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Rental real estate is one promising investment, featuring the dual advantages of rental income and long-term capital growth. However, as risk always comes with a reward, a real estate investor must be adequately protected from the unforeseen — with property insurance coverage.Rental Real Estate Risks
Since there are people residing on your property – the risks faced by a landlord usually differ to risks faced by a typical homeowner. Owning a multi-family rental is just like owning a small business. The 'American Apartment Association' says that there are at least nine common risks that a landlord faces, and they are:
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1.Fire, storm and other disastrous losses
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2.Liability for employee and tenant injuries
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3. Employee or tenant theft
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4.Loss of rental income
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5.Vengeful damage and vandalism by tenants
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6.Slander and libel by employees against tenants
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7.Discrimination lawsuits filed by unhappy employees and tenants
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8. Allegations of fraud, falsification and other intentional acts by employees
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9.Claims that exceed insurance policy limits
For instance, a landlord is liable if an injury or accident occurs on the property due to improper maintenance or dangerous property condition. A tenant, in such a situation, can sue for damages in court.
However, there is specific property insurance coverage designed to protect against such suits. In fact there is an insurance coverage available for almost all types of liability a real estate investor might face.
Rental Property Insurance Coverage Protects Against Risks
If you own a rental real estate, a standard home owner’s insurance policy will be insufficient for you. With a property insurance coverage, residential property owners are covered from fire, storm or other disastrous losses that could make the property unsuitable to live. Coverage can be based on either actual cash value or replacement cost and should also have an inflation provision to allow for rising prices. Coverage can also include the 'secondary structures' - such as, tool sheds, detached garages, and other 'out buildings'.
A single lawsuit or casualty can turn a promising real estate investment into a financial calamity. But most property disasters that a real estate investor will face can be covered with appropriate insurance. If you own a rental real estate, (or planning to own one) make sure you have all the paperwork done effectively. Not only will it offer protection against potential financial nightmares, but it will also provide the peace of mind that every real estate investor needs in order to productively manage his or her property.
Research all the insurance options available to you with an experienced rental market professional. Owners can rest easy knowing that your rental properties are covered well against any unfortunate circumstances. While most investors see insurance as an additional expense rather than an investment, you’ll be glad in the long-run that you spent the time and money to secure the right policies.
Rental Home Financing has the vast experience of financing over $75,000,000 in the year 2014 alone. Want a lending partner that offer more than just lending? We provide refinancing, insurance, financing, blanket mortgage loan and much more to rental property owners.
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