You have an apartment building that you want to rent out. You have some land that you are interested in loaning someone in exchange for payment. You own a marina and you want to sell dock space for a duration of time in exchange for money. If any of these scenarios are true, you are looking into "leasing" property. Residential leasing typically takes the form of renting an apartment. We'll explore the logistics of this type of leasehold in this article, as well as talk briefly about other forms of leasing.
- Renting your apartment: Gross lease. A gross lease is when the landlord pays all the expenses pertaining to ownership, like the utilities and repairs-and sometimes taxes. The most common form of gross leases are normal rental contracts. In some instances the landlord will pay the utilities, and in almost all, he pays taxes, repairs, and other costs affiliated with owning property. Below is how to embark on a gross lease with your rental property.
- Becoming a landlord: Getting mentally prepared. If you want to lease your home, or an apartment in a building to a tenant, you must be prepared for the potential problems of being a landlord. Being a landlord means that you are responsible, legally, for the safety of your tenants as it pertains to the condition of your property. In addition to this liability, there are costs. For instance, upkeep and repairs to the unit from wear and tear. Also, there can be inconveniences. Expect calls in the middle of the night for tenants that have locked themselves out. Expect disaster tenants that leave your place a wreck. Prepare for tenants that do not pay rent on time. And hope that you never have to go through the eviction process.
- Legal consulting. Before you make any decisions regarding your property, your intent to rent, and any moves that have legal implications, ALWAYS, always seek legal counsel. It is not enough to read an article and embark on a renting mission. There may be issues that you are not aware of that a lawyer can clue you in on. Seek the counsel of a real estate lawyer, not any lawyer, as real estate lawyers specialize in real estate affairs.
- Listing. If you think you can handle the potential annoyances and legal implications of being a landlord, you'll want to contact a real estate agency in order to list your property. Have them do a market analysis to come up with a suitable rent for your unit or home. Most agencies will charge some sort of fee (either to you, the landlord, or the tenant). Be sure to clarify about payment for services before listing.
- Repairs, etc. Ask the agent if repairs are needed. Have a handyman at your disposal at all times. If you do not live in town, it is essential to have some sort of property manager or, at the very least, a family member or friend that checks in on your investment property. It is better to have a paid employee than a family member, since it is a service that you need to be able to count on when and if something happens.
- Finding a tenant. Have potential tenants fill out an application. Have the real estate agency do credit and background checks on the person(s), including phone calls to prior landlords, current landlord, current employer, and past employer. Make sure you are comfortable with the tenant you choose, since you will be counting on him to pay rent to you in a timely manner.
- Lease. When you find a suitable tenant, you will have to sign a lease agreement. The real estate agent will draft the papers up. Review the terms of the lease carefully, and refer to a lawyer if you have any issues or need clarification. Leases can be 1-yr leases, tenancy at wills, and month to month leases, to name a few. Decide which format will work best for you.
- Other leases: Commercial leasing. While residential leasing usually takes the form of renting an apartment or home, there is such a thing as a commercial lease. A commercial lease pertains to the renting of space to a business. There are leases specific to food-related businesses, to office space, to retail industries, etc. If you have commercial space, you need to know what the space is zoned for. For example, not all commercial property can be used by restaurants. Refer to the deed and seek legal counsel to determine who you can lease your land to. Commercial leases are less standard, and most can be custom-tailored to the lessor, or landlord's desires, so take advantage of this when you draft the lease. Remember too, though, that commercial leases are most difficult to break-be sure you know what you are getting into when you sign the lease.
- Other leases: Ground lease: In this type of lease, only the land is leased out. Any construction on the land is owned by the builder. An example of this is the state leasing out land to private developers and requiring a percentage of the sales price of the units or a cut of the value of the property in exchange for the right to build on, profit from, and use the land.
- Other leases
- Sandwich lease. In this lease, the lessee (one who rents) leases the property out to another party. This form of sublet leasing can be done in both residential and commercial realms.
- Lease-purchase arrangement. This type of lease involves allowing the lessee the ability to make payments towards the purchase of the property. It can be done, again, in both commercial and residential.
As you will notice, there are many types of leases. The most typical that you will encounter in the residential world will be the gross (or net) lease as it pertains to renting an apartment or home to a tenant. If you are looking to do any of these types of leases, be sure to seek legal guidance as to what type of lease makes the most sense for you, and how you can, legally, go about doing so.