There are a few things investors should do in order to look after them selves when investing in residential property. Three of the main safety features everybody should consider are 1 - Work with a good property manager 2 - get landlord’s insurance 3 - Keep a bit of a cash buffer. These three actions will go a long way in improving the over all experience of an investor and prevent some potentially negative situations from happening.
A property manager does more than just collect rent. I good property manager will ensure that all of the legal paperwork is in place for a tenant who is letting your property. This may seem like common sense but if this paper work is not done correctly it can lead to significant issues. If a tenant is in default on their rent it can be a long and drawn out process to remove them from the property. This process has several steps that a landlord must follow and these steps can change slightly from area to area. If a tenant stops paying rent it can cause financial strain for a property owner quickly and if the eviction process is drawn out by months it can be a terrible situation. Work with a property manager who is diligent and serves any necessary notices to tenants immediately so that due process is followed.
Landlord’s insurance can protect landlords against a tenant who stops paying their rent or causes damage to the property before vacating. As with any insurance policy there are several requirements that must be met in order for the insurer to pay out. If due process is not followed while dealing with a tenant it can negatively affect a landlord’s claim. This is again where a good property manager will look out for a landlord. The cost of the insurance policy tends to be tiny compared to the peace of mind it can bring if applied properly.
Lastly it is always good to have a small reserve of cash available whenever you are a landlord. You simply do not know what can go wrong or when it can go wrong and you need to be prepared for the worst. If appliances fail or something needs to be repaired you may be able to claim it through insurance but often it will need to be paid for first. If a tenant needs to be removed from a property or there is a short vacancy period between tenants a landlord needs to be able to cash flow that loss of income. As a rule of thumb most landlords like to have at least 3 months of rent as a buffer just to be safe.
Although we don’t know everything the future holds we can take care to protect ourselves against the worst. Careful behaviors can turn a mountain of a situation back into a molehill.