Garage Rental Addendum: Fill & Download for Free

What are some things to keep in mind before considering being a landlord?I made this list up for my older son’s best friend, who bought his first rental unit last summer. He’s currently working in Australia, so some of the items are geared towards an absentee landlord, but just fill in “you” for those things.If it’s not written in the lease in very clear terms, it doesn’t exist. This means late fees, who’s responsible for what, where rent is to be paid, how it’s to be paid, whether or not pets are allowed, etc. Assume that you might someday have to take your lease and show it to Judge Judy to explain why you did/didn’t do something. If you think there is ANY chance she might yell at you, re-word the item or clarify it in the “additional terms and conditions” even if it’s already stated in the lease in “legalese”.Treat being a landlord like a business!! Keep the income and expenses separate from your personal finances. There’s a separate IRS form for rental properties that you’ll fill out with your income taxes. (Schedule E.) Trust me when I say it’s MUCH easier to fill out when you keep it all separate. I recommend getting a bank account and debit/credit card JUST for the rental. Use them for everything that you can. Also, because you work full-time, put as much as you can on auto-pay (mortgage, utilities, etc). Have all the bills sent to a local address – your mom, me, someone, so we can keep an eye on things and make sure everything is addressed promptly. You’ll need some “seed money” for the bank account, in case of unexpected repairs or fees at the start. Once you get going, then the rental should pay for itself from there out. But always keep the seed money in there, so your bills are covered if the tenant leaves or anything happens where you’re not collecting rent for a month or two. <<this turned out to be prophetic. We had to remove the elderly tenant from the unit this summer, and to get him to agree to terminate his lease the landlord paid to move him, put him up for two weeks in an extended stay hotel, paid for two months for two storage rooms for his belongings, and returned the security deposit. THEN he had to pay for some major repairs the tenant hadn’t mentioned because he was going to fix them himself - he made everything much worse by trying to do it himself.>>Use a realtor! Seriously. It will cost you $600 to list and rent the property. Your agent’s broker gets $300, the tenant’s agent’s broker gets the other $300. (How much the agents themselves get depends on their contract with their broker.) It’s worth it because you don’t have to do anything except decide which tenant you want to accept. Your agent will take pictures, list the property, screen the applicants, get the credit check, write the lease, and can even collect the deposits for you. Then she’ll do the move-in walk through, hand over the keys, and make sure everything is done properly. She’ll also do the move out walk-through, get the keys back, and relist the property. She’ll let you know if there’s any damage or reason to withhold any of the departing tenant’s security deposit or why the property can’t be immediately relisted, and can arrange for cleaning and repairs before the unit is relisted. Naturally, you’ll pay $600 every time you relist the property, but that’s a lot of work on your agent’s part for $300! Obviously, the longer a tenant stays, the better. Some of our tenants have been with us for 10–12 years! And if the tenant stays, your agent can do the renewal lease (which is always a good thing to have) for a substantial discount. My boss charges about $100-$150 to do that, but she handles the whole thing for you, including doing an inspection before the tenant signs the new lease. (We’ll explain about the rollover tenancy clause when you’re ready to be a landlord.  )Get to know your tenants. You don’t need a “come over for dinner” relationship, but you need to know them. They need to feel comfortable calling you when there’s a problem, whether it’s a leaky faucet or they’ve lost their job and will be late paying the rent next month. The more comfortable they are with talking to you, the more likely they are to tell you about problems BEFORE they become major issues. Your tenant is a person. You, the landlord, are a person. You each need to see the other AS a person.MAINTAIN THE PROPERTY!!! If your properties are always well-kept and everything is in good working order, you will never have a problem renting them out. Not one of our eight rentals is ever on the market more than 24 hours before we have multiple applications to choose from. We had an application on one 30 minutes after it went on the MLS! We’ve rented some out in 12 hours from the time they showed up on the MLS. While you’re in Oz, have someone here drive past the property periodically to look for signs of neglect or damage to the exterior (like the roof or landscaping). Jump on repairs immediately. A stitch in time saves nine and all that jazz.Get a home warranty. A home warranty will cover 99% of the things that could possibly go wrong. And it makes getting repairs very easy, especially when you’re not around. Your tenant tells you the dishwasher doesn’t work. You (or someone you designate) call or submit a