The lease agreement is the most important document a landlord has. A properly drafted rental agreement contract lists all of the policies by which your tenants must abide when renting your property.
Although your policies must fall within the confines of federal, state, and local laws, most aspects of your rental policies are up to you.
Here are some of the best policies you can institute for your rental properties:
Late Fees
Because receiving on-time payments is the backbone of your business, enforcing late rental fees is one of the most important policies in any rental agreement.
In most cases, the threat of a late fee is enough to ensure your tenants pay rent on time. On the occasion that a tenant does miss a payment, they must be penalized for breaking the rental agreement. If you don’t consistently enforce late fees, your tenants are likely to continue making late payments in the future.
Your late fee policy should also include a grace period (in fact, grace periods are required by law in most states). A grace period gives your tenants a few days of flexibility, in case they’re waiting for a paycheck or for funds to transfer between accounts.
By using property management software, you can automate your late fees and grace periods, which saves you the time and trouble of enforcing late fees yourself.
Pets
A majority of renters in the US own pets. While pets increase liability when it comes to property damage, denying tenants who have pets substantially reduces your pool of renters. For this reason, we recommend allowing pets, but not without a rental pet policy.
By requiring tenants to pay more if they want to bring a pet, you can outweigh the potential negatives of a pet in your unit by bringing in additional income. There are three ways to charge tenants for pets:
- Pet fees: These are single, nonrefundable payments typically ranging from $50 to $500.
- Pet deposits: These are also one-time payments, but unlike pet fees, they’re refunded when a tenant moves out if the property isn’t damaged from the pets.
- Pet rent: This is a monthly fee, ranging from $10 to $60, that a tenant pays on top of normal rent.
While pent rent and pet fees are more lucrative, pet deposits might be more appealing to renters. Ultimately, it comes down to your personal preference.
Utilities
When it comes to utilities, you have a few options.
On the one hand, some landlords choose to keep utilities in their name. If you decide to do this, you can include them with rent and increase the rent price, or you can charge an additional utilities fee as part of your rent policy. Utilities are tax deductible for landlords, which means that by leaving them in your name and charging your tenants a premium, you can make more money.
With that being said, maintaining utilities in all your units can be a headache, and you may prefer to leave the responsibility to your tenants (especially with utilities like electricity whose prices vary with usage).
Many landlords opt to provide some utilities (e.g., water, trash, and gas) and leave others for their tenants to handle (e.g., electricity and internet).
Subleasing
Subleasing is when a tenant re-rents your property to a third tenant. This subtenant then pays rent to cover all or part of the original tenant’s lease contract.
Allowing your tenants to sublease can be beneficial because it reduces vacancies. If a tenant needs to move out early or leave temporarily for a study abroad trip, subleasing leaves them responsible for finding someone to cover rent, which means you’re able to avoid an unwanted vacancy.
Subleasing also has its cons. You don’t want your original tenant to sublease to a bad subtenant who causes problems. If you do choose to allow subleasing, you should take the following precautions:
- Require your consent
- Run a full tenant screening on the subtenant
- Require subtenants to pay rent to you
- Outline the logistics in your rental agreement
- Require renter’s insurance to minimize the risk of damage
Conclusion
Every landlord has their own preferences on rental policies. While the specifics of your policies are ultimately up to you, we highly recommend considering the above policies when making your decisions. The most important thing is to be clear on all your policies in your lease agreement.
