I am in the early stages of developing my business model/strategy and basic structure of the business. I plan to buy and hold multi family properties long term for steady cash flow and equity building.
My specific question to the forum is about having a formal "Company Policy" document that tenants would sign as part of the application process. What are some "must have" items and situations that should be included on this type document?
Things that I am considering are pets, smoking, late fees for overdue rent, and modification of any kind to the property.
Thanks for any input!
The items you're considering will all be in your lease. That's where you lay out the ground rules between you and the tenants. Look up some sample Lease Agreements for your City/State to get a feel for what is generally there.
If you want, you can add a tenant handbook to your lease and reference it in your lease. That can cover many policies. To get an idea of these documents, go visit one of the local big box plexes posing as a perspective tenant. You will get an education.
@Eric Pocker It can be helpful to have in writing or at least discuss with them your rules before they apply to rent your unit. Giving them information about your policies could help them determine if they even want to live there.
We have a strict no dogs policy and non-smoking property (they can't even smoke outside on the property). These kinds of things are important for them to know before it shows up in their lease.
I have always communicated this to them on the initial phone interview and again at the walk-through, before they apply. I, too, am also considering putting these in writing to provide as part of their tenant handbook.
Aside from what is in the lease about quiet enjoyment and treatment of the property I do have a clause that says we reserve the right to make rules and change them.
Some things are explicit in the lease, parking only 2 registered vehicles and others are things that are more general in the terms of the lease where you don't think you should have to spell it out for people. A couple of the later points are I think what you would call rules.
I have had to say are:
Clear the stairwells, I don't want to see your junk and neither do the other tenants. Don't park your car so it blocks the dumpster, other people or general access to the property, keep your dog on your property and under your control. Don't put xyz in the dumpster. Don't plant a garden in the common area without permission (and then cry that the contractor drove on it.) Motorcycles don't belong in the bicycle parking area. Lock the common doors at all times not everyone feels as safe as you do. There are recurring themes and then the things you never thought of ... You really just need to find out the common themes in your area and deal with the rest on a case by case basis. I just tell them , there is nothing they sign.
We have the smoking, pet, and quiet enjoyment items in the lease. Then we have a couple of addendums referenced by the lease: criminal activity addendum (which also references domestic disputes), and house rules. The house rules include items such as sharing the yard, parking rules, lawn furniture, etc.
Any restrictions on the property should be covered the very first time they call to inquire: no smoking, absolutely no pets, loud music or parties that generate complaints are lease violations, they have to supply a lawnmower to cut the grass. Whatever is critical to their decision-making and yours. It's better that they filter themselves out before going through the application process if it's not a fit.
This sort of policy document is way, way premature for you to be working on now. If you are working on a business model/business plan then that is what you should be doing. I work for a very large management consulting firm, and policies at this level are not part of the modeling or business plan stages.
You won't need anything more than a standard lease modified to address your specific preferences until you start to really scale.
So if I were you I would finish up your business plan and then buy a property. Spending your time on this sort of thing at this stage is not productive.
Originally posted by @Richard C.:
This sort of policy document is way, way premature for you to be working on now. If you are working on a business model/business plan then that is what you should be doing.
That is a very good point Richard. I think most of my restrictions will be covered in the lease agreement. As far as items/scenarios that should be included on a separate document go, maybe I should wait and see what comes up and make decisions on a case by case basis.