Renting properties is fraught with risk. Your tenants could get injured. Your property could get damaged. One of your support staff could leave you open to a lawsuit. There are numerous ways in which a rental business could leave you open to risk. Therefore, before purchasing a rental property, it is prudent of you to consider methods that can reduce your risk.
Luckily, it doesn’t take an army of experts and a truckload of money to reduce your risk. Here are a few tips to reduce your financial exposure.
Inspect and Repair your Property
In California, property owners are bound by the implied covenant of habitability. The implied covenant of habitability means that you must ensure that your property is in a “fit” and “habitable” condition.
You are required to make sure that it has four walls, a roof, floor, is free from vermin, provides heats, a way to prepare food, lavatory facilities, and other standard requirements for any dwelling. If the property is being offered for work purposes, then it will need amenities required for whatever purpose it is fulfilling. For additional advice, you may want to consult with a San Diego rental property management company.
Second, you need to take steps to correct any potential hazards on the property. You may want to hire a professional inspector to identify potential risks and then contractors to fix them. For instance, you should remove mold before leasing a property. If you are unable to address the risk immediately, put up signs and caution tape to alert residents and applicants to the danger.
The Fair Housing Act (“FHA”) requires that all multifamily buildings (apartments and condos) constructed after March 13, 1991, comply with disability access requirements.
The FHA requires property owners to take reasonable steps to ensure that their property is accessible to people with disabilities. For additional information, you may want to consult with a San Diego rental property management company.
Anticipate Disasters and Prepare for them
Disasters interrupt business activity whenever they strike, but that does not mean that the disaster has to force you to start over completely. You can take steps to safeguard your business by anticipating potential disasters and preparing for them.
For instance, you should always backup your business files in a secure, off-site facility. You may want to utilize multiple backup systems, like physical hard drives and automatic syncing with the cloud.
Draft an emergency procedure manual that is tailored to your property. Distribute it to your employees and residents and ensure that they are familiar with all possible exits.
Document the location of the utility shut-off valves. You should make sure that multiple people know the location so that in the event of a disaster someone will be able to access it. Shutting off the utilities, especially gas, saves lives.
Finally, get a good insurance policy. You can get a general insurance policy which protects your business from personal injury and other standard liabilities. However, for disasters, you usually need to obtain special flood, fire, and earthquake policies. Carefully review the coverage to ensure that you are prepared to file your claim in the event of a disaster quickly.
Adopt Consistent Business Practices
Consistent business practices are the most efficient way to provide consistent service to your residents and to minimize your risk. Once you adopt these procedures and your support team follows them, your business and properties are protected from a myriad of preventable liability issues.
For example, always provide written leases to avoid any confusion. Adopt housing rules for your residents to follow (e.g. pet, noise, and late-payment policies). You can develop friendships with your residents but don’t let that friendship cloud the rules. Everyone is treated the same.
Fair Housing Complaints
Additionally, consistent business practices are the best way to avoid an FHA violation. Many people do not realize that you are bound by the FHA when you are soliciting applicants for your properties.
The FHA (and California) prohibits property owners from discriminating against prospective residents.
To avoid these complaints, it is best to institute a standard screening criterion. Keep an updated log on applicants, if they are rejected, include a business reason explaining why. Tell applicants why you reject them (e.g. poor credit, insufficient income, etc.) Additionally, grant reasonable accommodations, for instance, allow a blind person the use of a service dog.
For additional information, check out our guide to property management: