If you’re looking to take house hacking seriously, then writing an effective lease should be a top priority.
Your lease is of utmost importance when house hacking because it will set out all of the key terms, how long your tenant can stay, what rules your tenant needs to follow, and what happens if many bad things happen.
If you don’t get the lease right, you run a massive risk of getting burned legally (and financially!).
So how do you write a lease that will protect your interests and help you to avoid any headaches down the road?
Before we go any further, I have to recommend that you speak with a licensed attorney in the state where your property is located. Different areas have different landlord-tenant laws. An attorney can help you navigate them and draft the most effective lease given your specific situation.
This article is meant to be a general starting point, NOT legal advice.
With that said, here are some of tips:
Laying Out the Ground Rules
With any lease, it’s important to be clear and concise whenever possible.
To that, if your rules are unclear, don’t expect them to be followed.
You’re going to be living in the same house or building as the person you’re renting to. You don’t want avoidable problems arising from misunderstandings about using common amenities or where someone can go in the property.
For example:
- Is there a dishwasher available for common use?
- Can you tenants use the laundry room?
- Does one person get exclusive access to a bathroom?
- Is there a backyard shed or storage area that anyone can use?
- Are guests allowed?
- What about pets?
These types of clearly defined rules are especially important if you’re renting an individual room where you’ll have many shared common areas.
Two other items important items to cover in your lease are maintenance and repairs. You want to set expectations clearly from the start.
If a light bulb goes out, does your tenant replace that? What about smoke alarm batteries? What about a leaky faucet?
Generally, most maintenance items will be the landlord’s responsibility to maintain, but easy to fix issues (like replacing an easy to reach lightbulb) probably make sense to pass on to the tenant. Make sure that is laid out clearly in the lease if you are wanting to do that.
Finally, you likely will want to include rules about illegal or otherwise undesirable activity. This might include restrictions against running illegal operations from the unit, smoking, playing loud music past certain hours, guest limits, and many other things.
This way, everyone will know exactly what they can and can’t do, at least in many cases. And you’ll have written proof in a clearly-worded lease.
And that’s the point: your lease is your last line of defense if things go poorly. You want to make sure its thorough and easy enough to understand.
The Problem with Lease Templates
You might be tempted to use a free lease template that you found online. Why reinvent the wheel if you don’t have to?
You have to be extremely careful when using lease template.
The problem with lease templates is that they don’t include your property’s specific nuances, which are especially important when you’re sharing space with your tenant(s).
A template might not take into account the fact that your house has two floors, or that you don’t want to have pets in the unit. As a result, you could end up with a lease that doesn’t protect your interests or fails to clearly outline rules for you and your tenants.
Lease templates also might fail to include state or city specific restrictions. Many local governments have very specific restrictions about what is legally-allowed in a lease. A template might not incorporate those.
If you do use a lease template, it’s crucial to review it thoroughly to ensure nothing is missed or incorrect. Lease templates can be a great starting point when drafting a rental agreement, but be sure to tailor the document to fit your specific property and situation.
This is where a licensed attorney in your state can be very helpful for making sure that you’re adequately protected with your lease. Your attorney can guide you through issues specific to your property and area.
Don’t blindly place your potential profits and legal liability in the hands of a template. Make sure it really has everything you need.
How to Write a Lease for House Hacking: Steps for Writing a Rental Agreement
Remember, your lease is your last line of defense in the event that things go poorly with your rental. And you never know when that might happen.
To create your own lease, I recommend consulting with a local attorney. An attorney can help you draft an agreement that complies with state and local laws.
In a worst case scenario, a poorly drafted lease could result in certain clauses (or even the whole document) being completely void.
You want to get this right. An attorney can help ensure that.
But, if you insist on drafting one yourself, consider starting with a template from a local association of realtors or similar organization. Make sure you review the document thoroughly and edit it fit your specific property.
Whatever the case, make sure to establish clear ground rules for your tenants. These should include provisions for things like noise levels, overnight guests, and common area maintenance.
By clearly establishing expectations from the outset, you can help avoid conflict down the road.
FAQs
What should I include in my lease?
The most important thing to include in your lease is the term of the lease. This will determine how long tenants can stay in the property. You’ll also want to specify how much rent they’ll be paying and when it’s due.
Less obviously, be sure to include who is responsible for utilities and any other additional items. Lay out how many people are allowed to live in the property.
Finally, include rules about specific behavior in the property, including whether pets are allowed.
Above all, consult with a licensed attorney who can help you with your specific situation.
How do I calculate the rent?
Compare your space to other spaces available for rent. Is your space bigger or does it have nicer amenities? How is the location compared to other listings?
Consider leasing your unit slightly below market rents. This will likely increase the number of applicants you get for the unit so that you can pick and even higher quality application.
Should I require a security deposit?
Generally, this is entirely up to you. However, many landlords have started requiring non-refundable move-in fees instead of security deposits. Make sure to check your local laws about handling security deposits if you choose to require them.
This website, and any communication stemming from it, should not be taken as financial or legal advice for your specific situation. Consult directly with a licensed financial professional should you need investment advice and consult directly with a licensed attorney directly should you need legal advice. Assume all links are affiliate links. I am an Amazon affiliate.