or consult with your attorney, you should be able to adapt them to your needs as you see fit.

Don’t forget to add addendums to your residential lease agreement. Many landlords add educational materials to their lease agreements to give their tenants the knowledge they need to maintain the property better. Some addendums could include mandatory lead paint or bedbug educational pamphlets as required by local regulations, detailed descriptions of a renter’s pets, or information about planned renovations.

How to book or guidebook on wooden table

Types of Lease Agreements to Consider

Not every rental or lease agreement has the same terms. Standard lease agreements are long-term contracts that typically last for 12 to 24 months. Many landlords prefer long-term leases if they plan to hold onto an investment property for a considerable amount of time. However, some real estate investors choose to offer month-to-month or short-term leases. If you’re not ready to make a long-term commitment to being a landlord or working with a particular tenant, a month-to-month lease agreement may offer you some flexibility and peace of mind.

In the end, the lease you create should be tailored to your needs and preferences as a landlord. However, as long as the document you create is legally sound, you have the flexibility to protect your property, manage your rental income stream, and build relationships with your tenants as you feel appropriate for your situation.

With the right resources, knowledge, and support, you can create a standard residential lease agreement that you’re confident in. If you have any concerns about whether or not your lease is legally enforceable, don’t hesitate to reach out to a real estate lawyer. Many lawyers offer short-term assistance with document creation for new landlords. 

Once you have a basic, legally sound agreement that works for your area, you can add optional clauses and addendums to it as you figure out what matters to you as a landlord. You may find freedom and flexibility in adjusting your lease agreement on a per-tenant or per-property basis, as well. Over time, you will be able to streamline this part of being a landlord, so you can focus more on maintaining your investments and finding new properties.

Find Your Next Rental Property With Privy!

Don’t let tenants distract you from your primary goal of becoming a successful real estate investor. At Privy, we specialize in collecting and sharing essential data from investors that can help you find excellent properties without doing all of the research on your own. Becoming a landlord may require an investment of your time and energy, but we’ll help you stay in the investing game even while you gain more streams of income. Reach out soon to learn more about the Privy Advantage!

Get more details about creating strong leases! Download your free copy of "The Ultimate Guide to Lease Agreements."


Learn More About Privy - YouTube Channel