Owning rental properties can be a risky business. But in today’s landlord’s market, it’s also a very profitable one. If you’re not careful, you can end up with bad tenants who damage the property, don’t pay rent, and leave you with a mess. Of course, even if you are careful in choosing tenants, you can end up in the same situation. But taking a few noteworthy precautions will help minimize the risk. 

Screen potential tenants

For one thing, you should always thoroughly screen your applicants. A tenant screening will give you all the information you need to make an informed decision. It should include a credit check and rental reference check. But it is up to you to come up with the criteria you want your renters to have. It’s common for landlords to have certain FICO score requirements. But they also look for other issues in addition to that. For example, many landlords won’t accept renters with recent bankruptcies or repossessions. 

Have a solid lease agreement

A good lease agreement should clearly outline what the tenant is and isn’t responsible for. For one thing, it should clearly lay out rent due dates and late fees. And it should also include whether or not tenants can have pets and any fees you might charge for that. Other things the lease might include are the terms of renewal, types of repairs they are responsible for, and eviction procedures.

Know your legal obligations

Every state is a little different with their rental laws. But every state requires that the landlords maintain habitable properties for their tenants. And although all don’t specifically stipulate what this means, some standards are understood. For example, a habitable residence usually means having a sound structure, doors and windows that lock, and no water leaks. 

You’re also responsible for returning any security deposits within a reasonable time. Each state specifies this time limit, but it’s typically no more than 30 days. This, of course, assumes that the property was left in the agreed-upon condition to receive that refund. And always make sure you review this policy with your tenants before they move in so that they know what to expect should they ever leave.

Additionally, it’s a good idea to retain an attorney in case of any issues that might arise. For example, landlords often contact injury lawyers to make sure they know the precautions they need to take to keep from ending up in court. 

Make sure you are properly insured

Insurance is extremely important for landlords. And a lot of them mistakenly assume that their homeowners policy will offer some coverage. But when another party moves into your property, your homeowners policy is ineffective there. It’s crucial that you speak to your insurance agency immediately when you acquire a rental property. All policies are different, so you’ll need to discuss the particulars of your asset. Mainly, your policy should cover property damage, liability protection, and lost income.

Keep good records

Never rely on verbal agreements in landlord/tenant relationships. Everything should be in writing and accurately dated and signed, even if it is as simple as your tenant agreeing to fix something minor. And if your tenant is hesitant to put it in writing, remind them that a written agreement protects them just as much as it does you. It’s also a good idea to take pictures or videos before and after your tenants move in, and before and after any damage. This could serve to protect you in a lawsuit or small claims court.