Investment in rental property can yield stable cash flow with predictable margins. Real estate has lower risks when looking at investment options. Making it a better investment than stocks or bonds. It also yields better returns and has diversification.

With this significant investment, landlords need to understand how to handle risks systematically and limit liabilities. Smart landlords comprehend that regardless of how safe or secure a rental property may be, some specific measures must be put in place. Here are strategies you can implement to reduce your liability.

Reducing Liability on Rental Property Investment 

1. Perform Quality Property Inspection

Reducing your liability as a landlord can begin with a thorough inspection of your rental property. Quality inspections will reveal any problems or potential problems that may occur. Looking deep into areas like the foundation, plumbing, or even electrical system can reveal any faulty wires in the washing machine or electrical system. A cold or hot water system that is swished the wrong way can cause serious harm as well as put you in trouble.

Getting licensed as well as qualified professionals to perform inspections, property renovations, and repairs will reduce accidents as well as lower your liability. Having additional measures like completing a walkthrough checklist with tenants when they move in is a good measure to put in place.

2. Work with Leasing Services

Avoid making expensive legal mistakes by taking advantage of professional services. Real estate agents as well as property management companies are a buffer from liability, and they incur legal costs. When an error occurs, such professional services will make insurance claims and make your work easier.

3. Protect Your Property with LLC

When successful legal action has been taken against your real estate property, you may end up losing your personal property. Consider making your rental business a Limited Liability Company. This makes the collection of damages resulting from any successful legal lawsuit limited to your company assets. It means that your private property as well as finances are safe and cannot be used to settle damages.

LLC protects other assets that you may own elsewhere, like your personal home. Some landlords may shelter their real estate portfolio using LLC. This way, if one of your properties is held responsible for unforeseeable reasons, the other business properties are safe.

4. Keep Proper Records

Keeping records of your receipts, notices to tenants, inspection reports, as well as maintenance records can help defend your case. A property management system can also help you store electronic records if you prefer to have paperless records. A paper trail or paper records can be used as proof in case of a lawsuit.

5. Have an Attorney

When you have invested in real estate, you are likely to need an attorney in certain situations. A real estate attorney can help you understand as well as answer some questions or even write a warning letter. It is always a good idea to have a good attorney on call, or if possible, you can have a retainer attorney.

6. Hire Only Licensed Service Providers and Workers

Hiring licensed professionals will help you reduce risk should any of the workers get hurt on your property. All contractors, as well as repairmen working on your property, should provide an insurance certificate to prove adequate liability coverage. Not only will this requirement protect you, but it will also increase the chances of working with companies that provide quality work.

7. Get an Insurance Cover

Having an insurance cover is essential for every landlord. Insurance protects you against lawsuits as well as uncontrollable events. The four types of insurance that you should be aware of and have include:

Property and Casualty Insurance

This policy will cover residential property owners from catastrophic events like fire or storms. When your property is uninhabitable due to such circumstances, then this cover will provide compensation.

General Liability Insurance

This is a third-party cover. A property owner is reimbursed if a loss occurs, and he or she is responsible for compensating for the loss. Intentional wrongdoing like an assault or arson will not be covered.

Flood Insurance

This type of cover will protect you against damages caused by a flood. Property insurance will not cover damages resulting from floods. It is a good idea to consider flood insurance coverage if you live in a flood-prone area.

Umbrella Insurance

Umbrella insurance provides owners of rental property with excess liability coverage beyond what the general liability coverage offers. This coverage exceeds the limit of the general cover.

Boston landlords benefit from higher demand for rental property, and it is essential to get a great policy with competitive rates. Reviewing a variety of insurance quotes can help you find the best coverage. An independent insurance agent works with many insurance carriers. You can also get the most coverage at the lowest premium when you work with an independent insurance agent.

8. Make Renters' Insurance a Requirement for Tenants

Having a risk management plan that requires all tenants to provide proof of renters' insurance coverage will help reduce your liability. A renters' insurance will provide coverage against theft, injuries, fire, as well as damages. This requirement can be part of the rental agreement.

9. Screen Your Tenants

Performing a background check of all tenants will help you avoid problematic tenants. Thoroughly screen all tenants and employees and check for any criminal convictions before they can occupy a premise. Sign a lease agreement with tenants who are honest and disciplined. Disciplined tenants will take care of your property, follow the rules and pay on time. Having a vetting system that you review from time to time can enable you to find good tenants.

Final Thoughts

Taking the needed steps to reduce your liability will help you to enjoy returns on your investment. Putting smart strategies in place to protect your investment and your personal property is necessary. When you hire a property management company, you lower your risk and make your work easier.

Working with the right property management company will enable you to understand your vulnerabilities and carefully make the right decisions that will protect your property. At Charlesgate, we inspire and empower our clients through comprehensive real estate solutions. Feel free to contact us today for more information.