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spetznaz

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Posts: 6
Reply with quote  #1 

I am going to rent my prop, but not sure what to offer - lease agrr. or a rental contract?

OHlandlord

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Posts: 3,814
Reply with quote  #2 
This has come up many times and is much debated among landlords.  Each has its own benefits and drawbacks.  A lot of this depends on what your local law says about landlord and tenant rights.  Some states are more pro-tenant than others.  Check out your states' landlord tenant law before deciding on which is best for you.  That said, I'll sum up a few of those and maybe others will chime in with things I forgot.

Lease-benefits
Locks the tenant into staying in the unit for a set period of time.
Sets a standard amount of rent that is to be paid over that period.
Gives the LL some security knowing the place is rented and has an income coming in for that period.
If a tenant breaks a lease and moves early, you can collect some (1-2 mos) of additional rent after they move (but not the rest of the contract period).
You often have less turn over costs because it does cause some tenants to think and not move out early.
You can chose for the lease to automatically roll over for the same period as the original lease if you put it in the lease terms, or it can become a m2m after the first term expires.

Lease-drawbacks
You cannot change any term of the lease for the entire period no matter what else happens (no change in rent, rules, etc.)
You cannot end the lease early without having to go through the court system (eviction) and prove a lease violation (which may sometimes be hard to prove in court.)  This can be expensive.
Tenants do move out early on a lease, despite what the contract says, so the security is not always real.
When tenants do decide to move out, it is usually at the end of the lease period.  (They start looking for a new place just prior to the lease expiration.)

Rental Agreement-benefits
You can change any term of the contract easily by providing only a 30 day written notice.  (Raise rent, change rules, etc.)
You can terminate the contract easily by giving 30 or 60 days notice in writing.
No reason is needed to terminate the contract and you have to prove nothing in court should you have to evict.  (Thus, it is sometimes easier to get rid of a bad tenant.)

Rental Agreement-drawbacks
The tenant can move out at any time by only giving 30 days notice.
You may have vacancies in months when the unit is hard to fill.
You may have higher turn over costs as tenants may not stay in the unit as long.
Some tenants like the security of having a lease.  (knowing that you cannot change the rent or rules)
You cannot collect any extra rent past the 30 day notice if a tenant moves out.

Additionally, some landlords prefer to use leases for tenants that they know have good credit.  Those tenants are less likely to break the lease and ruin their credit.  Also, those tenants are collectible, so if they leave with unpaid rent & fees, you can go after the money owed to you by taking them to court.  (In my experience, I have also found tenants with families and stable job histories tend to move less often.)

Tenants with poor credit or short job histories are more likely to break a lease.  They don't care if a debt is placed on their credit file.  Some LLs prefer to use month to month agreements for these tenants.  Should they fail to pay rent or turn out to be a bad tenant, it is easier to get them out.  Many LLs use m2m agreements in roommate situations (like college areas)where they may fight or break up and one will move out.  You can then terminate the other if they cannot afford the unit.   Also, some LL use m2m in lower end units because they know they will have a higher turn over anyways.  Good tenants will not stay there, but will eventually look for a better unit.

Hope this helps.  Feel free to ask any additional questions, as I am sure others will put in their opinions.  This topic is always controversial.  Some LL's swear by m2m, and only use those.  Others only use leases.  (I use both depending on the property, situation, and the wishes of the tenant.)
spetznaz

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Posts: 6
Reply with quote  #3 

Ok, I have one lady pretending to be a tenant but she is on 8 section program. My house in a middle class neighborhood and well maintained. Rent is $1350/month. She has a kid and old mother + female friend. The previous rent was 1150 and she paid 260. I'm going to screen her very tight but now I'm very confused after reading this forum. All those horror stories about low income tenants. She just filled out an application so I can do not rent to her.  What are my risks you think? Will you rent to her or not?

