Let’s say that you inherit or purchase a house and end up with two properties. At this point, you have some very big decisions to make. You can sell the extra home or use it as a rental property. Either choice can have immediate benefits, but with rental properties, you have risks as well. These risks may include lawsuits and claims for personal injuries or damages to your tenants. Therefore, before you decide to start your new job as a landlord, we suggest you prepare for the ‘what-ifs.’ You need to know how to protect your personal assets when you’re a landlord.
Understanding Your Risks as a Landlord
There are some things that you cannot be held liable for as a landlord. If your tenant suffers a personal injury while jumping on a trampoline that they brought on the property, you most likely will not be held accountable for it. This is especially true if you were unaware that they had a trampoline or you felt that they were grown up enough to play safely while on it.
The problem arises when you, as a landlord, know that there is a risk of danger to the property or the people who are renting from you. For instance, you may be held liable if:
- You know that dangerous animals or pets are nearby.
- You are aware of improper maintenance, water damages, or faulty wiring issues and fail to repair them.
- You know that criminal activity in the area creates a risk for the personal safety of your tenants.
- You are aware that the home is in violation of local laws or building codes.
As a property owner for a rental property, you have to fix the issues that you know are there. The shortlist above is only a few of the things that you could be held accountable for.
How to Protect Your Assets as a Landlord
To protect yourself, you must put effort into securing your personal property. This can be done in several ways. Some of the most common include:
1. Create an LLC for Your Business
The term LLC means that you are a limited liability company. Many homeowners don’t think about the fact that they are a business when they become a landlord, but it’s something to consider. LLCs give you protection from potential problems. The term LLC basically gives you a buffer so that a tenant cannot go after your personal assets — just the business’s assets.
2. Hiring a Skilled Property Management Company
When you have rental properties, you may not know all that you are responsible or accountable for. A property manager can help you sort through applicants, avoid fair housing violations, and more. They have a full understanding of what is involved and can help you ensure your property is operating legally in every way.
3. Limit Potential Areas of Liability
If you know that there is a particular risk involved with the property, do everything you can to lessen it. For instance, if you know there is a family of feral cats roaming near your property, contact animal control to help you catch them. Remember that storm last year? If there is any chance that it caused roof damage, have the roof inspected before you rent it out. The more prepared the property is, the safer you will be.
4. Protect Your Assets with Insurance Coverage
When you have a rental property, you need to protect yourself with proper insurance. The minimum protection for you should come from adding a rider or extension to your home insurance. It can help you cover the cost of something going wrong with your rental property. An umbrella policy may also be wise since it can protect you from possible lawsuits.
Along with this, it is important that you inform your tenants that your policy does not cover them. They should purchase their own insurance to protect their personal property.
If you would like more information on your options as a landlord and protecting what is yours, we are here for you. You can contact us anytime for a quote. Vargas & Vargas is also available via phone calls or text. If you need help during business hours, call us at 617-298-0655.
