One very effective option that can be given to someone whose home you are getting ready to acquire is to allow them to stay and rent from you. This is definitely something you can pull out of the hat when the market is hot. It can make things a little easier for that person or family having these financial problems.
The first things you will do, after getting the deed to the property, is to bring the loan current. By letting them rent their house from you, you will want to get a few months security up front from them. The possibility is always there that they may do some damages to the house during their stay, so the security payments are a must.
The next thing you will want to do is to make sure that the seller goes to an attorney's office with you and closes the sale. And everything is done above board, legitimate, everything's explained to them and you even get a witness. If you want to rent it back to them, then of course you can do so, but you do not want to give them the option to buy it back. You will want to have the attorney fill out a third grade language disclosure that you are renting the house back to her but she acknowledges and agrees that if she doesn't pay the rent she will move and if she doesn't you'll have no choice but to evict her. Again, you will want to use a good real estate attorney for this. Some have used title companies to do it. It is not recommended that you do this, because if you have an attorney do it, the seller can’t come back and claim that you took advantage of them.
When you give them the option to buy back, it can give them a much stronger case against you at a later date if they claim that you were trying to trick them. Make sure that you are not in a situation where you have to get a second mortgage to bring the owners current on their mortgage. If you have the deed, they should owe you no money from that point and you should owe them no money. When you start creating a lender-borrower relationship, then they have grounds to say that you took advantage of them and created a useless loan.
Now would you get away with that? Probably 99 out of a 100 times. However, you need to know if you're going to bury skeletons you need to know where they're buried. And you want to make sure you don't do any of this without your being in front of an attorney.
You need to sit that seller in front of that attorney and you let them close that deal and you have disclosures so thick that could sit on them. You know really all I'm telling you to do is assume they're going to come after you later, so you need to prepare yourself for it now.
Whether you're a new landlord or property manager just getting your feet wet in the business for the first time, or a seasoned pro who has been dealing with renters for decades, it's vitally important that you have an in-depth understanding of the lease agreement. Your level of familiarity with the basic lease agreement and its components is a factor that can make or break your career.
If you're considering breaking into the property management business, learning about leases is the single most important thing you can do. If you have years of experience in the field, but you've always used basic, informal, or verbal rental agreements, there's no better time than the present to upgrade to a written, comprehensive lease agreement that will help protect your property, your investment, and your livelihood.
Let's start with the basics. What is a lease? Generally speaking, it's a specialized form of the standard contract. Rather than spelling out the terms of a sale or a service agreement, the lease documents an agreement to allow the renter (or ?lessee?) inhabit the property for a specified period of time.
Most leases spell out the terms of the relationship between the owner/manager of the property and the tenants. Common elements included in lease agreements are the duration of the lease (month-to-month, six months, a year, etc.), the lease renewal process, rules for the rental property, payment terms, whether pets, smoking, businesses, and other activities are allowed in the property, late-payment and non-payment penalties and procedures, and guidelines for vacating the property and returning the property to move-in condition at the end of the lease.
Based on the needs of both the landlord and the tenant, the terms of a lease can vary considerably. However, it's important to make sure that the lease agreement you are using is in compliance with all of the local, state, and federal jurisdictions that apply in your area. Otherwise, you may be opening yourself up to legal liability if the lease is ever challenged in court.
As a landlord, you pledge to uphold your end of the responsibilities and duties set forth in the lease, as well as to adhere to the policies and practices you have set forth in the agreement. You also are agreeing not to change the terms of the lease until the current agreement has expired.
Your tenant's signature on the lease confirms that your tenant will comply with all of the rules and guidelines specified in the document, keep current with rent payments, and leave the property in the manner described in the lease.
A legally-binding lease can be as simple as a basic contract handwritten and signed by both parties, or it can be as comprehensive as a multi-page package covering all aspects of life in the rental property. Some landlords may have gotten into the habit of using simple leases, perhaps believing that it's just not worth the time and effort needed to create a comprehensive lease package.
However, most legal experts agree that a more comprehensive lease package is your best bet. If your lease agreement does not spell out your exact expectations, you are leaving a lot to chance, and chances are, problems and misunderstandings will inevitably arise. On the other hand, if you rely on a comprehensive lease package that clearly spells out all of your policies and expectations, it is less likely that you'll end up in court over a dispute. Furthermore, you'll be less legally vulnerable with a comprehensive lease agreement.
For beginners, leases may be a bit intimidating, but at root, they're nothing more than specialized contracts. Even more importantly, they're your best defense against bad tenants. Every minute you invest in the process of building an airtight, comprehensive, legally-binding lease will pay significant dividends down the road.
Both Bryan Benson & Kevin Kiene are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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