Posts Tagged Rental Property
Did you know that if your Tenants have no renter’s insurance, it could leave you liable? Always require that your Tenants buy renter’s insurance with $100,000 liability and, with you named as additionally insured. This is a win-win for you and your Tenant; the insurance is relatively inexpensive, it covers the Tenant’s contents in the event of a loss (water intrusion, fire, etc) and covers you in the unfortunate event that someone is injured in the property . . . fall down the stairs, slip and fall and so on. So what’s up with additionally insured language? That names you as insured just like your Tenant, that way should the Tenant cancel the policy or fail to pay the premium, you, just like your Tenant will receive the cancellation notice. Otherwise, you will have no way of knowing if the Tenant’s renters insurance is still in effect. Make renter’s insurance a requirement . . . not an option on your properties!
For more tips or an information form explaining the benefits of renter’s insurance to your Tenants, visit our website at: ManageToMakeMoney.com
To view a short video about renter’s insurance Click Here
One last note; there is still time to catch one of our “How to Profitably Manage Rental Property Workshops”. We are in the final stages of our Spring teaching tour and have only two classes left. Click on this link for the schedule and links for signing up.
As always, thanks for reading . . . and we are still waiting on your input about forms of property ownership!
Pat & Kris
LLC . . . LLP . . . S Corp . . . C Corp?!?! For the last week or so, we have been teaching our “How to Profitably Manage Rental Property” workshops around California. It’s odd how each of our teaching trips takes on a theme. Last time, it seemed that nearly every workshop we taught people were in the process of inheriting properties. The trip before that the theme was short sales and buying foreclosures. This trip . . . true to form . . . has revealed it’s theme to us . . . Forms of Ownership. People at every workshop are asking us “What is the best way to take ownership of my rental property to protect myself . . . Living Trust . . . LLC . . . LLP . . . S Corporation?!?!”
This is certainly not our area of expertise, but we can give you some guidance here. I can tell you that owning your property just as a sole proprietor or as a couple is the most vulnerable form of ownership you can have. You can mitigate any financial exposure with general liability insurance but will still have exposure above and beyond the limits of your insurance coverage.
Let me paint an example for you: Someone trips and falls on a loose floor board which had been reported to you as a problem by your Tenant previously. The person who fell is permanently paralyzed and their potential to earn income for their family has been severely impaired due to your negligence. The case goes to court and the judge finds in favor of the injured person;$3.5 million. You have $1,000,000 in general liability coverage. Your insurance company will pay up to the million dollars of coverage you have. But, you are going to have to figure out a way to pay the other $2.5 mil . . . in other words . . . for most of us we would be wiped out financially!
As I understand it (and you will certainly want to consult a knowledgeable real estate attorney on this), if in the example above, you had owned the property as an LLC, LLP or a corporation, you would at least have had a layer between you and the judgement of the lawsuit. That entity would take the hit and not you personally. Of course this all assumes that you are operating that entity as a bonafide business, keeping annual meetings and minutes up to date, etc. Now, that entity’s assets would be vulnerable but you would manage the structure of the entity’s asset holdings.
A living trust, as I understand it, is merely a way to structure your assets so that in the event of your death, your estate will not be subject to the full impact of estate taxes. I don’t believe it will afford you any protection in the event of a lawsuit or unfavorable judgement against the trust. But then I could be mistaken.
This is a great subject to explore at more depth. I would invite any comments or insight any of you may have. I would love to pass more information along to our readers. In the mean time, we will continue to research the subject and bring you new info.
Thank you for reading. We look forward your comments!
Pat and Kris
VISIT OUR WEBSITE for a full array of books, documents, checklists, videos and tips to help you to Manage to Make Money with your rental property.
Change of Terms
I remember the first time I heard the statement “The only thing in life that is constant is change” it was quite an epiphany for me. After all, in many cases, we would all love to keep things the way they are and in managing rental properties it is no different.
We all know that changes will also come along when it comes to our rental properties… changing of Tenants (typically in a roommate situation), extending the lease, allowing a pet and requiring a pet deposit or changing the amount of rent (typically along with the extension of the lease.) What about taking care of the legal side of these changes? Do you have to completely re-write the lease and all the documents that go with it (gee, I hope not!)? Well, the answer is NO! In fact, we strongly recommend that all of the original documents stay just exactly as they were when they were first executed. Changing everything only increases your chance of making an error or an omission… there are simply too many little check boxes and blanks to fill in to hope to get them all exactly as they were on the original. So what to do? We have found a document that makes dealing with all of these changes literally a “piece of cake” and it is a “Change of Terms”.
The Change of Terms actually relies on and embraces the original lease documents and it’s language is very simple. The Change of Terms state: “All terms and conditions of the lease for the property: 123 Change Street, Beautiful California, (your property’s address), Dated January 1, 2020 (original date of your lease document)remain unchanged except for the following: (this is where you spell out the change): The term of the lease has been extended until December 31, 2022, and the rent amount effective January 1, 2021 will be $2,050.00 per month.” Everyone signs and dates and life is great!
In summary: Change is nothing to be feared with your rental property. With the “Change of Terms” you can deal with the change handily and focus your efforts on something more productive like… looking for that next property!
As always, thank you for reading!
Pat & Kris
We have produced a short video on the subject of using the Change of Terms. CLICK HERE to see it.
