Investing in real estate of any kind can be plane sailing or a rollercoaster ride. And there are a number of ways you can protect yourself and your property when you embark on this journey.
Of course just like in most industries, investing in real estate has its shortcomings. But you need to remember, protection of your real estate asset is paramount. So what is the difference between asset management and real estate property management?
Real estate asset managers are professional investment experts. They enable property owners to get the most return from their real estate, and assist with managing the risks of owning property. Meanwhile, property management firms handle the day-to-day tasks which are associated with being a landlord. And take that pressure off the owner.
At Coastline Equity, we are able to our clients both of these services as we have a great network of partners . If you have a number of different asset protection strategies for your real estate it will enable you to secure your property. But how can you protect a real estate asset to ensure its value? Here is our handy guide on three areas to look at to protect your real estate property. So you can keep your foot firm on the rungs of the real estate property ladder.
Insurance And Real Estate Property Climate
Insurance is an incredibly popular asset protection strategy in the real estate industry. You can choose from a variety of different options, and make sure you choose one that is tailored to your needs. Two options are a homeowner’s policy or a commercial property with a business policy. Keep in mind as your portfolio enlarges, you will need to increase your insurance coverage.
An umbrella policy is a great one to think about as it can provide comprehensive coverage. It can provide a significant additional layer of protection that can be at a relatively low cost. A policy could cover several rentals at the same time, and also include your personal assets and your residence.
However, it isn’t the fail safe in every possible claim. While you may be the owner, insurance companies don’t always rush to your side to pay a claim. You need to check if there are exclusions. And remember your insurance can’t protect you against catastrophic events.
Coastline Equity uses a great network of professionals, including insurance advisors so you can see which is the best fit for you. You should always discuss different types of coverage. Make sure you look at all the different options available to you before making a decision. You should also make sure your renters have renters insurance. That way they are covered for eventualities of their own and it limits the liability on you.
Run Your Real Estate Business Like a Business
Once you become a landlord, you’re operating a business. So you need to make sure you have the right business structure. This will enable you to protect your personal assets from the risks of your business.
LLC's And Protecting Your Property
By structuring your property rental business as a Limited Liability Company (LLC) or other corporate entity, you can manage the risks that come from inside liabilities, such as the threat of a lawsuit from a tenant or visitor. A corporation protects an owner against personal liabilities from business activities. An LLC offers similar protections, without the complications arising from traditional corporation. An LLC for rental properties can protect your personal assets from potential lawsuits. And this also means debtors can’t come for your home if they are looking for compensation for any issues that may occur in your business. The corporation pays for its expenses. You can also buy a house with an LLC, and then rent it to yourself. This minimizes any financial risk you may incur. And it can also limit the chances of personal real estate asset seizure. After you form an LLC for your rental property business, you will then transfer the property into your LLC with a deed.
However you need to be mindful on any asset transfers to avoid charges on fraudulent practices. If you have multiple rental properties, you may consider forming a separate LLC for each one to isolate each property from the liabilities of each other.You can also make sure your commercial real estate properties are in different LLC’s. This means if one of your assets faces a risk, the rest of your property will be safe. You can have your real estate investments in different names so this can avoid adverse effects if you’re subject to a lawsuit.
Anonymity and Trust
Another way to protect your property is put it into an anonymous land trust. The anonymity can provide a protection layer. You can get an anonymous land trust to avoid legal implications on your real estate property. This trust has a grantor, a beneficiary, and a trustee. And if you have a trustee, you don’t need to have your name on records. It means lawyers can’t connect your trust to any of your property. You can protect your assets and investment if you have a trust.
The trust will also mean people will be reluctant to pursue a lawsuit. They will need to invest money to find out who you are before they can take any more steps. This may far outweigh any compensation they may get.
Ensure Your Real Estate Property is Safe
If your property is safe, you are well on the way to making sure you will avoid any legal issues. Be aware of the basic legal requirements for repairing and maintaining your property. If your real estate property is fit and habitable, and this is maintained when your tenant is there, this protects you. Responding to repair requests quickly and listening to tenants concerns, is also a way of keeping that relationship in a good place.
Be aware environmental hazards are often silent and invisible. Check to see if you have any mold, or asbestos-containing materials, and get rid of them. Carbon monoxide detectors in HVAC systems can help alleviate air problems. And if your tenant has a flooding issue - act immediately. You also need to take precautions to help prevent any personal injuries, which could occur. It is your duty to keep your real estate property in a condition which is safe. However, the landlord is not required to be the “insurer” of the safety of tenants or others who come onto the property. Be aware of your exposure and also the limits.
Have A Quality Lease Agreement
If you have a strong lease agreement, it is half the battle to prevent any action being taken. A landlord cannot disclaim all responsibility for injuries. But you can take steps foreseeable hazards and risks are kept to a minimum. Use your lease to cover these risks. Your lease needs to have a comprehensive guide covering rules, guidelines, and policies, which treat the tenant with respect. They in turn will respect your property.
If you liked reading this post, check out our guide to finding a good property management company. And follow us on Facebook at Coastline Equity, and our LinkedIn page for more tips on real estate and asset management.