OHlandlord

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Posts: 3,814
Reply with quote  #4 
You will not have a choice about what type of contract to use with her.  Section (many say suction) 8 requires a one year lease.  They will not do m2m agreements.  I have rented to many s8 tenants over the years.  Some have been good.  Most have not.  (I only have one s8 tenant left.)  A few items about section 8:

All the occupants must be on the lease and must be included in her paperwork with metro.  I wonder about the friend being included in her paperwork.  Usually metro requires that the rent only cover the family unit and NO ONE else.  The applicant, her child, and her mother could be considered one family unit.  Not a friend nor an unregistered BF.  (It is common for a s8 tenant to sneak in other unauthorized occupants to live in their house.)

Metro bases their & her payments on household income.  An unregistered friend violates their rules because it is committing fraud to have unreported income in the household.  This is why they never mention the friend to metro.  I'd check with her caseworker to be sure this friend is listed on her paperwork.  If not, automatic rejection.  You don't want to help her commit fraud.

Have you checked out how much her voucher is for?  S8 frequently fails to meet the market rent levels.  The better rentals will never qualify since they won't pay you enough money.  Remember too, that the amount on her voucher has to cover the entire rent + ALL utilities.  $1350 rent + gas + electric + water/sewer/trash = voucher amount.  For your place, her voucher would have to be for at least $1550 or more to be able to do this.  The voucher amount is not necessarily what they will pay too.   The amount they pay changes for each property (based on # of bedrooms, what utilities are included, what appliances are included, etc.) 

You also will have to wait about a month before you are even approved to rent to her.  Have you ever taken s8 before?  There is a long process you have to go through to have the property approved including completing several forms, having your property inspected by their person, having the office personnel complete their forms and input all the info into the computer, going to the office to sign the lease, etc.  This process is NOT for new landlords.  They can find many nitpicky things wrong with your property that you have to correct before they will approve the place (peeling paint anywhere - even between windows, railings on any stairs, lead paint tests, etc.). 

There are also some big drawbacks to s8 including non-collectible tenants if they leave owing you money for damages (s8 does not cover this), having to use s8's lease (not yours), problems with unresponsive s8 personnel (hard to reach the caseworker), difficulty in evicting this type tenant (they get free lawyers to fight you), tenants can request another inspection of your property at will (if it fails, you don't get paid & tenant stays for free), etc.  I have found that this type of tenant doesn't care for the place as well as other types and has more lease violations.  If you do want to consider her, screen her VERY, VERY WELL!  If you have never taken s8 before, I would suggest you pass.  Just state that your property is not approved for s8 (which it currently is not).
spetznaz

Registered:
Posts: 6
Reply with quote  #5 

Well thank you a lot OHlandlord. I really appreciate your advise. Im a newbe and now Im getting the right  picture of landlording. The reson why I rent my house is that Im relocating in another state and dont want to sell my nice house in a good naighbourhood. Anyway she didn't show up so I changed my ad and made it more strict. Im in fear of deadbeats.

OHlandlord

Registered:
Posts: 3,814
Reply with quote  #6 

You're a new landlord and you will be doing it from across state lines?  Not a good combination I'm afraid.  How will you handle problems that arise (police calls to the unit, repairs needed, tenant failed to pay rent, tenant is unreachable, etc.)?  I would suggest you find a trusted relative, friend, or a property manager with good references to handle the day-to-day operations.  Running a rental via long distance is very difficult.  You never know when a pipe will break, someone will break into the house, the tenant will disappear on you, etc.  Believe me, the tenant will not remember how to shut off the water valve or flip that breaker back on.  (Had it happen many times.  Just last week as a matter of fact.)  At the very least, get together a list of local contractors who you know and trust that you can call at anytime night or day.  If you don't you will be searching for someone at 2a.m. to shut off the water flooding the basement because the tenant turned off the heat when he left.  Or trying to find someone to board up that window at midnight.  Or trying to find an electrician over the holiday weekend because a spark flew out of her stove.  (Happened to me this last week.)  Also, contact all of your current neighbors and ask them to keep an eye on your house.  Give them your new phone number so they can call you.  Neighbors will see things going on that you wouldn't have a clue about (drug sales, big drunken parties, domestic violence, damage to your property, neglect of your property. etc.).  You will need their help to stay on top of your place.  Good luck.

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