Renting out a property is a great way to generate passive income, but there are always some risks involved. Those risks include liability for injuries sustained on the property, physical damage to the property itself, and non-paying tenants. Taking the following steps can help minimize your risk as a landlord.
Purchase Landlord Insurance
This is essential protection to cover common occurrences such as fire, lightning, wind, or hail, which can result in property damage. This insurance covers the building and other structures, such as fences or sheds, on the rental property. In addition, it covers personal property used to service the rental property, such as a lawnmower or a snowblower. Landlord insurance can also provide liability protection in case a tenant or visitor is injured on the property. It can help cover the injured party’s medical bills, plus your legal expenses and other costs in case of a lawsuit.
Buy an Umbrella Policy
Umbrella insurance can complement your landlord insurance to provide a higher level of protection. This makes sense for a property with a pool or trampoline, or for luxury properties with a risk of expensive damages and lawsuits. An umbrella policy can provide you with additional liability protection against business and owner liability and tenant, guest, or vendor injuries, as well as libel and slander.
Have a Home Warranty Plan in Place
A home warranty plan can help protect the contents of your rental property. This type of plan covers a variety of appliances and home systems in case of a breakdown. It could save you a huge repair or replacement bill in the event of equipment failure. Another advantage is that companies providing home warranties serve as intermediaries between property owners and contractors. This can save you time and help ensure the problem gets handled quickly.
Check Out Your Tenants Carefully
A basic mistake to avoid as a landlord is renting to bad tenants. The reliability of the people you rent to and how they treat your property are important factors to consider. Running background checks on applicants can help make this possible. You can pay a specialized service to do it for you or run the background check yourself. This may involve:
Using Equifax to learn the applicant’s credit score
Contacting the employer to get an idea of how reliable the applicant’s income is
Searching criminal conviction databases for your prospective tenant’s name
In addition to running a background check before you rent to a tenant, it is important to conduct regular inspections to ensure your rental property is in good condition. Occasional surprise inspections can give you a better idea of how your tenants behave. Make sure these inspections are written into the terms of your rental contract, including what constitutes an inspection.
When you rent out the property, you are operating a business, and it should be treated as such. Among other things, this means you need the right insurance coverage to protect your business. Our knowledgeable agent will be happy to review your landlord insurance policies with you.
It’s the perfect time to remind ourselves to plan ahead for the ones we love.