Real estate investing has a reputation for being more stable and predictable than stocks, but it has its fair share of risks as well. Among these, property damage arguably has the biggest potential impact. It can cost you thousands of dollars to fix, while rendering the unit unusable for the duration of these repairs – not to mention the costs of evicting the offending tenant.
Collecting a security deposit is a nice measure, but it isn’t always enough to cover your losses. What can you do to avoid rental damage in the first place?
1. Screen tenants thoroughly – The first and most important things you can do is to make sure that you never accept bad tenants. Income, credit history, criminal records, references – all of these should be checked, so that you have a clear picture of who is going to live in your rental property.
2. Don’t neglect maintenance – Not all property damage is the tenant’s fault. Many landlords neglect basic maintenance, which can have disastrous long term consequences. A simple leak could lead to a mould or insect infestation. If a tenant sees that you do not take care of the property, it can also make them unhappy and apathetic, leading to further deterioration.
3. Hire good property managers – If you do not personally oversee the day-to-day operations of your rental properties, then you need to make sure that the manager you hire is competent. According to Buildcorp, the best Auckland property management firms will select good tenants, and keep an eye out for risks.
4. Have a good lease – Liability is a difficult thing to prove if you don’t have a well-written lease. There have been plenty of cases of landlords unable to prove that the damage was the tenant’s fault, since it wasn’t covered in the agreement. A good lease also serves as a guide for tenants, letting them know what is expected of them to keep the property in good condition.
5. Protect yourself with insurance – When all else fails, insurance is the only thing standing between you and massive repair bills. You should always have the basics covered, and consider getting an umbrella policy as well. The peace of mind you gain is well worth the cost.
While it’s impossible to completely eliminate the risk of property damage, being prepared can make a huge difference.