If you’re relocating or moving to a larger home, renting your property, or using it as an investment property, can be a tempting alternative to selling. There are many benefits to leasing and acting as a landlord, but the biggest is the direct income stream it provides. Ideally, the rent paid by tenants will be enough to offset your own living expenses and help pay off your mortgage, too.
However, there are risks involved with putting your property up for rent, from careless tenants to those who consistently fail to pay on time. While a bond or security deposit may protect you against basic damage to the property, there’ll always be additional costs involved if the problems are significant.
Then, there are larger dangers involved with the ownership of assets like rental properties, to ensure they’re protected in the event of legal proceedings. Therefore, it’s crucial you learn how to protect your property before putting it up for lease.
Here are some ways to ensure your rental property is protected:
Consider Offshore Asset Protection
According to this attorney, your rental property will likely be your biggest asset, so it’s crucial you protect it at all costs. One of the best ways to safeguard precious assets like these is to organize offshore asset protection.
Well-reputed companies will work to protect your property and other assets by placing them in a trust. You’ll still have full control and ownership over the property during this process; it simply ensures that, in the case of legal proceedings, your overseas trustee will take over and prevent it from seizure or foreclosure. This way, you can still cooperate with court orders, without surrendering your property, as it will no longer fall within the court’s jurisdiction.
Places like the Cook Islands, among others, are ideal for asset protection, as their legal system favors those defending themselves against legal action.
Invest In A Property Insurance Plan
Investing in a property insurance plan should be among the first things you do after deciding to put your place up for rent. There are many different plans available with varying levels of coverage, depending on your budget and how comprehensive you want it to be.
Some examples of things to cover under a property insurance plan include:
- Personal property replacement costs
- Accidental damage
- Liability—if your tenants are injured on the property due to your negligence
For example, if you’re simply seeking basic protection, there are affordable plans offered by many companies that’ll cover your property in the event of fire and theft. However, if your rental property is worth a significant amount of money, you may prefer to take out comprehensive insurance and protect it against a number of events, from accidental tenant damage to natural disaster and escape of liquid (e.g. burst pipes). Some policies will even protect you financially in the event of rent loss and tenant lawsuits.
Before taking out a policy, make sure to read the terms and conditions, and look for any limitations. You don’t want to be in a situation where you need to make a claim, only to find out you’re underinsured.
Ensure Your Tenants Pay A Security Deposit
Your rental agreement should include the payment of a rental bond or security deposit. This fixed sum, generally paid to you at the beginning of the tenancy, acts as basic protection against breaches of the lease agreement by your renters. It covers issues such as property damage and rent loss. This amount is typically held in trust during the rental period and at the end of the agreement, the deposit is refunded to the tenant, provided no breaches occurred.
Most security deposits or bonds are determined according to the value of the property, so make sure to research this prior to entering a lease agreement. A standard deposit is the cost of one month’s rent, however different state laws govern the maximum that can be charged, and some require the tenant’s credit history to be taken into account, too.
A security deposit will protect your property against basic damages, and at the end of the contract, if problems have occurred, you can use it for rightful causes like cleaning or unpaid rent.
Conduct Regular Inspections
Once you’ve signed a rental agreement and your tenants have moved in, it’s essential you conduct regular inspections. Carrying out routine checks on your property means you can monitor aspects like the living conditions, look for any damage, and see whether your renters are abiding by the terms of their lease.
For instance, if your tenants agreed not to bring any pets into the home, an inspection will allow you to ensure they’re not breaching this condition and hiding a cat or dog. Inspections also give you the opportunity to get feedback from your tenants on any repairs or maintenance required.
If issues are identified during the inspection caused by the tenants, such as damage to paint, you can request they be fixed. Laws vary across the country, but in most states, if the recommended changes aren’t made, you can start eviction proceedings or even sue the tenant.
Carry Out Security Upgrades On The Property
It can be hard to protect your property if you’re not living there. When you hand the keys over to renters, you’re essentially trusting them to take care of the place. So, before allowing tenants to move in, you may wish to install added security measures for added peace of mind.
Potential security upgrades include surveillance cameras, alarms, and bright exterior lighting to deter thieves. You could also change the locks to all exterior doors. Finally, make sure to paste security stickers around the property, such as near the front door, to show both renters and passersby that the place is protected.
Signing your property over to renters is a great way to earn additional income without selling. However, the process is not without risks. Aside from tenant damage and unpaid rent, there’s also the chance of asset seizure, security issues, and external threats like fire and flood. Consider measures such as offshore asset protection, insurance, and security upgrades to protect your rental property and ensure its value for years to come.