Steps Before Renting Out A Multi-Family Property

    Steps Before Renting Out A Multi-Family Property

    Jul 07, 2021

    Photo by F. Muhhamad via Pixabay

    Before renting out a multi-family property, you should take steps to protect yourself from personal liability if anything were to happen. Without the right protections in place, you could end up on the hook for damages caused by fires, crimes and more ­– even if you did not cause the situation yourself. Thankfully, there are a few smart steps you can take to minimize the risks. 

    Create An LLC

    If any disasters come your way while renting out your multi-family property, your tenants or other affected individuals can file a lawsuit and go after your personal assets to cover their damages. By creating an LLC, you effectively prevent the courts from going after your personal assets, limiting them to your business assets alone. 

    In addition to setting up your business structure in this manner, you must avoid piercing the corporate veil or the court could ignore your LLC designation. To avoid that scenario, make sure to open separate bank accounts and keep all your assets clearly separated. 

    Set Up An Insurance Policy

    Beyond setting up an LLC, you need a good business insurance policy designed for owners of multi-family properties. Your insurance company will tailor your coverage to your expectations, providing protection from a variety of risks. At the very least, consider including these three levels of coverage:


    With general liability insurance, you are covered if anyone gets hurt or suffers other damages while using the common areas in your buildings, such as:

    • Swimming pool
    • Hallways
    • Laundry facilities
    • Parking lot
    • Fitness center

    Depending on the situation, your insurance company will pay for their bodily injury or property damage claims, protecting your business from a lawsuit. 


    Fires, floods and other disasters are only covered if you add property damage coverage to your policy. Your insurance company will pay to have structural damage repaired and even replace items damaged in the office during the unforeseen event. 


    If criminals cause damage to your property or steal from your business, then crime insurance can help minimize your losses. The types of crimes covered by this type of coverage include:

    • Vandalism
    • Robbery
    • Forgery
    • Fraud
    • Theft

    Depending on the insurance company’s rules, you may need to file a police report before making your claim. 

    No matter what level of coverage you choose, your insurance policy does not cover your renters’ belongings. For that reason, you should encourage them to set up their own coverage through their company of choice. 

    Add Umbrella Insurance

    If you accidentally pierce the corporate veil or simply exceed your insurance coverage limits for the year, your personal assets will once again be on the line in the event of a lawsuit. For an additional level of protection, sign up for an umbrella insurance policy. By paying just a few hundred dollars a year, you can get over a million dollars in coverage for liability, property damage and other costly events. 

    By taking these steps, you will have the protection you need to start renting out your multi-family property without worry. If anything goes awry, you can trust that the steps you took in the beginning will go a long way in minimizing your personal liability.