The uncertainty of the current situation due to the pandemic has affected all industries, including the rental investment industry. Due to this, property owners should take steps in protecting their investment, especially if it is their only source of income.
Protecting the property requires a lot of things, including hiring a property manager, getting insurance for the investment, and treating the property as a business. Here are the different ways property owners can protect their rental investments.
Hire a Property Manager
Even as a property owner wants to handle the property personally, it’s best to get the services of a property management company to handle the operations of the property. Property management companies typically handle all aspects of managing a property, including marketing, tenant screening, lease management, rent collection, and managing maintenance work.
These companies have the knowledge and experience in managing properties. But before the property owner gets the services of these companies, they should make sure they have the necessary licenses from local or state real estate boards to ensure they can handle the work.
Get Insurance for the Investment
It is also important for the property owner to have the rental investment insured. In this instance, the property owner can get landlord insurance since it protects the dwelling and other structures in the property. It also covers belongings that the tenants can use while renting the property. Additionally, liability coverage protects the landlord in case the tenant gets injured while on the property.
But if the property owner is only renting out a room in a house where they are living, they may get homeowners’ insurance to protect the investment from financial losses. Similar to landlord insurance, this type of insurance covers the structure, belongings, and other structures that are not attached to the home. It also comes with personal liability coverage in case someone is injured while on the property. But the property owner should keep in mind that they can only get this type of insurance if they live on the property.
Treat the Property as a Business
Even as a property owner aims for tenant satisfaction, they should also have a professional relationship with the tenant. With the current situation, the property owner may consider providing the tenants a little leeway when it comes to the lease. But this does not mean that they should not collect rent. The property owner can reduce the monthly lease, but they should continue collecting rent. If the property owner stops collecting rent, they may end up missing on utilities or mortgage payments.
In case the property owner wants to negotiate, they should make sure to get any agreement into writing, especially when it comes to a negotiated decrease in rent or deferred rent payments. Any deviation from the original lease agreement should also be put into writing. This ensures both sides are protected in case of issues arising from the changes in the original agreement.
Additionally, the property owner should keep the Fair Housing Act in mind when deciding on any changes in the lease agreements of the tenants. The law orders the equal treatment of all tenants. Due to this, if the property owner offers a lower rate to one tenant, they should make the option available to the other tenants. While this may indicate that the property owner should keep the original terms on the lease, it ultimately depends on the willingness of the property owner to help his tenants.
Keep Rates Reasonable
The uncertain economic situation means the property owner may want to hold off any rent increases until everything goes back to normal. Increasing rental rates may backfire on the property owner since potential tenants may find the rate too high.
In cases where a rate increase is inevitable, the property owner should give the tenants enough lead time before implementing the increase. Many US states have rules on the number of increases and notice period for a property owner to follow. With this, the property owner should check the local regulatory body to ensure they are following the law.
Additionally, for new rental properties, the property owner may want to trust the property management company with finding a suitable rental rate for the property. These companies typically look at the market to see if a certain rate is suitable for the location and features of the property. These companies also consider the situation before it recommends a suitable rate to the property owner. If the property owner agrees to the rate, the property management company will start advertising the availability of the property to attract potential tenants.
Investing in a rental home offers a lot of benefits. But property owners should make sure to protect their properties so that they can earn income from them in the years to come.