If you don’t run your rental property business with care, you could easily face costly lawsuits and stressful conflicts with tenants on a regular basis. This applies not only to Howard County landlords, but to landlords all over Maryland and the rest of the United States.
That’s why it’s important for you to prioritize landlord risk management, which simply means predicting future risks to your financial well-being and working to minimize or completely eliminate them.
If you’re not quite sure where to start, check out this handy guide we’ve put together, and you’ll learn some risk management basics for landlords that will help you protect your business.
Risk Management Tips for Landlords
Get everything in writing and stay organized.
Some less-than-ideal tenants may try to take advantage of you if you’re disorganized or fail to keep track of important notes. So, no matter how much you like or trust your tenants, get everything in writing. You never know when you’ll need proof of something and keeping track of your documents now could save you a lot of time and money in the future!
Simply getting homeowner’s insurance isn’t enough when you’re a landlord – you also need to get landlord’s insurance. While this can be a bit costly, it’s a small price to pay for the peace of mind you’ll gain knowing that you’ll be covered if something unfortunate happens.
Keep in mind that there are different types of insurance coverage available for landlords, so you’ll want to research each type and decide which one is appropriate for your situation.
Fix problems with your property fast.
Maryland law states that landlords must provide their tenants with livable conditions. That means it’s your job to take care of major habitability problems, like fixing a broken heater or a plumbing problem that hinders tenants from getting water. You must also eliminate environmental hazards, like:
- Lead-based paint
- Carbon monoxide
If you do not take care of these habitability problems, your tenant could legally withhold rent from you or take other actions that could negatively affect your financial situation. And taking care of such issues quickly won’t just keep you out of trouble – it’ll make your tenants appreciate you more too. This is a great way to build healthier tenant/landlord relationships, which will likely make your job a lot easier in the long run!
Tip: To learn which problems with your property could cause a tenant to rightfully take legal action against you, check out this page.
Make sure your property is as safe as possible.
Landlords are sometimes held responsible for criminal activity taking place on their properties, so always prioritize your tenant’s safety when you rent to them. Here are a few actions you should take:
- Conduct regular safety inspections
- Quickly respond to security concerns from tenants
- Report questionable activity to the police immediately
- Make sure all exterior lighting fixtures are functional
You may also want to install a security system on your property, but if you do, avoid making promises to your tenants that you can’t keep regarding their safety. Otherwise, you could land in legal trouble.
Comply with fair housing laws.
By law in Maryland, you can’t reject a tenant solely based on their race, color, religious beliefs, sex, nation of origin, or family status. If you use discriminatory reasons like these as your basis for not renting your property to someone, creating different lease terms, or terminating a renter’s tenancy, they may file a written complaint or a lawsuit against you, and the consequences could be costly.
So, create and use a consistent screening process for all of your tenants and make sure you only reject tenants for lawful reasons like bad credit history, previous evictions, drug use, poor references from previous landlords, etc. Also, avoid including preferences when you advertise your properties that would cause you to be noncompliant with fair housing laws.
Handle your taxes properly.
Most people hate doing their taxes – and with good reason. It can be stressful and time-consuming, especially for those who don’t keep proper records year-round.
So, minimize your stress and reduce your chance of being audited by the IRS by creating an organized record keeping system and sticking to it all year long, learning what deductions you can claim, and hiring an expert to take care of filing your taxes for you (preferably someone who specifically knows how landlord businesses work).
Enforce your rules.
Simply handling your landlord business too casually can put you at risk. Make sure you enforce all of the rules laid out on your lease after explaining them to each of your tenants in detail. That way, there is no confusion as far as what is/isn’t allowed.
Pick reputable contractors.
Hiring contractors can definitely alleviate your stress because it means that they’ll handle some of your tasks so you don’t have to. However, if you’re not careful, contractors can add more stress to your life. That’s why it’s critical for you to have all of them sign a written contract.
You should also ask lots of questions to ensure that they know what they’re doing, make sure they have their own liability insurance, and perform a bit of background research by looking them up online – their reviews may offer some important information that will help you determine whether or not you should hire them!
Educate yourself on all of the legal requirements for Maryland landlords.
Let’s face it – for most people, studying up on lots of laws isn’t the most exciting thing in the world. However, for landlords, it’s an absolute necessity. Not only should you study up on federal laws and Maryland laws – you need to look into local laws as well.
For example, if your property is located in Columbia, Elkridge, or elsewhere in Howard County, you can come to an agreement with your tenant as far as their right to privacy and your right of entry. On the other hand, Prince George’s County landlords must provide tenants with a 24-hour notice before they enter the property unless there is an emergency situation.
As you can see, these two counties require different actions from landlords legally even though both of the counties are in Maryland, so make sure you research all of the laws that apply to you.
Managing risk as a landlord typically involves lots of learning and time-consuming tasks, but the effort is well worth decreasing your likelihood of being sued and dealing with a huge financial blow.
If you’d rather not take on all of the tasks associated with running a rental property business yourself, consider hiring Bay Management Group as your Howard County property management team. We help landlords de-stress by taking the burden of tedious tasks off of their shoulders, and we’d love to learn how we can help your landlord business succeed. To learn more, contact us today!