Owning and operating residential rental units is a great way to increase your cash flow and build a strong investment plan. Commercial real estate investments help expand your financial portfolio by providing a consistent cash flow. Protect your investment by creating a strong rental agreement. Â Here are some things to include in your rental contracts.
Application Documents
Be sure to let prospective tenants know the application requirements before they ask to sign the lease. Make sure they bring state-issued identification, bank statements, and income verification. In addition, the tenant should be prepared with checks for their security deposit, pet deposit, and monthly rent.
Utility Availability
The commercial real estate owner determines how utilities are paid. No hard and fast rule says if you should make utility payments for each unit or not. Consider what neighboring landlords are charging. You don’t want to lose a tenant because they are responsible for the water bill when nearby landlords pay those fees.
Renovation Guidelines
Most renters aren’t going to do any major renovations to the unit, but some want the flexibility to paint walls to make it their own. Set guidelines detailing the extent of approved improvements. Don’t forget to establish policies for restoring the unit to its original condition. This protects their security deposit and lowers your repair expenses.
Maintenance Expectations
While most repairs will be included in the lease, itemize any types of maintenance you will not cover. In addition, you may include reporting requirements, so that tenants don’t ignore a problem until it is an expensive fix. Many commercial real estate owners require that tenants provide proof of rental insurance before they can occupy the unit. This protects both the landlord and the tenant.
Pet Standards
If you plan to allow pets, create a provision in your contract. This is where you dictate the types of pets accepted in your facility. Establish additional deposits or monthly fees if the tenant brings a pet to the unit. Don’t forget to include penalties if the tenant fails to disclose a pet.
Parking Availability
Establish guidelines for parking. Detail the number of parking spots associated with the unit. Many landlords find it most effective to have assigned spaces for each residence. Add details such as visitor parking spots and street parking areas. Tenants that have frequent visitors can put an unexpected demand on your parking.
With a well-written lease contract, you are ready to start marketing your rental units and bringing in consistent revenue.
