Rental properties are a very good investment. It’s a great way for you to earn passive income, which come in the form of rent payments even though you’re not doing any active physical work. Your rental houses can provide stability to your finances as it adds income on top of the day job you have. When you’ve already amassed quite a substantial number of rental houses, these can even already serve as your main source of income.
Rental properties are a form of real estate asset that you must also protect in your lifetime. That way, even upon your demise, those who are left to inherit and manage them will know how to protect and care for these assets that you spent so many years working hard for. That said, here are some tips to protect your rental houses:
Go Through Estate Planning
Estate planning refers to the tasks related to managing the asset base of an individual in preparation for their death. This process would include the distribution of assets, the protection of assets from court proceedings, and even the settlement of estate taxes.
When you already have several real estate properties such as your rental property, estate planning is the best way to protect it even after your death. That way, these properties will continue to be profitable once they’re placed in the ownership of your children or eligible heirs.
A good lawyer can help you achieve the benefits of estate planning, such as the following:
- It protects the rental properties and other assets from going through court proceedings upon your death, which can be costly
- It spares the heirs and properties from significant estate taxes
- It distributes your rental properties to the right heirs
- It gives you the option of whether or not to go for domestic trusts in estate planning or offshore, such as through a Nevis LLC
Hire A Property Manager
This applies to when you already have several rental properties to manage. In this case, it pays to have a property manager so that every aspect surrounding your rental properties is protected.
The tasks of your property manager will include:
- Perform regular upkeep and maintenance of the property
- Monitoring the premises of the rental houses
- Screening tenants
- Managing bills and other utilities in your rental houses
When the tasks above are achieved, any issues are immediately taken care of as soon as they arise. Moreover, your property stays protected.
Apply For Landlord Insurance
A landlord insurance is your umbrella of protection, which covers many common occurrences that lead to property damage. This type of insurance policy covers the rental house or property itself and the other surrounding structures, such as the sheds and fences.
Paying for the insurance premiums may seem like an added expense to you for now. But in the long term, this still works as the best way you can protect the accounts of your rental properties. Otherwise, you might incur liabilities that are going to make your rental properties’ finances suffer.
With a landlord insurance policy, you don’t have to shell out earnings from your rental properties to cover contingency costs.
Separate Your Personal Accounts From Those Of Your Rental Properties
Even if you’re the sole proprietor of all of your rental properties, it’s still better for you to separate any of these personal accounts from that of your rental properties’. Otherwise, it’ll be hard for you to keep track of both the earnings and expenses.
The danger lies in the latter—losing track of the expenses is a sure-fire way for your rental properties to suffer financially. When you’re not able to keep this in place, the effects can be severe and could lead to bankruptcy. Hence, you’ll no longer be able to maintain all of your rental properties. In the long run, you might even have to sell these properties. This is the unfortunate plight of businesses that use the income from their rental properties to cover even for personal expenses.
When you’ve worked so hard to afford all of these properties you now have, the last thing you’d want is to risk losing it all simply because of mismanagement.
Separating personal accounts from that of your rentals is also a good way to monitor financial growth. Here, you’ll determine whether or not you’re already enjoying a return on your investment. It’s also helpful to determine if you can already afford to purchase more rentals for business growth.
Renting out real estate is one of the best ways to earn a stable passive income. But it’s also one with great risks. When your rental houses aren’t protected or are damaged, this can leave you with substantial expenses. You lose both money and tenants. These adverse effects are only short-term but the risks become greater in the long run. Thankfully, the tips above can help ensure that all of your rental properties are protected.