service request online with the home warranty company. They send a repairman to fix or replace the dishwasher. You pay the call out fee (usually between $75 - $125, depending on the company.You also need a good handyman. That will cover 99.9% of the things the home warranty doesn’t cover. Your agent can recommend guy(s) for everything.Use only licensed contractors for any major system, such as the roof, HVAC, plumbing, and electric. Don’t try to cut corners and hire some homeless guy from the Home Depot parking lot. If he does the job incorrectly, you’re personally liable for any damage/death that occurs. Don’t laugh – there was a landlord in Colorado sitting in prison because he was too cheap to hire a professional to fix the furnace (he killed himself after a few months in prison). He did it himself, and did it incorrectly. A family of five died in that house, and he was convicted of five counts of manslaughter. The home warranty people vet all vendors prior to using them, so you’re guaranteed a licensed contractor. And again, your agent can recommend a licensed contractor for anything you need. If she doesn’t know one, the roofer I work for does. We’ll have you covered.Do an annual inspection. You can have someone do this for you, but it should be done at least once a year. You’re looking specifically for things the tenant hasn’t mentioned need repair and things that are wearing out. Look at the carpeting, the paint, and under the kitchen and bathroom sinks (for signs of leaking). Again, jumping on these things right away will save you money in the long run.Never EVER make a tenant responsible for paying anything that can cause a fine or lien against the property. Ever. Specifically, pay your own property taxes and insurance (better yet, let the mortgage company do that out of escrow), sewer, trash, repairs by contractors, and HOA fees. Regular utilities (power, water, gas, and cable) will go after the tenant for non-payment – the others will put a lien on the property. Also, anything that the HOA can fine you for, like landscaping, should be handled by someone you choose, not left to the tenant. It’s not his house and he’s not going to care for it the way you would.You don’t NEED a property management company for just one rental. Seriously. My boss and I manage her eight properties, and we’ve had as many as 10 rentals at one time. It’s not that hard even if you’re not here. Again, the home warranty will solve 90% of your issues, and careful tenant selection and supervision will take care of the rest. Her tenants generally stay 5-10 years, which is what you want as a landlord. Every time you have to replace a tenant, it costs you money. You have to have the unit cleaned, possibly painted, repairs and touchups done, advertising for a tenant, screening, etc… and the longer that takes, the less money the unit is making. So long-term tenants are always best. Also, property management companies charge fees. They’ll handle everything, but if you have the home warranty, you’re basically paying twice for that. And with a PM company, you’re just one of who-knows-how-many landlords they represent. When you represent yourself, you’re the Number One customer. One more note: Property Management companies have very sneaky contracts. We had a client who didn’t read her contract. She wanted to fire them because they let her unit sit empty for 3 months – never even sent her an application to review, and she KNEW there were applications because we had sent one in for a prospective tenant. The PM company just wasn’t sending them through – tried to say none of the applicants met THEIR qualifications. When the owner tried to cancel, she discovered there was a “buy out” clause in the contract – she had to pay the full amount due until the end of the contract in order to cancel early! It took a lot of screaming and threats of a lawsuit before the PM company finally let her out. It’s a hassle you don’t need.When it comes to accepting rent payments, take ONLY checks or money orders, never cash. Cash is just too much of a hassle, especially now that banks won’t accept cash deposits from anyone except the account holder. You could let the tenants deposit their checks into the bank account, but that can be a problem if you’re trying to evict someone for non-payment of rent. All they have to do is deposit $1 into your account, and the eviction process has to restart. (We had a tenant pulling this crap last year. It’s a pain in the ass.) It’s better just to have them give/mail the check to someone who can deposit for you. I know [my son] offered to do a lot of this for you, and I’ll help you with it. I’m sure your mom wouldn’t mind doing your banking and/or being your point of contact, as well. And if you can’t trust yo’ mama with your money, who CAN you trust?Any refundable deposits you get (security, key, etc) should be kept separately from the property monies. That’s just good business. I seriously recommend you set up a savings account just for this “escrow money”. That way, you earn a couple dollars interest (which is yours to keep) and you don’t have to scrape up money to refund the deposits. Again, keeping monies separate makes tracking things easier, and should the IRS ever audit you, easier tracking could save your life.No lease, no