The scenario that you have outlined fits ideally into a lease/option. The difference between your rental scenario and a lease/option is that you have a potential buyer already occupying the property, who will have the goal of buying the property in 1-2 years…AND will be responsible for the repairs…AND in all likelihood will pay more than current market value for both the purchase price of the house and the rental price of the house. And how about some upfront option consideration to boot?
Dear friends, mentors, and just plain GREAT people,
I have the opportunity to pick up another good deal here shortly. This will NOT be a flip, but a home with a lot of equity, and no repair needed. I will keep this one, and rent it out.
My problem is that I need a good LEASE form.
I have several from office stores, and a form from a friend who rents out his second home, but I want to make sure that I’m covered in my lease.
Does anyone have a FREE copy of a lease form I can look over with some good clauses etc, so that I may create my own.
Also, what about deposit money for signing the lease. How much should I charge my tenant? I remember in College only being charged 1st and last months rent. But, I also remember that we did not pay the last 2 months rent in college, because the “landlord already had it”.
I DON’T want this to happen to me, but also do not want to charge too much. How do you all do this?
So, please, can someone send me a copy of a good lease form, and an example of what you charge for security deposit etc.?
Thanks,
Jim IL
I always make the deposit about $50-100 less than the monthly rent. For example I have one place I rent out for $520 and the deposit is $450. I figure with the numbers being different there is no way anyone, especially the tenants could say that it is simply last month’s rent. In addition though, I carefully screen my tenants and spend about 30 minutes going over the rental agreement and interviewing them right before we sign to make sure there are no mis-comunications and they know that I will come down on them like a hammer if they start playing games with me. I will email you a copy of my lease for your review, however make sure you know the law in Illinois because your lease has to comply with your local laws.
Posted by rudy-tx on January 24, 1999 at 06:57:31:
I think that you need to learn your state landlord, tenant laws before you go to rentals. Then get a management co. to help yo as long as you need to.I have a Co one that screens the applicants, tells me the information they found and furnishes the lease for the one I choose for $50.00…rudy=austin
One source for a lease is your board of realtors. If you are insistant on being a landlord I would suggest that you get a good course on landlording. Mr. Landlord’s products are sold here.
I still don’t understand why a property with large equity is preferred as a rental for a beginner. Some one with cash flow and surplus cash, yes. I can see landlording a Lease/Option or owner financing on a wrap but I just don’t see why the equity in monthly payments is viewed as more valuable than the cash.
Posted by Randy -IL- on January 23, 1999 at 23:50:46:
I too live in a college town area. How I prevent tenants from using the deposit as rent is holding a deposit LARGER than a months rent. It is also spelled out in my lease that the deposit is not allowed to be used as rent except to mitigate financial damage.
Most landlords I know charge the same amount or less as one month’s rent for the deposit. If this amount is less than rent, it is VERY easy for a tenant to see the deposit as a DISCOUNT payment on their last month. If it is more than a month’s rent, they may see it as a penalty for not paying as agreed.
You could also charge a higher rent in exchange for a rebate at the end of the lease for timely payments. An extra $50-$100 on top of the returned deposit at the end of a student’s lease is great gas money home after graduation day!
I found my lease in a variety of landlording books. ( barnesandnoble.com and amazon.com ) I used one as a template. Then added/changed/molded the terms as I needed. I then paid my attorney a couple of hours time to research, review, and revise in the margins. I told her NOT to type the finished product because I can type it myself for a lot less than $100 per hour!
Thank you for the response. The reason this large equity property is being
kept as a rental is the siomple fact that I’m using a partner and his cash.
He came to me, and said, “find a good proerty to buy with my money, that has
a positive cash flow, good equity, and we will be 50/50 partners in it”. We
further agreed to keep it for 1 to 2 years and then sell.
How could I refuse. He gave the money, the credit, and ALL I had to do was
find a property to buy, and I’d get half.
Otherwise, you are right, I so far am trying to only do “flips” to build up
cash flow.
Plus, he has agreed to allow me to use the equity any way I see fit.
Perhaps a downpayment on the next deal?
We shall see.
Thanks again,
Jim