7 Tips for Protecting Your Rental Properties: A Guide for Landlords
Investing in rental properties can be intimidating. Especially, when you hear the horror stories. Want to get into the rental properties investing game, but worried about being a landlord? This guide has 7 tips for landlord on steps they can take to protect their rental properties.
Why invest in Rental Properties?
First things first, why should you even consider getting into investing in rental properties? Well, investing in real estate is a great way to generate passive income and build wealth over time. The cashflow you generate from collecting rental income will start to compound. This in turn, will build multiple sources of income which can help you gain financial freedom.
However, it isn’t all peachy. It is important to take steps to protect your properties from damage, theft, and other risks. Here are some tips for landlords who are looking to protect their rental properties:
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You Need Insurance
The number one tip for landlords is to protect your rental property with the right insurance. Rental properties may require several types of insurance. The first is to have property insurance, which will cover damage to the building and its contents. However, additional insurance may be required to protect against floods, hurricanes, or fires. Therefore, as a landlord, you should do your due diligence in determining if your rental property is at risk for these.
In addition, consider getting liability insurance. Tenants are liabilities. This means anything that happens in your property, you can be held liable for it. To help protect against lawsuits, liability insurance can help reduce the financial impact. Many small new investors get an umbrella policy to help protect themselves from lawsuits.
Inspect Your Properties
Another tip for landlords, is to conduct periodic property inspections. You should create the habit of conducting regular inspections of your rental properties. This can help you identify potential issues before they become major problems. For instance, it is common practice to schedule inspections at least once a year. During these inspection, you want to check for signs of damage, wear and tear, and safety hazards. Catching potential issues right away, and fixing them, will prevent it from becoming huge costly issues later.
Screen Your Tenants
One mistake I see new landlords make is to not properly screen their tenants. It may be tempting to quickly get a tenant in the unit to avoid paying for the mortgage. However, one of the best ways to protect your rental properties is to carefully screen potential tenants before allowing them to rent. Screening your potential tenants should include conducting background checks, verifying income and employment, and checking references. Doing this in the front end can save you major headaches later.
Another important habit you should have, as a landlord, is communication. Ensure you clearly communicate your expectations before tenants move in. This should include expectations for how the property should be treated, maintaining the property, reporting maintenance issues promptly, and adhering to noise and other rules. If it is a multi-unit property (duplexes, etc.), you should ensure each tenant knows their individual responsibilities.
Your Lease Terms are Important
One thing that can set you up for failure, is not enforcing your lease terms or being lenient on them. Your lease agreement should include clear terms for how the property should be used and what is expected of the tenant. Be sure to enforce these terms, including taking action if the tenant violates the lease agreement. You should start eviction proceedings as soon as the rent grace period ends. You can always cancel the process. However, if you become lenient, it can set a precedent which can make it difficult to enforce your lease in court.
One tip for landlords, that many miss is that tenants should be provided a secure and safe place to live in. Investing in security can help keep tenants safe, protect your property, and prevent potential lawsuits. You can install security measures such as deadbolts, security cameras, and motion-activated lights which can help deter theft and vandalism. It can also provide evidence in case of a break-in or other security incident.
Lastly, as a landlord, you should take maintenance of your property seriously. It is understandable that maintenance can eat up some of your profit. However, responding promptly to maintenance issues can help prevent small problems from turning into major ones. The issue can become bigger, to where you have to fix it, anyways. Now, you spend more money to fix it when the maintenance could have cost very little.
Additionally, not taking care of your property can cost your potential gains when trying to sell later. I have been able to negotiate way under market, due to the property’s condition. Be sure to provide tenants with a way to report maintenance issues and address them as quickly as possible.
By taking these steps, you can help protect your rental properties and ensure that they remain a source of passive income and wealth for years to come.