Lease Agreement Help

[Patrick Hubbard]

I need some advice. This is my first rental property, and I need some advice on filling out the lease agreement. What advice would you recommend? I live in Texas

1. They have three small children. Do I list them under dependents?

2. Fee in Lieu of Security Deposit. Do I place a zero if I’m only collecting rent? 

3. How much should I charge for unlock fee? 

4. How much should I charge for the Early Termination Fee?

5. How much Rental Insurance coverage should a tenant have? 

I really appreciate any help you can provide.  

[Nathan Gesner]

Quote from @Patrick Hubbard:

Welcome to the BiggerPockets forums!

I think you should read a couple books to educate yourself on the basics of Landlording. My favorite is "Every Landlord's Legal Guide" by NOLO. Written by attorney investors, it's full of practical advice pertaining to management of investment property, has sample forms that can be edited, and - most importantly - they tell you what your primary state laws are and where you can read them. It's updated every year and is the best $40 you'll spend as a Landlord. There is one book for 49 states and a separate book for California. Brandon Turner also has a good book in the BP Bookstore.

It's hard to answer your questions well and I'm willing to bet there are other questions you haven't even thought of. I'll give it my best shot.

1. All adults (18 or older) sign the lease, even if they don't pay any of the rent. Children are listed as dependents just so you have a record of who is living in the rental.

2. The security deposit is your leverage to ensure the Tenants abide by the terms of the lease. I recommend it be equal to a month of rent or more. Read your State law to understand how it can be used. This is important because the majority of Tenant court cases involve disputes over the deposit. DO NOT take a fee in lieu of a deposit. That is for experienced Landlords that know what they are doing and you shouldn't even consider it as an option.

3. Tenants can pay me $50 and I'll bring them a spare key, or they can hire a locksmith for $65. I'm in a small town where delivering a key usually takes 15-20 minutes including drive time from my home. You need to figure out what is fair for you. I know some Landlords that don't offer an unlock service and require the Tenant to call a locksmith.

4. This is too complicated to answer, but there should definitely be a penalty. Most Landlords charge at least a month of rent. You should also develop a form to ensure you have a written agreement with the renter about what you are charging, when they are leaving, what happens after they leave, what happens if they fail to leave, etc.

5. Standard renter policy will have $100,000 liability (covers damage to your property). Tenant should name the Landlord and Property Manager (if there is one) as "Additional Insured" on the policy. This ensures you are notified if there are any changes to the policy and you will be protected under their policy.