There are two ways of earning from your real estate investment: sell it at a higher price, or rent or lease it out.

Finding possible tenants are not that different from finding buyers for your homeyou place ads, distribute flyers, arrange appointments (or open houses) so they can view the property, and negotiate for terms.

The obvious advantage of renting out the property is that you earn money while still retaining ownership. But it does have its own share of headacheslike the occasional tenants-from-hell who either skips on monthly payments or damages it during his stay. Of course you could always kick them out, but youve already incurred losses: the cost of repairing the property, the earning opportunities lost while finding another tenant, and the devaluation of the property because of the damage.

Thats why its very important to screen your tenants through the rental application form. It includes all the information you need to do a background check, evaluate their ability to pay, and even track them down in case he trashes your beloved apartment and skip town before you find out.

Once youve found your best candidate, you also need to protect yourself (and him!) with a residential lease. This basically outlines the terms in which he can use the property, his obligations (and yours), and any rules on damage and repair. It also has a description of the propertyso you never end up fighting over whether or not the bathroom tiles were cracked before or after he moved inand your policy on subletting.

In other words, the residential lease prevents the ugly squabbles that often occur between tenants and landlords. What if the dog ruins the carpet? What if the roof leaks or the cabinet door falls off? What if he abandons the property? What if he misses a payment? Better clear it now, than argue about it later on.