Landlords need to prioritize risk management, which simply means predicting future risks to your financial well-being and working to minimize or completely eliminate them.
Fact: Landlord risk management applies not only to Howard County landlords but to landlords all over Maryland and the rest of the United States. 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.
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
As a property management company in Howard County, we have local knowledge about the different risk management strategies landlords should make to protect themselves and their property from future lawsuits. In property management, risk management is a term that safeguards landlords from potential losses and liabilities. As property owners, landlords face numerous challenges such as tenant-related issues to property maintenance and even legal compliance.
Here are the key risk management strategies every landlord should know:
Get everything in writing and stay organized.
Some difficult tenants may try to take advantage of you if you’re disorganized or fail to keep track of important documents. 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. Therefore, keeping track of your documents now could save you a lot of time and money in the future!
Get insured.
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:
- Asbestos
- Lead-based paint
- Carbon monoxide
- Mold
If you do not take care of these habitability problems, your tenant could legally withhold rent 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 annual 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. If that happens, the consequences could be costly.
So, create and use a consistent screening process for all tenants. Additionally, ensure you only reject tenants for lawful reasons like previous evictions, legal convictions, or poor references from previous landlords, etc. Also, avoid including any discriminatory language or requirements 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 rental businesses work).
Enforce your rules.
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 or isn’t allowed.
Pick reputable contractors.
Hiring contractors can definitely alleviate your stress because it means that they’ll handle 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 proper liability insurance, and any necessary certifications. In addition, perform a bit of background research by looking them up online. Public 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 be aware of federal laws and state laws – local laws are critical as well.
For example, if your property is located in Columbia, Elkridge, or elsewhere in Howard County, landlords can negotiate with tenants as far as their right to privacy and right of entry. In contrast, 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 even though both of the counties are in Maryland. So, make sure you research any laws that may apply to you.
Mitigate Risk with Professional Property Management
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 Property Management Group as your experienced 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!
