Many landowners worry about protecting their investment from insurance claims, property damage, and lawsuits from tenants or any other way that they could end up losing money. Limiting risks of rental business can be simple, all you have to do is learn where you are susceptible to risk and then take necessary steps to reduce that vulnerability as a low risk landlord.
Step One: A good step to consider is getting the right insurance for your property and business. Review your current policy with your agent and discuss coverage options that fit your needs. Do not wait until a loss occurs to decide if you have the right insurance for your property.
Step Two: Also, make your property physically sound. Being a low risk landlord means keeping your property safe for all parties involved. Learn the legal requirements for your area and make sure your property is up to code.
Step Three: Make your rental unit accessible to disabled tenants. Make your property accessible to those with movement imparities as well as other disabilities. Be sure to check whether structures on your property follow the Fair Housing Act’s “design and construction” requirements. Consider all requests from disabled prospects and tenants to modify your building in order to meet that person’s needs. You should evaluate each request on a case-by-case basis and accept it if it’s reasonable. For example, if someone makes a request to install grab bars in the bathroom, it is probably a reasonable modification request.
Step Four: Remove any environmental hazards from your property. Require tenants to report leaks and flooding to you immediately so that you can fix it and prevent mold. Also maintain your heating systems and other appliances, and install carbon monoxide detectors to prevent carbon monoxide build up. You will also want to comply with federal testing requirements when employees or contractors work on asbestos-containing building materials, such as sprayed-on ceilings.
Step Five: Prepare for and handle disasters and emergencies. Back up computer files and keep important documents in a safe and fire proof site. You should also report all suspicious activity. Document the locations of utility shut-off valves. In addition, create an emergency procedure manual with an evacuation plan that fits your property.
Step Six: Lower the risk of crime at your property. To prevent problems and keep your property and tenants safe, abide by state and local laws concerning security measures on rental properties. Screen your applicants and employees carefully. In addition, answer prospects’ questions about security openly, and deliver on any promise you make to increase security.
Step Seven: Avoid fair housing complaints when choosing tenants. If a potential tenant believes you violated his or her civil rights, he or she may take legal actions against you. Even if you win, defending yourself takes time, money, and energy. In order to avoid problems, learn the basics of fair housing laws. The trick to compliance is treating everyone the same.
Step Eight: Use careful and consistent business practices. Use a written lease or rental agreement with tenants and enforce lease clauses consistently. Develop house rules for tenants to follow and enforce them. Never let a friendship with a tenant hinder your professional relationship. Also, to prevent identity theft, don’t use tenants’ Social Security numbers any more than needed.
Step Nine: Avoid problems when hiring help. To lower your risk, determine whether you should classify a helper as an employee or an independent contractor.
Step Ten: Keep up with your taxes. Take steps to steer clear of a tax audit and to maximize your deductions. Create a record keeping system for your business so you will be able to keep track of every document that will verify your claimed income and expenses. Understand how your choice of business structure and tax year affects your taxes. Also, you should find out what deductions you are permitted to claim, and then claim them. Lastly, hire the proper type of tax pro for your business, and evaluate your past returns for evidence of trends or problems.
By following these 10 steps, you can significantly reduce the possibility of any potential issues as a landlord to secure your investment.