Did you know that, according to lawyers, the most common landlord-tenant disputes have to do with property maintenance, nonpayment, and taxes (among others)? This means that if you’re a landlord looking to create a lease rental agreement, you’ll want to be mindful of these things.

After all, creating and enforcing an effective lease agreement is key in managing tenant relationships and protecting your rights as the owner of the property. Drafting up a great agreement can make your life (and doing business) a whole lot easier.

In this quick guide, we’ll cover all of the details related to creating robust rental agreements with tenants so you can feel confident they’ll honor your rules throughout their stay on your property.

What Type of Lease Rental Agreement Do You Need?

Different types of tenancy agreements come with their own set of administrative rules. Before you start looking at real estate leases and examples of rental leases, it’s important to make sure that you understand all the ins and outs of what kind of lease you need to draft up.

Fixed-Term Leases

A fixed-term lease can be the perfect opportunity for a real estate investor or property manager to get involved in a project with certainty and assurance.

Of course, fixed-term leases come with a few extra bells and whistles that need to be negotiated before fully committing, but what good investment doesn’t? 

There are tradeoffs, of course, as fixed-term leases offer a hard timeline instead of a possible extension. However, at least everyone knows what to expect in advance. So if you’re looking for something reliable and known, fixed-term leases are the way to go.

Automatic Renewal Leases

Not only do automatic renewal leases mean that tenants don’t have to actively sign a new lease each year, but they also help your bottom line by eliminating the need to find new tenants each time a lease comes up for renewal. 

Plus, automatic renewal leases offer stability for both parties; secure in the knowledge that rent payments will keep coming in, investors and property managers can focus on growing their portfolio instead of worrying about jumping through all the hoops every few months.

Month-to-Month Leases

From the perspective of a real estate investor, offering month-to-month leases can be both a wild ride and an exciting opportunity. 

With shorter leases comes more frequent turnover. In other words, there’s more potential for financial gain. There’s far less commitment than with a longer lease period, and it provides flexibility if the market changes or someone decides to move on unexpectedly. 

Sure, there might be extra paperwork involved in managing month-to-month leases but, as they say, you have to take the good with the bad.

How Much Should You Charge for Rent?

If you’re new to setting rent rates then we suggest starting by charging 1% of the market value of your property. This is pretty standard. However, the actual rate you charge could be anywhere between 0.5% and 0.8% depending on local rental values, your location, and amenities.

To ensure that your rent is at a fair market rate, get to know your local rental market by looking into comparable properties in the area. How much rent are they charging? How does their property compare to yours? 

Collecting as much information as possible will help make sure that you’re pricing competitively and maximizing your profits. It’s also a great way to ensure you’re not lowballing yourself and charging less than what you could potentially rent your property for.

What to Know About Deposits & Fees

As a landlord, understanding deposits and fees is a critical part of renting out your property. Security deposits can also be a source of landlord-tenant disputes if not handled correctly. 

It’s worth taking the time to understand applicable state regulations. These may set limits on the maximum deposit you can charge or impose certain restrictions. 

Plus, understanding local rental laws and tenants’ rights is important if you’re serious about making money from your real estate investment. Where do you start when it comes to charging a security deposit, though?

As a general rule, the security deposit should be equal to half to a full month’s rent. For example, if the rent is $2,500 then you should charge between $1,250 and $2,500 for the security deposit.

It’s also important to think about deposits and fees when you’re creating your rental agreement so both parties know what is expected. 

An agreement should always include a section on how the deposit can be used to repair damage or cover any unexpected cleanup costs. On the other hand, it’s equally as important to state in the agreement how deposits cannot be used.

At the end of the agreement, you’ll need to decide and communicate when and how the deposit will be returned and make sure you’re aware of and following all legal obligations for refunds. When in doubt, keep your rental tenants in the loop as much as possible to avoid confusion.

What to Include in a Rental Agreement

As you hopefully know by now, a rental agreement is a great way to protect both the landlord and the tenant involved in a residential or commercial lease. 

What you need to include depends on the type of property you’re renting, but there are some key things that everyone should have listed in most real estate leases.

Occupancy Limits

You should inform all of your real estate tenants of the exact number of people that can live in the residence before signing the agreement. This ensures all parties are aware of their respective rights and obligations. 

Occupancy limits:

  • Help ensure safety
  • Protect the property from damage and overcrowding
  • Allow residents to settle comfortably in their new homes

So, make sure to include specific occupancy limits in your lease rental agreements so there will be absolutely no confusion about these expectations.

Rent Payment Instructions

Rent payment instructions can vary widely from landlord to landlord, but typically involve:

  • The amount due each month
  • Where the money should be sent (such as a bank account or mailing address)
  • When it should arrive (usually at the start of each month)

Renters should also be aware that late fees might apply if rent is not paid on time. Establishing these ground rules ahead of time helps both tenants and landlords stay organized. On your end, it’s a way to ensure you don’t have legal issues down the road, too.

Additional Fees

Additional fees might include utilities, extra costs for damages, or cleaning fees that were not covered by the original contract. For example, one of the most common fees landlords include in their lease agreements these days applies to pets.

This is a great way to ensure your tenant is aware of charges they could potentially incur if something goes wrong. On your end, it’s a way to protect your investment property from damage or costly issues.

Maintenance Protocol

Maintenance responsibilities are critical components of any rental agreement. To ensure all parties involved are held accountable, a clear and detailed maintenance protocol should be included in the agreement. 

What the actual protocol includes can vary, but generally covers topics such as who is responsible for repairing broken items or appliances, what kinds of upkeep tenants must do regularly, and other standard procedures to keep up with particular features on the property. 

Necessary Rental Clauses

If you’ve never rented a property before then you likely won’t understand just how much rental clauses can be a lifesaver when it comes to mitigating legal problems. 

You might want to seek the help of a lawyer to help you write these out, though. These clauses should feature precise legal terminology to ensure the lease protects both you as the landlord and your tenant.

Severability Clause

A severability clause essentially states that even if one part of the agreement turns out to be invalid or illegal, the other parts of the agreement still stand. 

It’s like having a safety net. If one element of your agreement doesn’t hold up in court, no worries. Everything else remains intact. 

Access to Premises

Accessing the property during “reasonable hours” and with “proper notice” is completely within your rights as a landlord. This clause also acts as a safeguard in case of emergencies; if need be, you can access the property without providing a warning.

Sublet Rules

Sublet rules are a crucial part of any tenancy agreement and this clause is no exception. This clause specifically dictates that the express permission of the landlord or property owner must be provided before any tenant intends to sublet to safeguard your interests.

Get Help With Property Management   

Property management can be a full-time job that extends far beyond drafting up a lease rental agreement. From finding the right tenants to fixing broken appliances, property managers and real estate investors have their hands full. 

If the legal jargon and tenant issues mentioned above sound like a headache then we’re here to help. We are a full-service, Memphis, TN-based property management company offering years of experience managing properties for investors like you.

Click here to learn more about our property management services.