As most San Jose investors know, renting out properties is an excellent way to earn some cash flow and build some wealth. However, it’s also risky, especially in states like California.

Let’s talk about how landlords and investors can protect themselves and their properties from the risk and liability that falls on rental property owners.

You Need a Strong Lease

Legal protection begins with your rental agreement. A strong lease will protect you and your tenants, and you want to make sure it’s clear and understood. Everything that covers your property and your responsibilities as well as your tenant’s responsibilities should be included in the lease agreement. Make sure it discusses rent collection, late fees, maintenance procedures, and all of the things that are and are not permitted. Include pet policies and all the required addenda.

Use a lease that’s legal and binding in California. Some of the generic lease documents that are easy to find online will not include all of the necessary language and clauses that California lease agreements require. Talk to an attorney or a property manager if you’re not sure where to find a lease that complies with California law.

Brush Up on Legal Knowledge

There are a lot of laws and regulations to follow when you’re renting out a property. Not only do you have to know what’s required and prohibited in your local city and the state of California; you also need to be familiar with federal fair housing laws and things like the Americans with Disabilities Act.

Knowing these laws is not enough – you have to comply with them. Tenants are smarter than ever, and they know how long you have to return their security deposit. They know that service animals cannot be denied from housing and they know that habitability standards require you to fix maintenance issues right away. Make sure you know what’s required, and stay up to date with all the laws that affect you.

Make Tenant Screening a Priority

There’s less risk involved with your rental property when you have a high quality tenant in place. When you’re screening, make sure you have a documented set of rental criteria, and don’t stray from those standards. You’re looking for a tenant who meets all your qualifications and has demonstrated an excellent rental history in the past. Take your time with the screening process so you know you’re getting the best possible tenant. It will reduce your liability and provide a better overall experience.

Check Your Insurance Policy

Your landlord policy should be up to date and comprehensive. Make sure it’s not a homeowner’s insurance policy. If you have the wrong coverage in place and you go to file a claim, you’ll be disappointed to find you’re denied. Talk to your insurance agent and make sure you’re covered, especially for things like loss of rent and floods. Insurance law changes just as quickly as rental laws, so you need to have enough liability and property coverage.

Use a Professional Property Manager

Use a Professional Property ManagerFinally, there’s a lot of value in using a professional property manager. We do an excellent job of reducing your risk by keeping you in compliance, finding and placing the best tenants, and maintaining the condition of your home.

If you have any questions about how to protect yourself as an investor, please feel free to contact us at Real Estate Connections.