Hey guys, this is Liz from DeRosa Group here, back with you this week to talk about the
importance of lease signing and all the things that go into having an effective lease signing
meeting with your new tenants. I have Joshua here. Say hi, Joshua.
Hi, how are you guys doing?
Joshua is our property manager, and I thought, "He is doing these every day with our tenants
and our new tenants." So I figured I'd interview him, ask him a couple of questions, and then
together, we're going to actually go through, line by line, the things that we go through
with tenants when we're sitting down and doing a lease signing, which is a very exciting
thing in this real estate investing gain, but we thought it was probably one of the
biggest things that landlords don't really properly prepare and they don't properly do.
So we thought this would be a great topic to share with everyone here on BiggerPockets.
And so with that, I'm going to ask my first question. So Joshua, you've done a lot of
these lease signing meetings with our prospective tenants and our new tenants. What do you think
is the most important things that new landlords need to do as well as existing landlords when
it comes to lease signing?
I think it's important that the landlord that's conducting that lease signings set themselves
up for success, and a good way to do that is develop a system, a checklist, of some
sort. And by doing that, it allows them to be consistent in their approach to each lease
signing that they do. And if they ended up having someone do it for them, they at least
have a system in place that they can train that person to follow up and definitely have
a nice reputation in the area of lease signing.
Well, when it comes to the lease process, most people think it's just a matter of signing
a lease and being done with it. What are you talking about a process? Why do we need a
process? But actually, there's a lot more that goes into preparing a lease that the
items that go along with the lease, and I'm going to explain that. So again, what we really
want to get through to you is that it's not just the lease, the lease is the most important,
but there's a lot of other things that go along in this process to make sure you're
starting off on the right foot. This is the first step to onboarding your new tenant.
So it's pretty important. So with that, we're going to go through literally the 16 items
that we have on our handy dandy checklist.
Okay. And we're going to walk you through each of them, I'm going to take half and then
Josh was going to go through half. So the first one that we want to recommend to you
is prepare three sets of keys for your new tenants. So you might be saying, why three
sets? Number one, you want to have an extra set in your office or wherever you keep your
keys. Number two, obviously, you're going to give a copy to the tenants, and three,
you want to have an extra. And then the extra is when the tenant may lose their keys or
what have you. And that has happened a lot, right? Locking out. And that happens a lot.
So three sets. Why that's the first thing on the checklist or should be the first thing
on your checklist is because you're really busy. You have a tenant coming in the next
day to meet with you to go over the lease and the lease documents.
And then they get there and you're like, "Oh no, where are the keys?" And you don't always
have the keys prepared. And it might seem kind of obvious, but I got to tell you, that's
one that will sometimes get missed, if you don't have this front and center. Second thing
you have to have before as you prepare your kind of lease process. Number two is you want
to have, obviously, the lease, that's pretty obvious. But what I recommend to you is, when
you are going through the lease with people, and I'm sure you do this, Joshua, all the
time, every single page, when you're going through the highlighted information with them,
have them initial each page, so it shows their kind of commitment to, "I heard you say that
about noise or illegal activity", et cetera. So have them initial each page, that's the
second one. Number three, you always want to get a copy of the driver's license of every
single person that's going to be living in that unit, right?
And that could be driver's license or anything equivalent to a driver's license. A passport,
what have you. Number four is the security deposit, obviously. For New Jersey, it's one
and a half months rent. Other states, I know we do some work in Pennsylvania as well, it's
one month.
It's first month, and then last month.
First month, and then last month. Joshua knows more about this too. So regardless, you got
to know what your state requires and what's legal to charge as a security deposit. But
really, we have our rentals in Jersey and Pennsylvania. So that's what we're aware of.
So know it's required, and obviously, implement that. Where are we at? The fifth thing, obviously,
is the first month's rent. And this might seem obvious, but we've had people we've talked
to new landlords or even existing landlords where they give over the keys and the tenant
has some of the money. I would be very wary of that. So that's a requirement. You need
to have, obviously, the first month's rent. Again, might seem obvious, but we've heard
stories that would not always have that as the situation.
Next part, we have a thing called the Utility Transfer Agreement. What I mean by that is,
I'm sure you've seen this, and Joshua experiences this because he ends up following up with
our tenants that haven't switched over to the utilities, but when you're renting to
a tenant, a person in a multifamily, not so much the single family home, but a multifamily,
the utilities often need to get transferred, right? Electric, gas, water, and tenants don't
always do that as quickly as you need them to. So we actually have an agreement and we
charge them a fee if by a certain date that they don't switch over their utilities, pretty
simple. But we actually make that a pretty important point because we've had that, where
we continue to get the bills when the tenant is already there. So you want to protect yourself.
Next thing on our lovely checklist is, we have this thing called Truth in Renting. And
basically, it's policies and protection for the tenant in the state of New Jersey. Most
landlords don't give this out. They don't speak of it, but from a legal perspective,
it's really important to give this out so tenants do know their rights. That is important.
