Becoming a landlord is a dream for many an investor. But investing in rental property is hard work, and like all investments, it comes with risk. Accordingly, aspiring landlords must learn from veteran landlords how to hedge the risks involved in renting.
Here are six ways experienced property owners mitigate the investment risks associated with renting property:
1. Right Kind of Insurance
Experienced property owners look for bespoke insurance policies that cover events that can lead to different kinds of losses including large-scale events and tenant injuries. The veterans depend on landlord insurance companies in California to complement homeowners’ insurance.
2. References and Credit Checks
Knowledgeable landlords take the time to call references as well as run credit checks to ensure their prospective tenants are worth the effort.
3. Written Rental Agreement
Veteran landlords insist on written contracts even when dealing with friends or family. At the very least, the contract specifies the length of the rental agreement, the rental rate, how utility bills are split, and other relevant complexities that come with the territory. Essentially, the more detailed the agreement, the more protected the landlord is if eviction proceedings happen.
4. Security Deposit
Whenever possible, veteran owners put a security deposit in their rental agreements. The collected money grants the landlord some leverage in events such as a tenant who decides to leave abruptly or a tenant who refuses to repair the damage they caused.
5. Detailed Documentation
Knowledgeable property-owners always capture in detail the condition of the property before a new tenant moves in. Such landlords document every part of the property and send the time and date stamped files to relevant people. The sending out of the files helps to leave an electronic trail that can serve as useful court evidence.
6. Regular Walk-Throughs
Experienced landlords request regular walk-throughs of their properties. The walk-throughs serve to remind tenants that the landlord is watching as well as help the owner address emerging problems promptly.
People become landlords for different reasons. Nevertheless, the risk of investing in rental property is only worthwhile if the rewards are greater than the potential losses. Learn from the experienced landlords and manage your risk in a cost effective way.