Once you’ve made the decision to become a landlord, there are many things to consider before you take action. A great deal of money and time is involved in renting and maintaining a property. It’s best to have a good business plan so you can increase your chances of success and profitability. Some of the most important areas of concern are addressing compliance and responsibility issues, screening reliable tenants, managing financial and legal obligations, and being available to tend to your renters’ needs and those of your rental property. The experienced professionals from Altra Insurance Services, the experts in homeowners, renters, commercial, and auto insurance San Diego residents rely on for high-quality service, offer the following advice about some of the basic things a new landlord should prepare for to maximize profitability and eliminate as much heartache as possible.
Accounting and Record Keeping
It’s necessary to keep accurate records of all income and expenses regarding your rental property. Invariably, you’ll have to provide documentation like receipts, bills, and canceled checks to show all your expenses. This way, you’ll be able to keep track of everything going on with your rental property. These records can also help you prepare your financial statements for the property and provide the documentary evidence necessary to sufficiently handle an audit by the IRS.
Various tax benefits are available to you, so you should get to know what they are and develop an understanding of how you can utilize them. For instance, you can deduct some expenses such as advertising (for finding tenants and maintenance and repair people), depreciation of the property, cost of improvements, property taxes, repair and routine maintenance costs, and utilities, among other things.
Compliance with Laws
There are many local, state, and federal laws governing rental properties. In particular, local and state laws greatly affect landlord–tenant relationships as well as how the property is generally managed. You may wish to consult with an attorney specializing in real estate and/or landlord–tenant law. You can also do some research online or go to a public library, city manager, or mayor’s office in the area of the property concerned. You might also contact your state’s attorney general’s office or consumer protection agency to get updated information and/or documentation such as brochures to help you understand and comply with rental and general property laws.
A new landlord should also get the right insurance policy before renting out the property. While a standard homeowners insurance policy provides some coverage, it likely won’t give you enough protection. It’s best to get a specific insurance policy for rental property that will give you enough to cover any landlord–tenant issues. Expect to pay a little more than you would for a standard homeowners insurance policy, as tenants are considered to be a higher risk than the landlord/owner.
A landlord liability insurance policy will cover you for such things as personal injuries and damage or losses caused by storms, theft, fires, and vandalism. It also couldn’t hurt to advise your tenants to get renters insurance. San Diego renters insurance policies protect tenants in case their personal property is lost or damaged. You should also consider obtaining flood insurance, especially if your rental property is located in an area that has been known to have floods and/or has been legally designated as a high-risk area. Also, since flood losses have been known to occur in low-risk areas where floods haven’t happened before, it might be worth your while to get flood coverage. It’s not a bad idea to get insurance coverage for such things as tenant relocation, rent loss, and bonding as well.
If you need more advice on becoming a new landlord, especially when it comes to making sure you have the right type of insurance coverage, reach out to the experienced agents from Altra Insurance Services. Give one of our friendly team members a call today at 619-474-6666.