Rental property is one of the best investments you can make. It can be a relatively passive income in addition to earning you some pretty hefty profits. But just like with any business, it doesn’t come without its risks. And real estate rental may even be a little riskier than most.
For one thing, you are responsible for the condition of your property. It must be safe and inhabitable at all times. And if you get a bad renter, it can take some time to get them out. Occasionally, issues with these types of situations can lead to lawsuits, which is something every landlord wants to avoid.
Fortunately, there are steps you can take to protect yourself and your property, and stay out of the courtroom.
Know your tenants’ rights
One of the fastest ways to land yourself in a lawsuit is by discriminating against applicants based on protected criteria. This includes race, color, national origin, religion, sex, familial status, and disability. Landlords can do this by refusing to rent a property, falsely claiming a property is unavailable, or charging higher rent to someone based on any of those things.
But aside from that, your tenants also have a right to safe and livable conditions. While each state is different, all of them require running water and available heating. They also have a legal right to privacy. This means you can’t go into a tenant’s home without notice and permission, unless it’s an emergency.
Insure your property
Many property owners think their homeowner’s policies will cover their rental properties, but that is certainly not the case. Their terms and pricing actually vary quite a bit. Landlord policies typically cost about 25 percent more than homeowners policies. But they cover the property for physical damage caused by natural disasters or tenant negligence.
And it also covers things like appliances you might leave on the property for your renters to use. But the unique thing about landlord policies is that many of them will cover your lost wages should something happen to your property to make it uninhabitable.
Screen your tenants well
It’s extremely important to screen your potential tenants before you agree to anything. While you can’t do this based on the previously mentioned criteria, you can make certain requirements of them. For example, you can conduct background checks on applicants through your free property management software.
And it’s perfectly legal for you to set your own income and credit score standards. When tenants have higher credit scores and decent incomes, you’re less likely to have problems with them in the future.
Retain your own lawyer
Keeping an attorney on retainer can give you a lot of peace of mind should an unexpected claim arise. Most people wait until they’re already being sued to seek out a lawyer. But a personal injury attorney in Alabama, for example, can help you understand your tenant rights and advise you on all your processes. And then, if something does come up, they might be able to head off any serious problems.
It’s also not a bad idea to have your attorney draw up your lease agreement. You can’t shirk certain legal responsibilities that make your property safe, but you can set forth certain guidelines to protect your interests.
For example, your tenants should know exactly how long their lease periods are. And if they are required to re-apply at the end of that term, they should know in advance. The agreement should also include any stipulations about pets, rent increases, occupancy limits, and any applicable regulations.