Organizing Your Lease
How to create a lease in an hour or less.
Found a client to rent your home! Check that box.
Yikes. Now you need a lease.
Creating a lease and organizing your paperwork is not as hard as you might think. There are plenty of services out there that will let you customize your lease according to your state and needs. We use EZ Landlord Forms for our homes as they have an array of forms and state specific topics. We don't rely on their free forms, however. We find them too general and not state specific. When it comes to getting things in writing, you want to be sure that you are up to date and complete with your state requirements. Rather than becoming an expert in the ever changing regulations and laws, we have found it much more effective to allow them to stay up to date and us utilize their service.
When it comes to what pieces to include in the lease, it makes sense to review everything that is included by you and everything that you expect from the client. Some often overlooked things might include:
- Pet Requirements - deposits, fees
- Clean Out Expectations
- Homeowner Contact Hours
- HVAC Filter Replacement
- Utilities
- Emergency Contact Information
- Parking Instructions
- Key Responsibility
- Surface Care (ie, Granite, Tile, Grout, Wood Floors)
The more your outline expectations, the easier it is for you and your client. We like the simplicity of the online services. Most clients are in the middle of a move and have a transitional address. It wastes a lot of time sending a lease through the mail to your client. With online forms, you can use digital signatures that allow you to create, send, and receive the signed lease all within a few hours. Additionally, you then have a saved copy already to go on your computer.
Even though the services do help automate your lease creation, that does not relieve your your burden of being familiar with your state requirements. Things such as security deposits, late fees, termination notice, and more all vary by state. There are cues in place with automated forms to help you understand what you need to be familiar with. We will cover that in greater detail in another post.
“You are far too smart to be the only thing standing in your way.”
Don't be nervous. This is a lot easier than you might think. In a matter of an hour, you can have a solid lease that is ready for your client. You just need to do it!
- Casey
HOW DO I KNOW A RENTAL HOME WILL BE PROFITABLE? EXPLAINING THE 1% RULE.
Breaking down the 1% Rule - What it is and why it matters.
The 1% Rule.
Ever heard of it?
The 1% rule is a quick and easy way to determine if your rental home is going to make you money. This rule helps you know if your property will cash flow (ie, will you make money after your mortgage, repairs, taxes, insurance, and other bills are paid?). Will there be money left for profit?
Here is how the 1% rule works. If you can rent the home out for 1% of the price of the home, then it will likely produce income. When you consider the total price of the home, you need to consider your "all in" price. If the home is ready to go, then the total price is the home price and any associated loan or closing costs. If the home will require any renovations, then the price is the purchase price (including any loan/closing fees) + renovations = total home price.
Once you have determined your total home price (let's say for ease of math that the all in home price is $100,000), then you need to be able to rent that home for 1% of that price, or for this example, $1000/month.
If you can achieve that ratio, then you most likely will end up with a profitable rental home.
Some people are more strict, and opt for a 2% rule to ensure a greater margin for profit. Some rental markets are not as lucrative and 2% is harder to achieve.
What if your home doesn't meet the 1% rule?
Well, then you probably need to keep looking. There are lots of reasons why, but let me give you the most obvious example that makes me strive to meet the 1% rule.
Historically, a mutual fund in the stock market achieves about 7-8% returns annually. When you invest in a mutual fund, you literally spend a few minutes making the transaction and then you move on. You might spend a little time checking your investment, but essentially, it becomes a passive investment and does not cost you any additional time.
Therefore, if you are going to spend your time renovating, renting and managing a rental home, you should expect something more for your time than what you could otherwise achieve passively in the mutual fund. You need to get paid for your extra effort and time. If you can meet the 1% rule, you will likely see better returns on your money than what you'd see in good to average mutual fund. You are rewarded for your additional work with additional returns.
This is just a brief overview into how the 1% rule comes into play. There is a lot of additional math that does need to be considered, but usually the 1% rule is a fast and easy way to size up a property and see if it will work for you. Many people are confused by the 1% rule because they don't understand why it matters; I hope that this helps break it down a little bit.
Have you purchased a home that meets the 1% rule? Do you consider the rule when you are looking for rental homes?
- Casey
The Birth of Haymount Homes
Welcome to Haymount Homes! We are excited to be here and become part of your community as well.
Welcome! Today is the first day of our website. We are proud to be moving into the online space and we hope you'll become our fast friends. A little about ourselves, we are a family of six (well, seven if you include our dog) and we are a proud military family in Fayetteville, NC. Fayetteville has been home to us for nearly 14 years and we have embraced the southern charm of our historic neighborhood, Haymount. We don't believe there is a better place to call home and we're excited to welcome you to it!