Establishing a Relationship with Tenants

While selecting the best property may be a critical first step in rental property investing, a close second is establishing a relationship with tenants. Rental property investing is inherently a people business, which is probably why many investors may shy away.

But it is not as hard as it sounds! My wife and I believe in the inherent goodness of people. Sure, there are a few bad apples in every bunch, but for the most part, people want to do the right thing. Our experience over the past 14 years has proven this out.

That being said, there are some tricks of the trade that must be followed to ensure a landlords relationship with tenants remains healthy! In my upcoming new book, “Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing” I share what we’ve learned so far about the tenant – landlord relationship.

The relationship begins before a lease is ever signed! From the moment we show a property, through the screening process and finally to move in day, expectations are being set for both parties. Dignity and respect rule the day, but there are some specific things to cover.

One area of particular importance is the lease. It must be perfectly clear and comply with local laws in order to protect the interests of both parties. The following excerpt from my book reviews the key points we’ve learned (mostly the hard way) about the most important sections in a lease.

First and foremost, determine who needs to sign the lease. Today, there are a myriad of living arrangements. It is really none of our business! However, when those folks are living in your property, it becomes the landlords business.

Any adult non-family member who resides on the premises (i.e. roommate, girlfriend, boyfriend, common in law spouse, whatever) should sign the lease. Furthermore, we also require these adult occupants to apply as a co-applicant during the screening process. 

It is important to be very upfront with prospective and selected tenants on this topic when discussing the lease.  This also applies to adult occupants who may move into the premises after the initial signing but during the term of the lease. Of course, immediate family members of the tenant do not have to sign the lease, but their names and relationships should be recorded in the appropriate portion of the lease document.

Why is this such a big deal? Once an adult establishes residence in a home, they have certain legal rights. Let’s say a tenant decides to have their partner move in with them and the landlord just turns a blind eye by not placing the new non familial occupant on the lease.

If some months later the tenant abandons the premises but their (former) significant other remains, then the landlord has a real situation on their hands. The landlord has no legal contract with the person occupying the property, but the individual possesses some rights to occupancy as the home is established as their residence.

The second most important portion of the lease is the rent, namely, when it is due, how much and what are the late penalties. Most leases will contain language such as “due on the first, late after the fifth” or words to that effect. If so, just know, 99.9% of tenants will not pay rent until the fifth. I know I do when I rent!

Ensure tenants understand the paragraph regarding late fees and when the eviction process will be initiated due to non-payment. This should all be spelled out in the lease, with all the required legalese. Seldom did we have to go that far, but the language must be in the lease just in case.

The third most important item to cover is the paragraph regarding pets. There should be no question whether or not pets are allowed on the premises and the penalties for bringing them without the owner’s permission. Technically, introducing pets into the home when none are allowed is a breach of contract and the tenant could be evicted.

More than likely, the tenants and landlord can work out an agreement but realize this is a topic the average rental investor will have to address at some point in their rental property investing career.

Lastly is a paragraph regarding improvements. If the property has a yard, many tenants may want to put in a storage shed or kid’s outdoor activities (above ground pool, swing set, trampoline). If this is the case, a tenant must request these improvements in writing.

We require the tenant to sign an addendum that states they are responsible for placing, upkeep and removing the improvement. The addendum also includes a “hold harmless” clause. We also require these tenants to maintain a renter’s insurance policy and provide us a copy when the premium renews. You may ask, why even allow a tenant to place an improvement on the property? The answer is simple, a tenant who makes the home their own is likely to stay there long term!

If you liked that small excerpt then you’ll love the whole book! Look for Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing coming to Amazon this month!

Want to learn more about the financial truths that have helped our average American family achieve success? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truths to Build Wealth on sale now at Amazon!

The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

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