4 Profit Maximizing Choices for Rental Property Owners
Owning a rental property can be an excellent investment opportunity. In fact, over 11% of the U.S. population are landlords. This group of over 28 million American investors have realized the income potential of renting out single family homes, multi-unit apartments, and dwellings of all sorts. Whether you are considering joining this group for the first time or are adding yet another property to your investment portfolio, maximizing profit is a key goal of the successful landlord.
We have worked with many landlords over the years with their insurance needs and know that this can be an exciting venture for the informed investor. Making the right choices about your rental property can lead to more profits and less stress for the investor. Here are some tips to help you make the most of being a landlord:
- Pick the Best Financing: There are many options for financing your rental property. Be sure to talk to multiple lenders, not just your current financial institution. Each may have a unique perspective and program available. Get to know team members at a local lender and choose the option that is best for your specific situation. Interest rates aren’t the only factor that can influence your bottom line. Ask how much experience your lender has working with real estate investors like yourself.
- Save Money on Income Tax: Laws for rental properties can be very different from what you may be accustomed to for the home you occupy. Even the options you choose for financing can impact your tax liability so be sure to ask lots of questions from both your lender and your tax professional. One of the great advantages to owning an investment property is the ability to deduct expenses for maintenance and improvements. Some of these expenses can be deducted in the year they are spent and others may need to have their costs distributed over a longer period of time. A good tax pro that has a lot of experience with assisting real estate investors will be happy to educate you on these laws and strategic purchases to help your tax situation, keeping more of your rental income in your pocket each year.
- Plan for Property Management: Some landlords elect to pay a small fee to a property management company to handle particular challenges. These management companies could increase your chances of retaining more profits in the fact that they are often skilled at keeping your rental units occupied. They also typically provide services to check the credit and references of prospective tenants to see if they would be a good fit for your rental. Property management companies may also have a significant pool of resources for maintenance and improvement work that may be needed for your property, and be able to find you a better rate on these expenses. If you decide you are up to the task to manage your own property for lower expenses, just be aware of the time it may possibly take to do this successfully and weigh your decision carefully. If self-management doesn’t work out, you can always find a property manager later.
- Choose the Right Rental Property Insurance: Just as other types of insurance protect your ability to earn income and remain financially stable while working, insurance coverage that is specifically designed for your rental property will insure that you maximize your potential for rental income and protect you in case of a tragedy. Not every insurance agency specializes in, or even offers the rental property coverage you will need as a landlord. Here at Gibbel Insurance, we’ve been assisting landlords with rental property insurance for 125 years. There are different insurance coverages that you should consider for your rental property to make sure you are protected from not only losing rental income, but your principal investment itself. Here are a few coverages that are important to protect your investment.
Types of Available Rental Property Insurance Coverages
- Property Coverage
- Replacement Cost Coverage: Replacement cost is the actual amount it will take to replace or rebuild your rental property. This is what we recommend for rental property insurance coverage. This coverage is recommended to best protect you in the event of a claim.
- Equipment Breakdown
- Water & Sewer Backup
- Ordinance & Law
- Personal/General Liability: If a tenant or visitor is injured or an unsafe or improperly-working item on the property causes an injury, this liability insurance can keep you from losing a tremendous amount of money if sued. Accidents are bound to happen on some level so this is an essential coverage for any landlord.
- Loss of Rental Income: Just because your structure is covered for replacement cost, doesn’t necessarily mean that you will recoup the rental income you’ll lose in the event that tenants cannot occupy a unit. This coverage can replace rental income so that even in such an event, you’re still being paid.
Buying a rental property can be a fantastic first step towards a rewarding, long term investment. We would love the chance to discuss the insurance options available to you as an investor so you can maximize profits and reduce your chances of loss in the event of a claim. If you’d like to learn more about these coverage options, please feel free to contact us. https://gibbelinsurance.com/rental-property-insurance/