Roberts Insurance Group Blog
Real estate investing can be very lucrative. It is one of the few investment opportunities that can be financed by a bank or lender. It also creates a passive stream of income and an asset that (historically) appreciates in value over time. However, there are certain things to look out for as an investor when purchasing and managing a property.
We work with real estate investors and landlords throughout the state of Georgia. Here are some of the things that the most successful investors do to make sure their properties maximize their value and profit and are well-protected:
Thoroughly Inspect The Property Before Purchase
This may seem like a no-brainer, but it is often overlooked and not done thoroughly. We recommend hiring a trusted third-party inspector to thoroughly inspect the property before purchase. This will help you make a solid decision on whether to purchase or not as well as negotiating the purchase price.
Is everything up to current code?
Has the roof, electrical, plumbing, and HVAC been updated in the last 10 years?
Is there any mold?
All of these are important questions that home inspectors can tell you before you buy. Depending on the answers to those questions, you may decide it's best not to purchase. Or you may use that to negotiate the price down, knowing that it is something you will have to address after you purchase.
Either way, a thorough home inspection is KEY to making sure you're making a good investment.
Written Contracts With Tenants
Having a written contract (lease) in place with your tenants is crucial to protecting your investment and your business. We recommend hiring an attorney to draw one up and tailor it to exactly how you, the investor, want it. Doing so does present a small up-front cost but will protect you in the event you have a disgruntled tenant in the future, which can lead to lawsuits and claims. Lawsuits and claims, at the very least, will increase the cost of your insurance, which cuts into your profit. At worst, it can ruin you financially.
Screen Your Tenants
Screening your tenants is a great way to ensure your property remains in good condition and that the value continues to appreciate over time. Requiring your tenants to carry Renters Insurance (HO4) not only protects your tenants belongings, but it pays for a place to them to stay if there's an issue that causes them to have to move out. Additionally, it provides a way for you, the landlord, to pass liability exposure back to their insurance policy (and not yours).
Performing background, eviction, and credit checks is another great way to ensure you get a tenant who will pay on time and take care of your property, all of which is vital to maintaining a profitable property. If you don't get paid and have to go through the eviction process, you'll be out of pocket several thousand dollars just for the loss of income. Not to mention any damage they may leave behind that you're forced to repair.
Insuring your rental or investment property is vital to protecting your investment. Damage that is uninsured could cost you more than your original investment, which is why it is so important to have the right type of policy in place.
For traditional long-term rental properties, you need to have a Dwelling Fire Policy (DP1, DP2, or DP3) in place. This is also called a Landlord policy by some carriers. The landlord policy is rated for tenant exposure and also includes coverage for loss of rent or income.
If your rental property is written as a homeowners policy or as a secondary home or as a vacation home, chances are any claim you file will be denied and there will be no coverage. If there is damage, you would have to pay for everything out of your own pocket, which is why its important that your policy is written properly.
Keep Tabs On Your Property
When you purchase an asset that is worth hundred of thousands of dollars and someone else is living in it, it's important to make sure it is being maintained over time. Seasoned investors make a point to drive by their property every few months to make sure the property is being maintained. If you are unable to do this due to the size of your portfolio or due to your location, you may need to hire someone like a property manager to do this.
How Can We Help?
At the Roberts Insurance Group, real estate investors is one of the top classes of business we write. We insure hundreds of portfolios throughout Georgia and have the knowledge and carrier access to ensure your investments are properly insured. In addition, we have a network of real estate professionals that can be a resource for you and your investment properties.
Give us a call at 678-250-8133 or click below and one of our licensed agents will help guide you through the process of properly insuring your portfolio and maximizing your profit.