Investment properties in Denver can be a great investment. But like any investment, rental properties come with a level of risk, as well. If you’re thinking of getting into the world of investing in a rental property, there are some ways to lower your liability with your investment.
You can start protecting yourself from the moment you start looking to purchase a rental property in Highlands Ranch. That starts with buying an appropriate property. Don’t over extend yourself by purchasing something you can’t afford. Remember: a big chunk of the rent you collect is likely going to principal and interest (if you take out a mortgage), so the income won’t be as lofty right away. Don’t stretch your budget too thin before you even get started. That can lead to shortcomings elsewhere, and fixing those can get costly. You should plan to maintain a reserve account with at least 3-6 months of rent payments, so that unexpected repairs, non-paying tenant or vacancy will not put you underwater on the investment.
One of the best ways to mitigate risk is by covering your bases before something happens. Making sure you have the right insurance can go a long way in helping you sleep at night. Most landlords should carry four different kinds of insurance to make sure you’re guarded against things outside of your control.
Property and Casualty Insurance protects your investment from physical damages that could make your rental unit uninhabitable. That’s fairly common, but don’t forget about things like general liability insurance – to protect yourself in the event you’re responsible for someone else’s loss. On top of that, it’s wise to have an umbrella insurance policy to allow for additional coverage past the policy limits of your general liability. Also, since we’re talking about extra coverage, don’t forget that property insurance often will not cover damage from floods. Depending on where you live, make sure to look at flood insurance, as well.
It’s also vital to have a trusted team of other professionals to help you out. From electricians and plumbers to HVAC and landscapers (oh, and Property Management companies too), it’s important to work with licensed professionals in their field. Working with these licensed pros gives you the peace of mind that they have the proper insurance and training, and will help mitigate potential issues later.
Once you have your team in place, and all of the proper coverage, the potential pitfalls don’t disappear. When it’s time for the tenants to move in, make sure to have a solid process for background checks and screening those potential tenants. Nothing can send the experience of owning a rental property south faster than troublesome tenants. You can alleviate a lot of those troubles by making sure your lease agreement doesn’t have any loopholes. That way, you’ll be more likely to find tenants that follow the guidelines, are responsible and respect your property.
There’s a lot that goes into managing a rental property, and a number of other things need to be in place before the first renter moves into your rental property in Highlands Ranch Property Management Company, Castle Rock Property Management or Parker property managers. For more information on how to limit your liability as a landlord, or to find out even more tips reach out to PMI Elevation.