A passive income stream and several tax benefits can make becoming a landlord look attractive. If you’re seriously considering it, consider researching the pros and cons. That way, you can get a well-rounded understanding of what is involved.
We’ll provide you with essential information, from landlord and tenant rights and obligations in your state to the proper insurance coverage. We’ll also explain how requiring your tenants to have the best renters insurance possible can help protect you.
Essential Fact #1 – Landlords Have Responsibilities
Landlords have rights and responsibilities, but the law is heavier on the responsibilities than the right. While property owners have the right to collect rent, and if the tenant fails to pay, they can go through the legal eviction process and have the tenant evicted.
If the tenant leaves property behind, the landlord must store the property as outlined in the laws specific to that state or county.
Landlords must maintain a property and ensure that vital safety features are installed and in working order. These safety features include smoke detectors, carbon monoxide detectors, and fire extinguishers.
You’ll need to look into all your responsibilities by reading state and local landlord laws.
Essential Fact #2 – Tenants Have Rights
You’ll need to keep this fact in the forefront of your mind. Your tenants have rights. You may own the property, but that doesn’t mean you can enter it whenever you want. If you need to check on the property, you’ll need to notify your tenant.
Another critical tenant-right is the right not to be discriminated against. Property owners must comply with federal Fair Housing laws when choosing tenants.
Essential Fact #3 – Landlords Need Insurance
Any property you own should have insurance. You’ll need insurance to cover the risk of damage or loss to the structures on your property, and that insurance policy should also cover your liability. If someone visiting your property is injured, you need liability coverage to pay for their medical costs.
Those coverages are included in most home insurance policies. Landlord insurance has additional protection tailored to their unique needs. For example, landlord insurance should also cover loss of income if the unit becomes uninhabitable following a covered peril.
If a property owner’s rental unit sustains fire and smoke damage, the home might take a year of renovations to become inhabitable. During that time, the landlord will not earn an income from that property. Loss of income insurance will make up for that loss.
Keep in mind that not all perils are covered by insurance. If damage is deemed preventable, like termite infestations or water damage from unmaintained leaking roofs, your insurer is unlikely to pay your claim.
Essential Fact #4 – Tenants Need Insurance
Landlord insurance covers the structure of the rental unit, but that policy doesn’t protect the renter’s personal belongings. That’s why renters need a rental insurance policy.
You may think that renter’s insurance only helps the renter, so you should leave the decision regarding whether to get a policy up to them. But renter’s insurance can also help you, so you might want to consider requiring tenants to purchase a renters insurance policy as part of their lease agreement.
How does renter’s insurance help a property owner? Some states require property owners to help tenants with relocation costs following a natural disaster. Renter’s insurance can help cover some of those relocation costs so renters don’t end up spending more than they can afford.
Another way renters insurance helps property owners is that tenants could come after you for their property losses in the event of a fire or another disaster. If they have renters insurance, they can file a claim with their insurance provider instead of filing a lawsuit against you for their losses.
Essential Fact #5 – Landlords Carry Risk
If being a landlord were easy, everyone would do it. It may be a good investment, but it certainly carries risk. To be a property owner, you have to purchase the property. Then, to make it profitable, you need to earn rental income.
Unfortunately, sometimes rental units go empty. And the longer they sit without tenants, the longer you go without being paid.
There are also risks associated with maintenance and repairs. Since you own the property and, in most cases, the appliances, you’ll be responsible for fixing and replacing things that wear out or become damaged.
Essential Fact #6 – Property Ownership Can Be Rewarding
Being a property owner can be financially rewarding. Buying a property is an investment. Property values tend to appreciate, but property ownership does more than protect your finances from inflation. You can also earn an income with your property.
So, despite the risks, owning a rental property can be a profitable investment. To make your experience the best it can be, ensure you understand your responsibilities and tenants’ rights. Finding adequate insurance coverage can enable you to recover even if an unexpected crisis occurs.
Melanie Musson writes and researches for the insurance comparison site, Clearsurance.com. She’s passionate about helping property owners understand the importance of finding adequate insurance coverage to protect their assets and income.
Last Updated on 6 months by admin
