A home rental business can be a great way to earn some extra income. Landlords typically make a higher return on investment than traditional investments, and there is the potential for a lot of revenue if you rent out multiple properties. Many people choose to start a home rental business because it is a relatively low-cost way to get into the real estate market
However, before you start renting out your home, there are a few legal documents you need to take care of. In this blog post, we’ll review some essential documents you need to start your home rental business on the right foot.
1. Rental Agreement
The first and most important document you’ll need is a rental agreement. This document will spell out the lease terms, including the lease duration, the rent amount, and any rules or regulations regarding the property. This will also be the document you’ll use to evict a tenant if they violate the lease terms.
Having a written agreement is essential to avoid any misunderstandings down the road. Depending on your state, you may be able to find a generic lease agreement online. However, it’s always best to have an attorney review the contract before you sign it. You want to make sure that the agreement is airtight and protects your interests
2. Commercial EPC
An EPC or Energy Performance Certificate is required by law if you’re renting out commercial property. This certificate shows how energy efficient the property is and gives potential tenants an idea of the energy costs they can expect. The certificate is valid for ten years, and you can get one from a registered assessor.
Getting a commercial EPC is a bit more complicated than getting a residential EPC. For one, the assessor will need access to all parts of the property, including any areas not being rented out. Additionally, the property must be vacant when the assessor does the assessment. You should factor in the cost of the assessor’s time when you’re setting your rental rates.
3. Homeowner’s Insurance
Next, you’ll need to get homeowner’s insurance. This will protect you in case of any damage to your property that your tenants cause. Check with your insurance company to see if there are any special requirements for insuring a rental property. Many companies will require you to purchase a separate policy for your rental property.
A good homeowner’s insurance policy will cover the cost of repairs if your tenants damage the property. It will also cover you in case of a liability claim, such as if a tenant is injured on the property. Read the policy carefully to know what is and isn’t covered. You may need to purchase additional insurance to cover all of your risks.
4. Business License
If you rent out your home regularly, you’ll need to get a business license from your city or county. This is typically a simple process, but you must check with your local authorities to ensure you follow all the necessary steps. Different jurisdictions have different requirements, so getting the correct information for your area is essential.
A business license allows you to operate your home rental business legally. It also shows potential tenants that you’re serious about your business and following all the necessary rules and regulations. If you don’t get a business license, you could be fined or even shut down by the authorities.
5. Lead Paint Disclosure Form
If your home was built before 1978, you’d need to provide your tenants with a Lead Paint Disclosure Form. This form discloses any known lead paint hazards on the property and must be signed by both parties before the lease is finalized. Because lead paint can be dangerous, disclosing any hazards to your tenants is important.
You can get a Lead Paint Disclosure Form from the EPA’s website. Be sure to fill it out completely and accurately, as any misrepresentation could come back to bite you later. If you don’t have a lead paint disclosure form, your tenants could sue you for failing to disclose a known hazard.
Starting a home rental business can be a great way to earn some extra income. However, there are a few legal considerations you need to take care of before getting started. Be sure to have a solid rental agreement, order a commercial EPC, get homeowner’s insurance, obtain the necessary business license, and provide a Lead Paint Disclosure Form if required. By taking care of these basics upfront, you’ll be well on your way to running a successful home rental business!