Landlords must face many risks on a daily basis, so what type of strategies can rental property owners implement to decrease the risk involved? Risks can include things like lawsuits— legitimate, frivolous, or malicious. The types of cases can be built out of injuries occurring from faulty appliances, rehab work, or harassment by a landlord. A tenant’s dog could bite a neighborhood kid or the “Justin Bieber’s” of the block could terrorize the vicinity by pelting homes with eggs, tomatoes, or the like. With all these risky variables a landlord submits themselves to— by owning and renting a property— how can one protect themselves and their assets? Read on to find out.
Inspect The Quality Of Work Regularly
When you are a landlord, the details matter. It’s essential (and the right thing to do) to check-up on renovation and repair work. You need to know what’s being done to your buildings and properties is done correctly. A few faulty wires on the washing machine. Mold covered up and not removed. Hot-and-cold piping switched to be opposite. All of these can, and probably will land you in hot water.
I have an in-house general contractor that conducts the inspection work after renovations are complete. On top of that I hired a leasing agent who does a walkthrough checklist with the tenant upon move-in.
Make Paper Trails
You need to make sure you keep excellent records of everything. Save receipts, inspection reports, tenant maintenance requests, notices, and more. Retain the proof on file to defend your case in the event you need to do that. I recommend going paperless— uploading all documents to whichever property management software you choose to use.
Top-Shelf Insurance
No one enjoys paying top-dollar for insurance, but when a claim does arise, you will be grateful you have good coverage. The insurance you need could include things like basic property coverage, fire, floods, storms, and even an income policy that fills in the gaps in rents in the event you have to evict a tenant. Prompt renters to carry their policies, which is usually very inexpensive for them. Remember to verify if they have it and that it is renewed. Pets can also carry additional insurance coverage depending on the breed.
Keep Real Estate Counsel Close
As a real estate investor— if you are in the business long enough and make consistent investments— you will one day (highly likely) find yourself in need of legal counsel. Limit your liability by having a real estate attorney already picked. This way, you aren’t scrambling when you find yourself in need of calling a lawyer.
Separate Yourself
It’s key to protect your privacy in real estate investing. You don’t want to put yourself out there as an easy target. Take into consideration the benefits of an LLC or using a business address instead of your home address. If you invest through a partnership, this will help protect your identity, decrease your liability, and separate your assets. You’re not such a target when you separate yourself.
Services To Create Legal Distance
Third-party property management companies are a great option to limit liability. These entities allow physical limits between landlords and responsibility that can incur. Professional services will often take on the expense of legal representation or make claims on their insurance if there happens to be a mistake. Services like agents and management companies exist for the reason to limit a landlord's liability and will payoff in many situations.