Investing in real estate can be a great way to build wealth, but it’s important to remember that your investment is only as secure as the measures you take to protect it. Here are six ways by William Schantz to help safeguard your real estate investments.
How to Protect Your Real Estate Investments
According to William Schantz, as a landlord, you should carry insurance to protect your property and income in the event of damage or liability. Look for a policy that covers things like fire, theft, vandalism, and water damage.
Landlord insurance provides coverage for the following damages.
- Liability coverage provides insurance to the landlord in case a tenant sues for injuries that occur on the property.
- Property insurance protects the physical structure of the rental property and any personal belongings of the landlord that are kept on site.
- Loss of income insurance covers lost rent in the event that the property is uninhabitable due to damage.
Carefully screening tenants is one of the best ways to protect your investment. Often, your tenants can be your biggest asset or your biggest liability.
To screen tenants, run a credit check and criminal background check. You can also ask for references from previous landlords.
It’s also a good idea to require all tenants to have renters’ insurance. This will protect their belongings in the event of damage or theft and will provide some liability coverage in case someone is injured on the property.
Diversify Your Portfolio
William Schantz wants you to note the importance of the adage in investing, “Don’t put all your eggs in one basket.” Diversifying your portfolio is one of the best ways to reduce risk. Invest in a variety of property types, including single-family homes, multi-family homes, apartments, and commercial properties. Spread your investments out geographically as well. This will help to mitigate risk if one area experiences a downturn.
Create a Cash Reserve
It’s important to have cash reserves set aside for repairs, vacancies, and unexpected expenses. A good rule of thumb is to have three to six months’ worth of expenses set aside.
This will ensure that you’re able to cover any unexpected costs and keep your investment property running smoothly.
Hire a Property Manager
If you don’t want to engage in the daily tasks of being a landlord, you can hire a property manager. A good property manager will handle things like collecting rent, screening tenants, and handling repairs.
While hiring a property manager will cost you a percentage of the rent, it can be well worth it for the peace of mind, and free time it provides.
Have a Solid Legal Foundation
It’s important to have a solid legal foundation in place before you start investing in real estate. This includes having a clear understanding of the law and your rights as a landlord.
Be sure to consult with an attorney to draft leases that are fair to both you and your tenants. You should also have an understanding of local, state, and federal laws that pertain to landlords and tenants. This will help you avoid any legal problems down the road and protect your investment.
By following these tips by William Schantz, you can protect your real estate investments and keep your property safe.