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Why Your Lease Agreements Determine Your Profitability as a Landlord
July 24, 2024
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Being a landlord is tough, but it’s also profitable. However, if your lease is weak, you could end up losing money. Here’s why your lease agreements can make or break your profitability.

1. Your lease is your only legal protection

Lawsuits are expensive and will eat into your investment profits fast. Since you can’t avoid all lawsuits, you can at least craft a lease that will help you win if you get sued.

Tenants aren’t always in the wrong, but sometimes they twist facts to try to make the judge rule in their favor. A written lease agreement that outlines the rules is the only protection you have against a tenant making wild claims. Sometimes judges are sympathetic toward tenants and side with them when there’s confusion.

If you’re not sure how to create an iron-clad lease, hire a property manager because they know the law. For example, Houston property management company Green Residential provides their clients with strong, written leases that make everything clear.

2. Strict lease terms can deter bad tenants

Bad tenants come with a variety of habits and traits, but they usually like to postpone paying rent (if they pay at all), break the rules, cause damage, and love to argue. Many of these types of tenants specifically look for loose rental agreements and will ignore rentals that seem like they’re managed by strict landlords. They know they can only get away with their shenanigans when a landlord is passive and permissive, and strong lease terms can deter some of these people.

Make your strictest lease terms known to applicants. Don’t try to hide certain rules and hope the tenant will agree when they come in to sign the lease. Strict rules can be a deal-breaker for good tenants, but they can also help you discourage bad tenants from applying in the first place. 

For example, if you’re renting a home governed by an HOA with strict rules that forbids colored curtains or placing items on the window sill, bad tenants are going to realize right away they can’t manipulate you and will find another rental.

3. A lease allows you to hold tenants accountable

The number one reason you need a contractual agreement with your tenants is to be able to hold them accountable for violations without getting involved in a “he said, she said, you said” match. You might need to rectify problems that can potentially lead to property damage out of spite or retaliation.

Crafting a strong lease that outlines the rules and regulations for living in your unit makes it easy to give tenants notice when they’ve violated their lease. All you have to do is reference the clause and give them an official notice to remedy the violation.

Without a lease that outlines the rules, you’ll find yourself getting into arguments and shouting matches with your tenants over what’s allowed and what is not. If you have a month-to-month tenant who won’t cooperate and your lease isn’t clear on the matter, in most cases you can change the lease terms if you give them a 30 day notice. Although, it’s always best to ensure all rules are outlined in your lease from the beginning so tenants won’t feel sideswiped later.

4. You need a tight lease for a swift eviction

When you need to evict a tenant, you want it to go as fast as possible to minimize vacancies and reduce the time and money you have to spend on legal fees. Evictions aren’t always fast, but a strong lease can maximize the speed at which you evict bad tenants who don’t want to follow the rules.

For example, say you have a tenant who is repeatedly late with rent and you want a new tenant. You need to be able to refer to your lease to establish that they have violated the agreement by paying rent late. If your lease says rent is due by the third of the month, and they haven’t been paying until the seventh of the month, you can start the eviction process without any concerns. If they try to sue you, your lease will speak for itself and make their violation clear.

On the other hand, if the rent due date isn’t specified in the lease, if it’s ambiguous, or if you don’t have a lease at all, you can still start the eviction process, but it might not go in your favor once your case is heard.

Create a strong lease to protect your investment

Spend time creating your lease to ensure it’s rock solid. It’s the only evidence you’ll have when you need to evict a tenant or correct their behavior.

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1. Zippers Are Universal

 

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