How-To do Leases in Texas
On this page, we have assembled some training on how to work with Lease clients. They are similar to buyers, but different in several ways. With lease clients you will want to still get them "pre-qualified" but to do so, you won't be sending them off to a lender. Instead you will be collecting the application and documentation yourself.
The reason this step is so important is that you can spin your wheels showing just as many homes to a lease client as you can a buyer, but the payout is much less and often the likelihood of them qualifying for a lease is less likely. There's usually reasons that people lease instead of buy and it's not because they want the flexibility of renting instead of owning.
As a business owner, you must make sure your return on investment is there. You are investing your time.
Lease Client Consultation
Establish your creditability, build rapport and a relationship with them. This could be a future buy-side client someday, so do treat them with respect.
Understand their needs.
What problems are they trying to solve? (schools, proximity to work, size increase, etc.)
What's important to them? (must have a safe yard for Fido or kids, must have a space for a home office)
What are deal-breakers? (outdated homes, homes with tiny back yards, etc.) - It's important to know what they won't accept so you don't waste time showing houses that they don't like.
Do they have pets? Many landlords strictly prohibit pets, so you would not want to show them homes with pets and you can filter them out in the MLS search. Keep in mind that service animals and emotional support animals are NOT PETS and cannot be prohibited by landlords.
What is their monthly budget? Many landlords are looking to qualify tenants using 3x rent as the income qualifier. Therefore if they make only $3600 per month - their max rent budget is going to be $1200/month. That's going to be harder to find a 4 bedroom home for that price in the DFW market. If they make $4600 per month, dividing by 3, they can qualify for rent around $2700 max and that's more doable.
Establish and recap their MLS search criteria and map search areas.
Talk about next steps. Explain that this process is to give them the best chance of getting a win and finding the right home for them!
You will be sending them "new client paperwork" which are the disclosures they need to sign. This includes the Buyer/Tenant rep agreement.
You will be sending them a lease application PDF to fill out
You will need them to send you back their income and asset documentation. (They MUST be able to document their income. There's no getting around that step.)
You will ask them to pull their credit report and credit score from www.annualcreditreport.com (the official site to get a free credit report)
Once you get the documentation back, you will set up a search for them based on their search criteria. DO NOT work with someone who is unwilling to get qualified up front. They are usually hiding something and you will waste your time showing houses to someone who can never rent and you do not get paid by the landlord until they move-in to the home.
Texas Lease Application Process
Send the "New Client Paperwork" aka the Buyer/Tenant Representation agreement
Email the PDF fillable lease application to them. An application must be filled out for every tenant over the age of 18.
They do not need to fill out the property address, rent, landlord info, etc. but they MUST fill out the rest of the application completely.
Have them email the PDF back to you, not printed so that you are able to type into the form and add the property specific information to it before they e-sign it and you submit it to the landlord.
TIP: Be sure they know that need to save it to their computer locally and then open in Adobe Acrobat and NOT in the browser like Chrome. If they fill it out on their browser, none of their information will be saved. For every person that will be on the lease over 18, save a copy with their name at the end so they have 3 separate PDFs to fill out.
Income - usually looking for last two months of paystubs and last year's W-2. Other sources of income beyond salary should be verified with the appropriate documentation as well such as child support, etc.
Assets - usually looking for last two months of bank statements showing they are receiving the income and have money to pay bills
Credit - ask them to pull their credit report and credit score from www.annualcreditreport.com (the official site to get a free credit report)
Rental/Mortgage History - have they had issues with paying their rent in the past? How has that issue been reconciled?
Animals
Pets - you will want the breed, weight and age of each pet. Possibly even get pictures of each animal. Some landlords have a weight limit on animals or a limit on the number of animals. If the tenant has 5 dogs and the landlord criteria strictly says 2 pets max, check with the agent to see how firm the landlord is on that criteria. They might make an exception or negotiate a different deposit, but you need to know that up front.
Service animals - you will need proof that the animal is either a service animal or an emotional support animal with a doctor's letter or other documentation of the animal. Landlords cannot prohibit documented service animals. Read this article from Texas Realtors.
How to create your first TX Representation Agreement & eSign
A 20 minute walkthrough of how to create a Zipforms Buyer Rep Packet (or Tenant Rep) and get it signed in less than 5 minutes! Easy peasy! (It takes longer to talk about it than do it!)
... forgive the bad edit job
Setting up the search in MLS
Log into MLS and click on Search > Residential Lease > Quick
Use the Add/Remove button in the Additional Fields area to add some search criteria that helps to narrow down the search. This is where you can put in criteria such as school districts or specific elementary schools, pets, etc.
Remember, every filter you add is going to remove homes from your search, so be careful how you add them.
Once you create the search, you can set up the client in MLS and set up an "Auto Email" that will automatically email them listings.
TIP: Be sure to uncheck the box that says to CC you a copy of the emails. Also sending Daily is probably preferred instead of ASAP because the client might start getting too many emails.
Before you show any house, look in Transaction Desk to see what documents have been posted by the agent such as rental criteria, etc. Not every listing agent will have documents in Transaction Desk, so this icon may not be showing up under the pictures.
Note that there is an additional section in the MLS listing that gives information specifically applicable to lease listings that you don't see on purchase listings.
Applying and Getting Paid
Once you find the house and they want to apply, you will need to make sure that you understand the rental criteria.
Communicate with the listing agent that you have a client who wants to apply.
Find out if they have received other applications. If they have received multiple applications, find out what you can do to make your client's application more desirable to the landlord. Your client may have to offer
Does the listing agent have an online application portal or do they require the TAR application form that we had the client fill out already?
Gather all of the documentation required for the application and submit that to the listing agent.
For the application, you will now fill in the application form with the address and landlord information and get it e-signed by the client.
Once the client signs the application, you can upload it to the Google Drive folder and get a sharable link to give to the agent for downloading the application docs.
After the application is accepted, the other agent/landlord will prepare the actual lease.
You will typically get paid a portion of 1 month's rent. If the listing says 0.35 and the rent is $2700, then you would get GCI of $945 (2700x0.35)
At that point, you will need to send them the eXp Lease Invoice with the W-9 attached. Here is the PDF to download and save a copy on your computer. I recommend creating a new saved copy for each individual client by saving it with their name at the end or saving a new copy in a folder on your computer for each individual client.
Next step is to set the file up in Skyslope. Here are step-by-step instructions.
NOTE: The rental income is going to be received after the tenant actually moves into the home. The anticipated move-in date is what you will put for the closing date in Skyslope and you will also want to push it out an additional 2 weeks to allow for the check to be received in the lockbox.
GETTING PAID IS AS EASY AS 1-2-3:
The rental income is going to be paid directly to eXp by mailing a check to the lockbox address on the invoice.
Once the tenant moves in, remind the other agent/broker that you need a copy of the check BEFORE it's mailed to the eXp lockbox.
As soon as the check copy is uploaded to Skyslope, eXp will pay you via direct deposit and you'll get an email confirmation.
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Lockbox address (found in multiple places on the fillable Lease Invoice)
eXp Realty, LLC
PO BOX 207182
Dallas, TX 75320-7182