You want to be the landlord that actually shares that with them versus making believe
there's none. So they have rights and you want to make sure that they know them and
that you're doing what's right in the eyes of the law. The last one, oh, actually, I
was taking half of this and Joshua was taking the other half and I was about to get into
his part. So I'm going to give the floor to Joshua. I just shared about half of the important
forms and pieces of our lease signing process and procedure. And Joshua is going to take
the next step.
Yeah. So we talk about taking care of our tenants and setting them up for success with
Truth in Renting, same thing goes with the lead-based painting documents that we give
them. It's pretty much a document that allows the tenant to understand that we don't want
them licking the walls and different things like that. Certain houses have been through
certain paint jobs and different things of that nature. So, lead-based paint document.
Moving on from that one, though, we have move-out charges and-
This is an important one.
Yeah. This is very important. We like to make our tenants aware up front of what the charges
look like if after they leave from the place and move out. When we go back in there, we're
looking at this place, we're looking at the charges and we're going to look at this sheet
that they signed, that they agreed to, and if there's anything that we need to make charges
out of the security deposit, it's going to be referenced out of this sheet. So it's a
very important one. Moving on from that one is smoke detectors, carbon diet, carbon monoxide
detectors. This sheet is just a sheet that, again, makes the tenant aware that they share
some responsibility in making sure these different parts of the house are up to where they should
be to make sure that their family is safe, but also in liability reasons too.
We want to make sure that they're on top of that. The next area is tenant emergency contact
information, which is very important because what happens is if we can't get a hold of
the tenant because they've changed the number or something like that, this allows us to
get a hold of their family member. But also, in the event of emergency, the sheet is an
emergency contact sheet. So any event of emergency, we need someone to contact, and this sheet
helps us have a third party that they are connected to if we need to get in touch with
them or if we need to notify people.
And I'll just add another reason for the emergency contact information is that if you are ever
in a collection situation, which, we are working with a great collection agency right now where
we give them all that. So now they have more information about that person. So it actually
has two good reasons why you want to get that emergency contact. For everyone that's going
to be living in the unit, not just for the person signing the lease, you want that emergency
contact info. Sorry, I'm taking Joshua's thunder, but that's just how I am.
Yeah, she's absolutely right. So, collections. So, emergency contact info is very important
to this whole process. Pet agreement form, whether they have a pet or not, you can determine
that on your lease, but it's important to have something set up where, if you're going
to charge them extra, that's entirely up to you. But it's important to have some guidelines,
some agreement there. Pets can make a mess if not supervised. So handing over the keys
after that, that's a given, but also, we like to provide them our contact information. It's
not so much just us contacting them, but they have to get a hold of us. So we try to be
as clear as possible, how the different forms of different avenues that they can reach us.
And then lastly, in the state of New Jersey, at least we know this to be true, is we have
them sign a W9 or a W8 form, and that's just a form that the banks over here require that
we give our tenants when it's time to do a security deposit and within those banks and
stuff like that. So, did I cover that right?
Thank you. Yeah, exactly. So you want to make sure you're going to obviously be giving your
security deposit over to a bank and they aren't going to have certain requirements, certain
forms that need to get signed from the tenant, not just you. So you need to figure out what
that is for your own state, but for New Jersey. It's a W9 or a W8 form, because sometimes
there're different forms for people who are U.S. citizens and non-U.S. citizens. So you
just want to make sure you're using the right forms. The only other thing you missed was
the tone of appreciation.
Absolutely.
So what is that, Joshua? Tell everyone.
Every landlord has different approach. So landlords, believe it or not, don't do this,
but we pride ourselves and we're very proud of this process of pretty much, there's a
sheet that we give them at lease signing, making them aware that we have a program or
something that's in place where, if they pay rent on time every month at every quarter,
they get into a rolling of...
Contest.
A contest. Yeah.
A fun contest.
A pulling, and if their name gets pulled out, then they get a $50 gift card. Or at the end
of the year, if they have paid on time the entire year, then we give them a TV. So there're
more details to that, but that's pretty much what it looks like.
Well, we share that with them at that point before they even became a tenant for a long
time, but right at the beginning, you want to teach them how we're going to reward for
not just obviously, I'm not a victim, but most importantly, a positive incentive in
a fun contest that we have.
I think it puts them in a good step forward and encourages them to want to pay on time
if they have any idea not to.
So I hope this was helpful for all of you. We're happy to share our checklist with you.
I know folks have asked us for other documents. I'm always happy to share what we're using,
so it can help either new landlords or existing landlords. But the key is, the lease signing
process is more than just the lease.
It's actually a process and you should have a system. You should do it consistently, and
you should create forms that are the biggest things that people either miss, or the biggest
things that can bite you at a later date. So you want to really protect yourself. And
we've had a lot of luck with that, and we create a little checklist so we don't forget
anything. So I hope this has been helpful. I'm glad you joined us here this week, Joshua.
Thank you.
And you'll be seeing more from Joshua, but thank you for watching. And I love to hear
from all of the folks that watch this today. What have you found to be really important
when you're signing a lease with a tenant and what are the biggest things that people
need to know so they're protected and they also do it in the most effective way? So thanks
for watching and have a great day.