Before you get down to marketing your rental you need to decide on some basic rental terms you’ll be asking a renter to agree to. Below is a brief rundown. See the complete episode for more information.
Each property is different, so you’ll want to make sure you think carefully about what will work best in your case. Here are some common rental terms:
- 1-year lease
- Something shorter than a year, like for student housing
- Month-to-month
Something else to think about is whether the tenancy ends at the end of the term. For example, if it’s a one-year lease, at the end of the year, is the tenancy over or will it automatically revert to month-to-month?
Animals
Do you accept pets at all, and if so what kind and how many? For example, some of our properties will allow cats but not dogs.
Be careful not to lump Service Animals and Emotional Support Animals into your “pet policy”, as they are NOT considered pets and there are strict rules about what you can and cannot do when people have them.
If you do allow pets, consider the different types of pet fees and things you might need to ask for. For example, charging for pet screening, pet deposits, and pet rent. Are you going to charge a flat fee for having a pet? Or will you charge monthly?
Setting the Rent
You can quickly survey listings on Zillow, Craigslist, etc to get a feel for how the competition is priced. Many property management software products also have free rent estimation features. You could also use products such as RentCast, which gives you comparables, trend lines for local rent, and pricing suggestions.
Utilities
You’re also going to want to decide how you and your tenant will handle utilities.
Which utilities can tenants put directly in their names? Generally, these should be metered separately so that they are only paying for what they use, but sometimes there are exceptions or tradeoffs.
Where not separately metered there are multiple ways to charge tenants for utility costs:
- RUBS: Ratio Utility Billing System — charging tenants for actual utility expenditures, usually calculated based on square footage or occupancy.
- Submeters
- Flat fees: For example, $40/person/mo for water, sewer, and garbage.
Wifi
Will you provide wifi for the property, or do tenants pay for their own service? Consider whether your building is wired in such a way that tenants can get their own service easily, and without a bunch of new holes being drilled.
Parking
Will parking be included, or is it an extra fee? Some places, like Seattle, require parking to be separate.
Deposits and Fees
Consider whether you want to separate deposits for different purposes, or use one umbrella security deposit. We often just take one general security deposit. Note that there are requirements in some places regarding how you handle the money.
A security deposit is generally fully refundable but can be used for unpaid rent or fees, repairs, cleaning, or other amounts due.
Another type of deposit is a cleaning deposit, which tenants pre-pay for having the unit cleaned at move-out. They don’t need to deep clean anything at the end. This is a good way to handle concerns regarding cleanliness and having to hire cleaners without compensation.
Going back to pet deposits and fees, decide whether you want to collect a fee that’s not refundable. This can be used for services at the end of the tenancy to prepare your rental after having a pet in it.
Next is application fees. Nowadays, screening services will collect a fee, which makes it easy, as you don’t have to worry about collecting or refunding fees.
There are also some miscellaneous fees for things like storage or locker fees. If you have those amenities on your property, that’s something you can charge for. Amenity fees are something that we have seen at larger, nicer complexes. They might tack on a fee because they have a nice fitness center or other amenities that tenants can use.
Another thing that we charge for is a lockout or lost key fee. If the tenant does not want to pay that fee, they can instead hire a locksmith to let them into the property.
There will also be move-in costs. When the tenant first moves in, what will they have to pay upfront? Usually, it’s the first month’s rent and possibly the last month’s rent that you’ll collect upfront. Along with any of the deposits you choose to charge. In some places, there are regulations on how much you can collect.
Takeaway
Before marketing your property, be sure to decide on the things you’ll need to communicate upfront. This includes the things that we went over in this article, such as animals, rent, deposits, and fees. This will ensure that prospective tenants understand what they’ll be getting themselves into.
Landlording A-Z Series:
Our Landlording A-Z series will walk you through each of the stages, tasks, and issues involved in rental real estate investing. In our next installment, we will discuss advertising, showing, and accepting applications for your rental.