If this tip has been helpful to you, please visit our website at: ManageToMakeMoney.com where you will find the “Change of Terms” I spoke of as well as many more tools, tips and techniques for managing your rental property profitably.
ALWAYS Collect Move In Funds in REAL Money
By: Pat Larkin
Don’t take unnecessary risks with people you don’t know. When you have a Tenant moving into one of your properties ALWAYS collect the move in funds in Cashier’s Check or Money Order.
When you have someone getting ready to move into one of your properties ALWAYS collect the move-in monies in “Real Money”. When you have a Tenant getting ready to move into your property, typically you will trade them the keys to the property for their final balances due; deposits and first month’s rent, etc. Always collect these funds in what we call “real money”… cashier’s check or money order. To help your case, be sure that you state in their lease agreement that “only cashier’s check or money order will be accepted when paying final move in amounts.” This way, you have discussed the issue with them and they have signed off agreeing to that. In fact, depending on how much time is between them paying their holding deposit and their move in, if there is not sufficient time for a personal check to clear their bank, you may want to require that all funds paid by them are “real” money also. If you do allow for the holding deposit to be a personal check, make sure that it has cleared their bank before you give them the keys to your property.
Why go through all this “dain bramage”? Well, unscrupulous Tenants have been known to pay their move-in funds with a personal check, get their keys and promptly stop payment on their check. Then the Landlord (you) have given possession to the Tenant, have no money, no income and a couple of months of legal wrangling to look forward to before you can get your property back. And don’t forget about the make ready costs to market your property again!
In summary, don’t take unnecessary risks with your property. Always collect move in funds in REAL Money.
To view a short video on this same subject CLICK HERE
Thank you for reading!
Pat & Kris
For more tips and forms and educational tools to help you to effectively manage your rental property, please visit our web site at: ManageToMakeMoney.com
RENTAL PROPERTY WORKSHOPS:
Don’t forget that we are in California for the next couple of weeks doing these very affordable rental property workshops all over the state. If you or anyone you know could benefit from learning more about the day-to-day management and how to profitably deal with the challenges of managing rental property . . . these workshops are just what the doctor ordered! CLICK HERE to find a workshop in a location near you. We hope to see you there!
“Buying low cost property and renting it is a great way to create wealth and constant cash flow, but it can be tricky and very non-productive and even a disaster if you don’t know how to do it properly and profitably.”
There is so much to be said for education, and what an integral part of our life it plays . . . except when it comes to managing rental properties. Many of us take high level, intellectual courses that deal with a lot of great theory but many of those fail to get to the heart of managing rental properties . . . having systems and procedures in place to deal with the down-in-the-trenches, day-to-day issues of managing properties.
I hesitated this morning to write on this subject. Because we are so involved in teaching our workshops, I didn’t want to come off as a shameless marketer. OK, perhaps a bit of marketer is creeping in but my motivation for this subject this morning is mainly from the perspective of letting you know about a valuable resource. We have taught our Rental property workshops to thousands of participants and where we really get our pay off is in seeing the “lights going on” when one of our students “gets it”!
Oriented for professionals and novices alike, these workshops deal with the roll-up-your-sleeves issues such as: Getting your property ready for market, Marketing your Property, Listing your property for lease, Leasing your Property, Collecting Rent, Dealing with Challenging Tenants, Tenant Move out, Dealing with Homeowner Associations and Property Maintenance. Through our years of owning and operating one of the largest residential property management firms in Orange County, California we have come up with lots of systems, processes, forms and documents to make management easier. In our classes, we share this stuff with our students so that every time a situation comes up, they aren’t caught “flat-footed” having to re-invent the wheel . . . again . . . and again!
We will be starting our workshop tour next week in Northern California and then moving to Orange County and San Diego and then back through the Midwest. If you know of anyone in those areas . . . property manager . . . property owner managing their own property . . . someone thinking of buying rental property, please forward this posting to them. Click here for our Workshop Schedule and More Workshop Information. There is good information to be gained through these workshops and/or our books and other resources offered at our web site. Click here for Rental Property Management Resources
See what people have said about our workshops:
“I’ve done everything wrong! Pat and Kris showed that there are “do-overs” and that I can learn from my mistakes, turn my property around and do a good job of managing it!”
Workshop Participant – Pasadena City College
“I came back and took the workshop a second time because I learned so much the first time and the instructors are so down to earth, I wanted to learn more!”
Workshop Participant – Sierra College
As always, thank you for reading!
Pat and Kris
Why Renter’s Insurance
Did you know that if your Tenants have no renter’s insurance, it could leave you liable? Always require that your Tenants buy renter’s insurance with $100,000 liability and, with you named as additionally insured. This is a win-win for you and your Tenant; the insurance is relatively inexpensive, it covers the Tenant’s contents in the event of a loss (water intrusion, fire, etc) and covers you in the unfortunate event that someone is injured in the property . . . fall down the stairs, slip and fall and so on. So what’s up with additionally insured language? That names you as insured just like your Tenant, that way should the Tenant cancel the policy or fail to pay the premium, you, just like your Tenant will receive the cancellation notice. Otherwise, you will have no way of knowing if the Tenant’s renters insurance is still in effect. Make renter’s insurance a requirement . . . not an option!
Click here to view a sample document we recommend you give to your Tenant’s AND have them sign. 03.17 Insurance Facts for Residents SAMPLE
We have a complete assortment of 62 documents, Forms and Checklists which can be easily downloaded from our website. Check them out.
Thank you for reading!