keys!!!!!!!!!!!!!!! It doesn’t matter whether the tenant is a stranger, your best friend, or your mother – no signed lease, no keys! Once the tenant has the keys, you have accepted him/her as the tenant and he has the legal right to occupy the premises. If he doesn’t give you the deposits he promised, if he doesn’t pay any rent, if he violates the terms that would have been in the lease, you will have to go to court and prove what terms he accepted. With a signed lease, it’s easy. “Here’s the paper with his initials and signature. “ Without a signed lease, it’s “Well, here’s a text where I told him this. He didn’t answer, but he didn’t say ‘no’, so I assumed it was okay.” And the tenant says “I didn’t answer because I never got that text.” Then it’s up to a judge to decide what he agreed to or not. It’s an expensive legal hassle that is easily avoided by making sure you have a signed lease. Even if the tenant is doing “labor for rent” (where he doesn’t actually pay you in money), you need a signed lease. It’s not rocket science to make the lease cover whatever payment terms you want.(Note: this item is specific to Nevada - check the laws where you live to see if it applies there} Whatever you do, NEVER EVER refer to anyone helping you as the “property manager”. EVER. Nevada law requires property managers to have both real estate AND property management licenses. Anyone claiming to be a property manager without a license is subject to some hefty fines. It’s allowed for the property to be “owner-managed” and it’s fine for you to have a “personal representative”, but you cannot have an unlicensed person using the title “property manager” even informally.Accepting pets is something you need to think about. Your rental listing can say “no pets” or “pets considered”. Either way, you’ll have people applying who have pets. That’s just life. You do not have to accept them, though (unless they have a service animal, which is a whole different thing). The boss’ properties, and most of her clients’, are always marked “no pets”, but half of them do accept dogs. You can charge an extra deposit (per pet, if you want), and a new trend is to charge extra rent per pet each month! Personally, I think that’s a bit excessive. The idea is to collect enough to cover any damage the pet(s) might do to the property. If you select your tenant carefully, that’s not usually a problem. Many landlords won’t take cats at all. Too many people are allergic to cats, and when the tenant moves out, you need to do extra cleaning (like the ducts) to ensure you’ve gotten all the cat residue out. Another issue is pit bulls (and other bully breeds). Before you agree to accept one, you need to make sure your landlord insurance will allow them. Some insurance companies won’t cover bullies. That means if the tenant’s pit bites someone, you could be held liable for renting to them. If your insurance doesn’t allow pits, you’re on your own for any judgment against you.Many realtors and other landlords will tell you to avoid Section 8 tenants. Sometimes, that’s due to a misconception that you must take whatever Section 8 sends you. That’s not true. You vet a Section 8 tenant just like you do anyone else, and they’re subject to exactly the same rules as everyone else. More, in fact, because Section 8 does an annual inspection of the property in addition to yours. Most landlords who accept Section 8 time their inspections 6 months after the government’s, so the tenant is getting checked every 6 months instead of once a year. (Of course, you can schedule an inspection as often as you want, as long as it’s in the lease.) Sometimes, let’s face it – Section 8 people aren’t necessarily the cream of the crop. There ARE a lot of problems with them, especially if you have a single woman (with or without children) who gets a drug dealer boyfriend. Of course, that’s a risk no matter who you rent to, but it seems to be less of a risk with non-Section 8 tenants. The advantage of Section 8 is that the government pays you directly whatever portion of the rent it’s paying. For some, that’s 100%, for others only 50-80%. It’s entirely up to you whether you take Section 8, but very few landlords using the MLS will do it. They just don’t think it’s worth the risk of having the “wrong kind of people” renting their properties. And there are enough tenants for nice properties that they don’t NEED to take them. The choice is entirely up to you, but you need to tell your realtor whether you will or not, or she’ll default the listing to “No Section 8”.Due to some issues this kid had with his presumably wonderful elderly tenant (who wound up costing the kid thousands and thousands of dollars this summer), we have added a few things to the leases that my boss and I prepare for our tenants and those of our clients:Even if the lease specifies how many people (and who) may live in the property, add an addendum that restates it. Include a clause that NO ONE ELSE may live there OR get mail there. That is particularly important, since receiving mail can establish residency, which means you could find yourself having to legally evict the woman storing stuff in your tenant’s garage (like we did) because she’s also getting mail there, living in the garage, and selling drugs and turning tricks in there.