Rental properties can often seem like one of the easiest ways to make money. But like any investment, they come with pros and cons. When renting out a property, it is important to protect yourself and your property from everything from physical damage to insurance claims.
1. Get a Robust Insurance Policy
Basic landlord insurance isn’t enough when protecting your rental asset. Having coverage that provides protection from all types of potential losses is ideal for property owners looking for maximum coverage. We recommend insurance that covers you from the following losses at a minimum, including property damage, liability coverage, and loss of rental income from rent not received.
With a full umbrella policy, you receive an additional layer of coverage after your other policies have reached coverage limits. An umbrella policy protects landlords against tenant claims, guest injury, or even injuries suffered by a squatter in your vacant property. If you are a landlord with multiple rental properties across multiple destinations an umbrella policy could be for you.
2. Create A Strong Lease
Though it is easy to make a one-time templated lease, it is important to customize your lease to make it as strong as possible. Your lease should cover federal, state, and local laws along with your specific rental terms and requirements. Stay up to date with local laws by visiting your city government’s website to look for residential landlord and tenant ordinances.
Be specific about rental terms including length, lease start and end, residents’ names, co-signer’s names, maximum occupancy, rent amount, due date, late fees, rent payment instructions, and security deposit amount. The lease contract should also touch on additional fees for pets, move-ins, utility costs, utility setup, and maintenance protocols. Having a customized lease for every tenant and property is ideal for laying out expectations and mitigating problems before they occur.
3. Purchase A Home Warranty Plan
Save money on repairs and maintenance with a home warranty that prevents you from unexpected costs at your rental property. A home warranty covers repairs, maintenance appointments, replacement items, and more to save you time and money. Be sure to always read the fine print when choosing a warranty plan so you know what is covered and what is not.
4. Avoid Additional Risk
Implementing a tenant screening process or software can help landlords avoid risk. With an applicant screening service, you can run credit reports, review background checks, and request references from the applicant so you have the best understanding of a person’s background. Always ensure your vendors have references and documentation of proof of insurance before ANY work is started on your rental property. Avoid risk by keeping uninsured contractors away from your property and tenants to lessen your chances of being liable for damages or potential injury.
Selecting a combination of strategies is your best bet to protect your rental investment. Most long-term rental property owners do the above things to ensure their investment is protected. It isn’t easy to factor in unexpected costs from the get-go but with a strong plan in place your property is ready for anything.