Tips on Making Sure Your Rental Property is Protected

by Katharine Breithaupt (bright-hop) 11/29/2020


 Photo by Tumisu 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:

Liability

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.

Property

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.

Crime

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.  

About the Author
Author

Katharine Breithaupt (bright-hop)

The Wine Country is one of the chosen places on all the earth. I have lived here over 30 years in this extraordinary place. Over 20 years ago, I started representing both Sellers and Buyers and now have proven results and experience in Residential Homes, Luxury Estates, Farms/Ranches and income property here in paradise. I have been in the top 5% year after year in real estate sales, and it is for a reason.  

It takes an extraordinary agent with proven marketing expertise and negotiation strategies to close deals with the results you desire. I am a full time, full service Realtor with the networking connections you need. I produce results and closed sales because of my experience and behind the scenes contacts. As a Top Producer with Premiere Client Services and Global Reach, I will get you to your chosen goal sooner. In any market, it is important to choose a Top Agent that has MORE to offer. You will be my priority. From the finest photography, internet exposure, social networking and networking connections, you will be well-represented by me, first and foremost.  

Benefits to You: Multiple website portals; Free Seller Pak/Free Buyer; Pak/Free Home Analysis available upon request; Member Luxury Networking Group - Top agents of the $1 million plus range; Five Star Technology Training and Internet/Search Engine Optimization Exposure; Member of Marketing Masters Networking Group/Santa Rosa - former President - Top agents in Sonoma County all price ranges; Consistent Sonoma County Top 5% Producer year after year. Active member of BAREIS, CAR, NORBAR. Let's talk! I look forward to serving your needs!  

My husband/partner, Henry (Spud) Davis and I will cover your real estate needs throughout Sonoma County. With six grown children out of the house, we have the time, the energy and experience to devote to you. We support many non-profits with needs. We love to travel, and Spud's the chef so tell us about your favorite foods/recipes. Give me a call/text/email today to have a conversation about your real estate needs and how we can help make your dreams of Wine Country Living come true.