Thursday, February 29, 2024
HomeReal EstateUsing a Free Lease Template Will Cost You More in the Long...

Using a Free Lease Template Will Cost You More in the Long Run | Black Kite Express

One of the questions we see in the BiggerPockets Forums Over and over again it’s, “Where do I find a good lease document?”

When people ask that question, they don’t really mean that they want a good lease document. What they mean is that they want a free lease document.

The truth is, leases are truly the most important investment you will make as you begin your career as a self-managed real estate investor. The free leases shared by self-managers are likely to be the most expensive option you will find in the long term.

By the way, a BiggerPockets Pro membership gives you access to unlimited attorney-approved lease documents for all US states..

Why is a good lease contract important?

The good news is that the return on investment on a great lease is huge. The bad news is that it can’t be measured, which is why many new investors don’t want to spend money on a lease, but that’s a big mistake that can have disastrous consequences.

Think about it this way: If you’re finally pulling the trigger on your first deal, you’ve probably spent hundreds, maybe thousands of hours learning, researching, walking around, and underwriting properties. When you get to the point where you are ready to rent it, the lease is the only thing you have to protect your rights and property as the owner.

Is this really the time to take shortcuts? Are you really going to trust your life savings to something that showed up on a subreddit in your Google search?

And don’t fall into the “more is better” fallacy when it comes to leasing. There’s that guy your aunt’s hairdresser’s neighbor knows, who owns four rental properties and has been doing it for 30 years, and has “seen it all.” Heck, he’s so experienced that his lease is 28 pages long and full of clauses like “the tenant cannot use the garage to manufacture large quantities of illegal drugs to sell on the black market.”

There are already laws to protect owners from that kind of thing; Putting specific clauses in your lease is just amateur hour. There is a much better way.

You Need a Lawyer: Here’s Why

Head to a local meeting or participate in a local investor forum and start asking around for landlord/tenant attorneys. These attorneys are specialists in contract language, current legal cases, local trends, and the political climate that can and will affect your experience in the marketplace.

They are different from real estate lawyers or business lawyers. They specifically specialize in understanding the balance of power between a tenant and a landlord and how state and local laws influence that balance. The art of ownership It’s much more complicated and nuanced than a random lease found online can address.

Meet with at least a couple of these attorneys. Will you be charged a consultation fee? Probably. Will be worth? Absolutely! I dare say it will be a drop in the hat compared to what you have already spent on projects, learning and procurement.

First, when you have a problem with a tenant, you will need some type of relationship with an attorney. As tempting as it may be to go on the BP forums and post your question, you don’t know who you’re getting answers from or what their experience and ethics are.

Additionally, each state and city has its own rules regarding numerous details about what is and is not legal in the way you interact with your tenant. Seeking simple advice becomes much easier with a lawyer you have a relationship with. If you have a simple, non-emergency question, you can often send an email and get a quick response from someone who knows what they’re doing.

But real The value comes in that lease contract that they will give you in your consultation. That lease will be of infinite value to you. For one, you know you comply with local laws and regulations, so you’ll have better protections than a generic lease. Secondly, when you have a problem (and willpower If you have a problem at some point), that attorney will know your lease inside and out and will be prepared to address your problem immediately and defend your rights in court if necessary.

You don’t get these benefits with a generic “free” lease. In some cases, your lease may not be defensible in court, and when you find yourself in a bind, you may not find a solution. Qualified lawyer willing to help. If you find someone willing to help, you will have to pay them to review and analyze your lease anyway, which will be more expensive than an initial consultation would have been.

Many landlords don’t realize that the lease doesn’t exist solely to protect you; It also protects tenant rights, and rightly so. As landlords, it is our obligation to provide tenants with safe, clean and reasonable accommodations. It’s a two-way street: We hold up our end of the bargain with the expectation that they do the same, communicate effectively, and pay on time. The lease is not, nor should it be, a weapon that a landlord uses against his tenants.

Most municipalities have laws that protect tenants’ rights. These laws, in many cases, exist for a reason. Landlords are notorious for trying to create leases and relationships that strip tenants of their rights. If your lease violates any local or state law regarding your tenant’s rights, it will not be enforceable in court. It is much better to work with a professional from the beginning than to try to be your own lawyer.

Final thoughts

Real estate is a team sport and you need a lawyer. A lawyer is the manager of your team and his support and guidance will form the backbone of your business. Starting that relationship early and investing in a lease that protects you within the confines of the law will be the best investment you can make in your property.

Ready to succeed in real estate investing? Create a free BiggerPockets account to learn investment strategies; ask questions and get answers from our community of over 2 million members; connect with investor-friendly agents; and much more.

BiggerPockets Note: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments