How to manage risks: fire / carbon monoxide detectors, etc.

Question

Hello everybody,

how do you see the biggest risks of being a landlord and how do you manage them?

For example, how do you decrease the liability in the case of fire?

What are other risks you are concerned about and how do you manage them?

Thx

Max T. · Answer

I replace old smoke detectors with the 10 year lithium battery ones that are built in.

Bob B. · Answer

Tenants often like their water hotter than normal.  To be safe it should be around 120 degrees. Also make sure they don't store anything to close to the furnace or water heater and for sure nothing flammable nearby.

Karen R. · Answer

Also, make sure you put in a clause that there is no sub leasing.. bad things can happen if your tenant decides to rent out the apt without your knowledge

Jane A. · Answer

Thank you @Bob B.   I am making a list of "Safety rules" for tenants to get their acknowledgment via DocuSign  before the winter :)))

Bob B. · Answer

In Georgia it's the LL responsibility to maintain the smoke and carbon monoxide detector.  You can not put it on the tenant.

Jane A. · Answer

@Jim Goebel

Thank you very much for sharing your perspective, your thoughts are very useful for me, I have a little break from managing everyday issues, so I was thinking to make some decisions on who is responsible for  working fire detectors, what company to hire to check detectors and other safety issues, I am going to sign an addendum/reminder that people would not use basements as a bedroom if there are no 2 exits.  Ripping the place does not scare me anymore, I had even good tenants (good paying tenants) who left the place like after a tornado :)))  At this moment my most concern is managing places safety and my liability.   Very simple stuff which could cause trouble like open space heaters, dryers vents, mold, windows and doors safety, etc.

Jim Goebel · Answer

@Jane A.

Wow that's a pretty intense question.

Firstly, fire stuff - make sure you're going through local inspection processes, as needed.  Do what you can to do things to code, and then get good insurance.  For us, knock on wood, that's all you can do there and as long as your insurance doesn't kick you to the curb, you'll be fine.

Biggest common risk I hear about is bad tenants ripping your places up and sucking away your time and equity.  Get good properties in good areas and get a good screening process in place.

Other risks, include regulatory risks which I think are in proportion to the size/scope of projects you take on (if you're fixing up houses lets say before renting them).

Other risks include common maintenance items.  The projects that frankly just suck and are costly but occasionally do happen include a main sewer project (say it collapses), and a roof.  Usually you can buy yourself some time with a roof though.  Major appliances can fail.  Biggest thing you can do there is get experience to manage these projects, best you can.  Get experience negotiating.  Also, you can use warranty companies.  In theory they spread out costs instead of having big ones possibly hit you at once.

Other risks are burnout, running out of money (usually because of outside issues, personal issues, etc).

For me, I've been thinking/evaluating a lot lately the 'opportunity cost' risk of stepping away from engineering and business career to do the real estate stuff.  Like anything there, will depend on what your other options are on those risks....

Other risks include more of the macro picture stuff, which mostly has an effect on the equity picture of your properties.  All kinds of stuff goes into this, including rents, strength of regional economy, other things that affect supply and demand.  For instance, even big fluctuations in prices or inventory of fixer uppers in certain markets can have a large effect on ability to rinse and repeat a model of execution.

How to manage risks: fire / carbon monoxide detectors, etc.

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