First-time House Hacker - many questions!

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First-time House Hacker - many questions!

Ryan Casey
Rental Property Investor · Philadelphia, PA · Member since 2018 · 5 posts · 2 votes

Hey everyone!

So I am closing on my first property, which will be a house hack, on 9/13 and will be renting out to two buddies. I just had a few questions in regards to the lease agreement and some details related to this. Any and all input is appreciated - thanks in advance! Here are the questions:

- Given the anticipated close is on Thursday, 9/13, we had planned on starting the move-in process that weekend. Would you make 9/13 the official start date of the lease? Or would you put it as the following Monday or another date altogether?

- Also, I was leaning towards a standard residential 1-year lease. Is there any reason you would not do this or do a month-to-month lease instead? In the case of a 1-year lease, would the end date be exactly one year from the start date, or would you set it as the last day of that month a year from the start date to make the next cycle begin evenly on the 1st of the following month? (i.e. 8/31/19 or 9/30/19 end date, then 9/1/19 or 10/1/19 start date the following year). Long story short - what ideal start/end dates would you recommend?

- Given the two tenants are my close friends (I do trust that they will be responsible and pay rent, respect the property etc..), would you recommend still doing a security deposit? Or in the case of renting to close friends do you feel this is unnecessary? If a security deposit is still recommended, is there a standard amount or range I should request?

- Do you typically ask for first and/or last month's rent at the signing of the lease? Or any other particular payments up front?

- I have gone on the township's website of the neighborhood of the property and printed all of the required rental unit and landlord forms and paperwork. Are there any other specific forms, licenses, agreements or procedures I must complete or carry out prior to renting this property? The property is located in Palmyra, New Jersey (Burlington County) - are there any state-specific requirements that NJ landlords must meet as well? I understand there must be an inspection and will be having this carried out. Anything else though? 

- As a landlord, will I need any specific type of personal insurance for this? Or just standard homeowner's insurance?

Feel like I am overthinking and overcomplicating things, but just don't want to miss any small details! Thank you again in advance for taking the time to read this and give any input or information - I truly appreciate it!

-Ryan

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Allison Stewart
Rental Property Investor · Austin, TX · Member since 2018 · 76 posts · 46 votes
8y

1. I wouldn't put their move in date on the same date as the closing. I would put it the next day. 

2. We didn't chose to do a 1-year lease with our tenants for the first lease because they were moving in in the fall and if they chose to move out at the end of the lease term, we wanted it to be during the time when it was easy to find other renters (for our market, that's the spring). So their initial lease was 8 months so the end date was in the spring. You can write the lease term for however long you are comfortable with. Our renewal with our tenants was for a standard 12 months. I like 12 months - but our tenants are great so it's basically a guarantee for us that they won't leave. If you're not so sure about how good of tenants your friends will be, maybe give them a shorter lease to start. 

3. Yes. This is a business. If they are responsible, then they get their security deposit back. No big deal. We request 1 month's rent for security. 

4. First month's rent + security deposit + any fees (pet fees, etc). But this can vary by area. 

5. Check with a realtor or lawyer. 

6. Check with a realtor or lawyer.

7. An umbrella liability insurance policy ($1M) isn't a bad idea. You don't NEED it, but it does offer some protection for liability. Your renters should carry their own renter policy - this should be a condition of the lease. Your homeowner's insurance won't cover your renters. 

Best advice? Get a realtor to do the initial lease - even if it means you have to pay them. They know how to do them well. 

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  • Allison Stewart
    Rental Property Investor · Austin, TX · Member since 2018 · 76 posts · 46 votes
    8y

    1. I wouldn't put their move in date on the same date as the closing. I would put it the next day. 

    2. We didn't chose to do a 1-year lease with our tenants for the first lease because they were moving in in the fall and if they chose to move out at the end of the lease term, we wanted it to be during the time when it was easy to find other renters (for our market, that's the spring). So their initial lease was 8 months so the end date was in the spring. You can write the lease term for however long you are comfortable with. Our renewal with our tenants was for a standard 12 months. I like 12 months - but our tenants are great so it's basically a guarantee for us that they won't leave. If you're not so sure about how good of tenants your friends will be, maybe give them a shorter lease to start. 

    3. Yes. This is a business. If they are responsible, then they get their security deposit back. No big deal. We request 1 month's rent for security. 

    4. First month's rent + security deposit + any fees (pet fees, etc). But this can vary by area. 

    5. Check with a realtor or lawyer. 

    6. Check with a realtor or lawyer.

    7. An umbrella liability insurance policy ($1M) isn't a bad idea. You don't NEED it, but it does offer some protection for liability. Your renters should carry their own renter policy - this should be a condition of the lease. Your homeowner's insurance won't cover your renters. 

    Best advice? Get a realtor to do the initial lease - even if it means you have to pay them. They know how to do them well. 

    1Reply
  • Ryan Casey
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2018 · 5 posts · 2 votes
    8y

    Hey Allison,

    Thank you so much for the detailed feedback, that is a huge help!! My realtor is actually an investor as well with several rental properties, so I will run this by her and see if she can write up the initial lease as you had suggested. Thanks again.

    Ryan

    1Reply
  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    Welcome to real estate investing! You can learn so much from the Bigger Pockets forums, blogs, and podcasts. Check out the landlord sections!

    Start the lease whenever it works out for everyone, it really doesn't matter. You'll prorate the rent for the month and go from there.

    I like month to month agreements over leases. I charge a move in fee (say $600) that turns into refundable deposit if the tenant stays for 12 months or longer. If the person needs to leave sooner, fine, you keep the fee. If the tenants stays 12 months, great, you can refund the fee. Month to month agreements allow people to live their lives freely, and you also have the freedom to ask them to leave, raise the rent, etc. There are probably tons of forum topics on this.

    My total security deposit and fee is equal to the monthly rent. YES, charge a security deposit. This is a business, so treat it like a business. If you trust your friends, great, they can get their full deposit back at the end! I know they are your friends, but please, this is a business. Have them sign all the necessary rental agreements and forms, hold them accountable to pay their rent on time, screen them if you'd like, and charge a deposit.

    I just ask for first and deposit + fees. Depends on your area and the demand.

    I know nothing about NJ, but check your state level landlord tenant laws. Maybe join a local investor group to ask them.

    For this househacking, your standard insurance should suffice. You can always ask your insurance agent. Maybe your renters will want to get renters insurance to cover their personal property.

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  • Johann Jells
    Rental Property Investor · Jersey City, NJ · Member since 2011 · 1k+ posts · 876 votes
    8y

    Umm, I'm trying to figure out what makes this a 'house hack' rather than just buying a rental?  House hacking takes advantage of all the owner-occupation benefits on loans and taxes, usually while you renovate.

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