One of the questions we see on the BiggerPockets forums over and over again is, “Where do I find a good lease document?”
When people ask that question, they really don’t mean that they want a good lease document. What they mean is they want a free lease document.
The truth is that leases are really the most important investment you’ll make when starting your career as a self-managing real estate investor. The free leases that self-managers share are likely to be the most expensive option you’ll find in the long run.
By the way, a BiggerPockets Pro Membership gives you access to unlimited attorney-approved lease documents for every U.S. state.
Why Is a Good Lease Important?
The good news is that the ROI on an excellent lease is huge. The bad news is that you can’t measure it, which is likely why many new investors don’t want to spend any money on a lease, but that is a huge mistake that can have disastrous consequences.
Think of it this way: If you are finally pulling the trigger on your first deal, you’ve likely spent hundreds, maybe thousands of hours learning, researching, walking, and underwriting properties. When you get to the point that you are ready to rent it out, the lease is the only thing you have protecting your rights and property as an owner.
Is this really the time to cut corners? Are you really going to trust your entire life savings to something that popped up on a subreddit in your Google search?
And please don’t fall for the “more is better” fallacy when it comes to leases. 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 he’s “seen everything.” Heck, he is so experienced that his lease is 28 pages long and filled with clauses like “tenant cannot use the garage to manufacture large quantities of illegal drugs for sale on the black market.”
There are already laws in place to protect property owners from that type of thing—putting specific clauses in your lease is just amateur hour. There’s a much better way.
You Need an Attorney: Here’s Why
Head to a local meetup or get on a local investor’s forum and start asking for landlord/tenant attorneys. These attorneys are specialists in contract language, current legal cases, local trends, and the political climate that can and will impact your market experience.
They are different from real estate attorneys or business attorneys. They specialize specifically in understanding the balance of power between a tenant and landlord and how state and local laws influence that balance. The art of being a landlord is so much more complicated and nuanced than a random lease that you find online can possibly address.
Meet with at least a couple of these attorneys. Will they charge you a consultation fee? Probably. Will it be worth it? Absolutely! Dare I say it will be a drop in the hat compared to what you’ve already spent on projects, learning, and acquisitions.
First, when, not if, you have an issue with a tenant, you’ll need some sort of relationship with an attorney. As tempting as it may be to pop on the BP forums and post your question, you don’t know who you are getting answers from or what their experience and ethics are like.
In addition, every state and city has its own rules regarding numerous details in what is or is not legal in how you interact with your tenant. Reaching out for simple advice becomes much easier with an attorney with whom you have a relationship. If you have a simple, nonemergency question, you can often email and get a quick answer from someone who knows their stuff.
But the real value comes in that lease that they’ll give you at your consultation. That lease will have infinite value for you. For one, you know that it complies with local laws and regulations, so you’ll have better protections than a generic lease. Secondly, when you do have a problem (and you will have a problem at some point), that attorney will know your lease inside and out and be prepared to address your issue 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 are in a pickle, you might not find a skilled attorney willing to help. If you do find someone willing to help, you’ll have to pay them to review and analyze your lease anyway, which will be more costly than an initial consult would have been.
So many landlords don’t realize that the lease isn’t there solely to protect you; it protects the tenant’s rights as well, and rightly so. As landlords, it’s 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 in the expectation that they will do the same, communicate effectively, and pay on time. The lease isn’t, and shouldn’t be, a weapon a landlord uses against their tenants.
Most municipalities have laws in place that protect tenant’s rights. These laws, in many cases, are there for a reason. Landlords have a reputation for trying to create leases and relationships that strip tenants of their rights. If your lease violates any local or state laws as far as what your tenant’s rights are, it won’t be enforceable in court. You are so much better off just working with a professional from the outset than trying to be your own lawyer.
Real estate is a team sport, and you need an attorney. An attorney is your team manager, and their support and guidance will form the backbone of your business. Starting that relationship early and investing in a lease that will protect you within the boundaries of the law will be the best investment you can make in your property.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.