Owning a rental property may sound like a dream come true, but it does come with some obligations that landlords need to handle. One of the most important things landlords need to do is make sure all of the paperwork is in order. Unfortunately, there are many common mistakes landlords make with rental agreements, which we keep seeing time and again. Your best course of action is to learn about these common mistakes and ensure the rental agreement is handled properly.
Avoid these common mistakes landlords make with rental agreements:
Keeping things vague in the rental agreement can lead to problems down the line. The agreement represents a legal contract, and you should personalize it with actual names instead of just putting ‘landlord’ and ‘tenant.’ Avoid nicknames or shortened names, and just use the full, legal names written on the driver’s license or other documents. You should also make sure that the tenants sign the agreement and have them confirm that you have their correct names and information listed.
1.Not naming tenants in the agreement
In the unfortunate event that you have to file a dispute, having the correct names and signatures on the rental agreement can save you a lot of time and money, not to mention nerves. Thankfully, the security deposit should help you cover certain damages or unpaid rent. However, that shouldn’t be an excuse for sloppy documentation, so you should do your due diligence and get the names and signatures correct on the agreement.
2.Not knowing the law
Owning a rental property doesn’t mean you can put whatever you want in the rental agreement. One of the common mistakes landlords make with rental agreements is that they put in provisions that go against the law. Every state, including Florida, has a detailed tenant’s rights law in place to protect tenants from any wrongdoing from the landlord. The fact that you may be unaware of the law will not be an excuse if you put anything illegal in the rental agreement.
You should also remember to occasionally check to see if there have been any changes to the legal requirements to the rental agreements, as was the case during the coronavirus pandemic. You can download an online template; however, tweaking any of the terms in the agreement without consulting with an expert can be problematic.
3.Forcing an automatic renewal
For the most part, rental agreements are short-term, usually set to a month’s time. The common practice is to renew the agreement every month. However, forcing an automatic renewal provision in the agreement can get messy. Neither you nor the tenants will know in advance if there will be a renewal, and forcing one on the tenants is just in bad taste. Additionally, you might want to revise some of the initial provisions if you realize that you need to change a few things in the agreement.
Attracting reliable long-term tenants is every landlord’s dream, but that shouldn’t be forced or coerced. Instead, you should have a month-to-month reassessment and renewal. Giving your tenants more time to decide if they want to renew can also work out to your benefit. If they choose to cancel the lease and vacate the property, you will have more time to market it and find new tenants.
4.Setting the rent at a wrong rate
A common mistake landlords make with rental agreements is that they fail to research appropriate rent rates. For example, Miami is a great place for investments, and while there are many perks of being a landlord in this city, you have to know how to price your rental correctly. Landlords will often eyeball a number that seems right at the time, which usually leads to the following scenarios:
- The rent can be set too low. In this case, you will be losing money due to the rent being set lower than the market average. This will go on until the lease expires and is up for renewal. Unfortunately, if you try to overcorrect, you will probably drive the tenants away since they were used to paying a lower rent for the property.
- You set the rent too high. This usually leads to the property remaining vacant for far too long, which again means that you are losing money. Even if you manage to find tenants, they won’t be rushing to renew their lease.
5.Not detailing the specifics of the move
We highly recommend helping your tenants organize all of the details of their move-in. Obviously, they should be present during the move-in inspection, and you can go through the property together. However, you should realize that rental properties often get damaged during move-ins if tenants handle the move themselves. You can help them find the best solution by recommending a moving company. This will let you relax, knowing that professionals are doing the heavy lifting. Both you and your tenants will know who is accountable for any damage to the property or the items being transferred.
Now that you know the common mistakes landlords make with rental agreements, it should be easy to keep an eye out and avoid the obvious pitfalls. Getting the paperwork right may seem complicated at first, but it’s essential as it is the foundation of the tenancy. Just take your time and consult with experts to ensure that everything is in order.