Landlording & Rental Properties

6 Smart Strategies for Limiting Liability as a Landlord

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
230 Articles Written
limit-liability-landlords

What essential tactics should rental property owners be implementing to minimize risk?

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

The truth is that landlords do face a number of risks on a daily basis. These can be legitimate, frivolous, and malicious lawsuits. They can range from injuries from faulty appliances and rehab work to harassment by landlords, drug activity, tenant’s dogs biting neighborhoods kids — or even infamous tenants like Justin Bieber pelting neighboring homes with eggs.

So how can rental property owners protect themselves, their assets, and their other streams of income from these assaults?

Related: Landlords: The 6 Best Ways to Minimize Your Chances of a Lawsuit

Perform Quality Work & Inspections

It’s always the right thing to do to make sure renovation and repair work is done correctly. A few faulty wires on the washing machine, some mold left only covered up, or the hot and cold water piping switched the wrong way can be all it takes to do real harm and land yourself in trouble. Currently, I have an in-house general contractor who does inspections after renovations. Additionally, our in-house leasing agent always completes a walkthrough checklist with each tenant when they move in.

FHA Home Inspection Checklist

Leave a Paper Trail

Keep great records of everything. That means receipts, inspection reports, tenant maintenance requests, notices to tenants, and more. Have the proof to defend your case. If you want to go paperless (which is what I recommend), upload everything into whichever property management software you use. 

Get Good Insurance

No one loves paying for insurance. But when a claim does come up, you’ll be really glad you have it. This might include basic property insurance, coverage for fire, floods, and storms, and even an income policy that covers any gaps in rents if you have to evict. Tenants should normally be prompted to carry their own renter’s insurance. This is usually very inexpensive for them. However, it is essential to verify they have it and that it is renewed on time. Pets can also require additional insurance coverage depending on the breed.

Have a Real Estate Attorney on Call

If you are in real estate long enough and you make enough investments, the chances are that one day you’ll need to call on an attorney or have them write a warning letter for you. This is always most efficient if you’ve already picked a great one out and have them on retainer.

missed-call-missed-deal

Related: 7 Tips to Keep Landlords Free From Costly Tenant Lawsuits

Protect Your Privacy

Not putting yourself out there as an easy target is essential as well. Consider using LLCs, your business address instead of your home, or investing through a partnership to protect your identity, limit your liability, separate business and personal assets, and become a less attractive target.

Use Professional Services as a Legal Buffer

Real estate agents and third party property management companies can provide a great buffer from liability. They physically limit landlords from making expensive legal mistakes and then will often have to take on the costs of legal representation or make claims on their insurance if an error is made. That’s what these services are here for, and they can really pay off in these situations.

Landlords: How do you protect yourself and your business? Any tips you’d add to this list?

Let me know with a comment!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
Read more
    Kevin Fox
    Replied about 4 years ago
    Great tips Sterling!
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 4 years ago
    Thank you Kevin. What was the biggest takeaway from the article for you?
    Isaac Ingram from Dillon, Montana
    Replied about 4 years ago
    This is my first article I have read on BP. Some very good points that I had not thought of heretofore.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 4 years ago
    Welcome to BP Isaac! What was the biggest takeaway from the article for you?
    Timothy
    Replied about 4 years ago
    If going paperless with your records make sure to make backups! Make backups of your backups.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 4 years ago
    That is true Tim! Great point!
    Kevin
    Replied about 4 years ago
    Sterling, Nice list, thanks for taking the time to put these down on BP. Something for the LLC fans and newbs to consider with respect to hiring to do the work and LLC. Had a lower friend tell me this and it stuck. If ya have the property in an llc and you personally go do the work, and that work fails, say, for an example a ceiling fan install, if the fan falls and hurts someone, the LLC will not protect you because YOU did the work. Kevin
    Kevin
    Replied about 4 years ago
    Sterling, Nice list, thanks for taking the time to put these down on BP. Something for the LLC fans and newbs to consider with respect to hiring to do the work and LLC. Had a lower friend tell me this and it stuck. If ya have the property in an llc and you personally go do the work, and that work fails, say, for an example a ceiling fan install, if the fan falls and hurts someone, the LLC will not protect you because YOU did the work. Kevin
    Frank Smith
    Replied about 4 years ago
    Can you recommend property management software?
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 4 years ago
    Propertyware by real page.