Managing a rental property can become a chore if you don’t find the right tenant. Some of the most common problems that arise with tenants are payment of rent, vacating the property after the termination of the contract, misuse of the house, and non-payment of fees for maintenance and other utilities. Unless you have a robust legal contract, your tenants’ activities might not be actionable under the court of law. A weak agreement offers your tenant loopholes and ambiguous clauses to exploit in his favour. There are some things that you need to keep in mind before letting your house to tenants
Deciding on the Rent Amount:
The first important step is to determine what your rental payment should be. The rent that is charged on a lease will always be dependent on the neighbourhood it is in. This means that no matter the grandeur of the house if it is in a lower-class area, you can’t expect rent that the grandeur would otherwise have been worthy. This does not mean that your property should have added value. If it is exceptionally well-maintained, you can charge higher rent. When you calculate the lease rent you need, you should keep in mind the average rate around the area.
In a group society, it is easier to calculate the rent because you just need to ask others for the latest figures. This is possible because there is more uniformity, as all flats are similar. For independent houses, this benefit is not available. If your furnishings and interior decor are excellent, you can charge a premium, but you’ll have to wait longer to find a tenant. To arrive at the rent for your independent property, you could look at the rents in the general area and arrive at an approximate rent per square foot.
Calculation of Rent:
Basic rent is a percentage of the approximate current value of your property. That means, out of the rental amount you’ll charge from the tenant, basic rent is only a small percentage, usually around 4%. The remaining part of the rent is calculated basing on the amenities you provide. Properties that have excellent furnishings, well-maintained building, clean and spruce, good facilities will attract tenants faster. This is how you decide on the premium you will charge. It shouldn’t be too high to drive away tenants, nor should it be too low to recover the cost of your investment.
Before you charge for the amenities, you should consider what the tenant wants. This is what will decide the amount of premium. If the society, or a municipality, charges you for any additional facilities, you can charge your tenant for them. You should also consider adding maintenance fee so that you can account for any damages, wear, and tear, or abuse of the facilities you have provided your tenant.
Registration of Your Lease:
This is an essential step. Your lease should include everything that you and your tenant have agreed upon. Depending on goodwill, relationships and oral promises can result in unwanted disputes in the future. The clauses in the lease agreements should be ironclad to protect your interests if any conflict arises. Registering your lease serves as a proof of the terms both parties have agreed on. Besides, it acts as an insurance against unilateral modifications to the contract that could be detrimental to the other party’s interests. Even courts of law will enforce the agreement if it has been registered with the authorities.
As a lessor, you should conduct a background check on the tenant to ensure there aren’t any red flags in his history. Performing this check without the informed consent of the tenant can constitute stalking and an invasion of personal space, which is grounds for a civil lawsuit. Your contract should include clauses that the tenant acknowledges that the lessor has the right to use whatever means he may see fit to conduct a background check on the tenant. The lease agreement should also elaborate on the clause giving the lessor the right to terminate the contract without prejudice if the tenant has misrepresented or if there have been any red flags in the tenant’s history.
Purpose of Use:
If it is a residential property, the lessee should only use it for residential purposes. The agreement should restrict any commercial activities meant for the tenant’s profit. The clause should also mention whether the rent would be higher retrospectively or the contract would be terminated if any such disallowed commercial activities have been discovered. Apart from this, the agreement should also clearly specify or restrict what the tenant can or can’t do on the premises. These restrictions generally apply to pets, gambling, or other illegal activities, modifications to the interior decor, and interpersonal activities. The agreement should also give the lessor a conditional right on property visits to ensure its maintenance.
Jessica is a writer by calling and an academic. She has created scintillating and remarkable content for dozens of websites in the Business Sector. She possesses a fair understanding of the inner workings of several business establishments, making her the foremost expert in this field.