Protecting Your Multi-Family Property
Multi-family properties present an income opportunity for owners. A knowledgeable real estate professional can help you purchase an ideal building as well as find tenants to live there. Be sure to protect your property before you rent it. Lee Schilare, Broker Associate at ERA Justin Realty, suggests landlords (especially new ones) take steps to protect themselves and their properties against personal liability before opening up their apartments to tenants.
Know the law.
Consult a lawyer first to set up all you need regarding your property and your tenants, such as registering your rental units, drafting lease agreements and collecting security deposits. They may advise you to create an LLC, or limited liability corporation, or another type of business entity, to protect your assets.
“A bad tenant can ruin your property and your finances,” says Lee. “An accident or act of God could bankrupt you. This way, if a disaster occurs, a tenant can’t go after you personally, just the business assets.”
A lawyer will also advise on Tenant Law and your obligations as a landlord. For example, you must register rental units. There are some exceptions if they are owner-occupied. An experienced real estate professional can also guide you through what owners must do and guide you to resources, such as providing a copy of Truth in Renting to your tenants.
Consult an insurance broker. Your insurance policy should be tailored to multi-family properties, including: liability, property and crime. Liability will cover common areas such as swimming pools, hallways, laundry areas and parking lots. Property insurance covers damage to your buildings caused by floods, fires, hurricanes and other disasters. Crime insurance can reduce your losses due to vandalism, theft, fraud and more. Also, consider an umbrella insurance policy should you be subject to a lawsuit or exceed your coverage.
None of these types of insurance cover your renter’s belongings, so encourage them to get their own policy.
Rent the units.
Work with a professional real estate agent to purchase your multi-family properties and investment properties, and then to rent them out so you can maximize your returns on your investment. An empty apartment pays no rent! Realtors will work with you to make sure you have tenants in your buildings.
For more expertise on purchasing or filling a multi-family property, please call Lee or any of the real estate professionals at ERA Justin Realty, 201-939-7500.