Covering Your Rental Property – Do you need a personal or commercial policy?
By: Zach Bartness
The investment and rental property business can be a very rewarding and sound investment for many individuals. Many ask, what’s the difference in a personal and commercial rental property policy? A personal dwelling rental policy is designed for an individual with one dwelling that they rent out to others. A commercial dwelling rental policy is designed to accommodate residential or commercial properties rented to others, but most specifically someone in the “business” of renting a property with the hopes of generating revenue and as long-term investment. However, if you don’t know exactly what insurance policy form you have or need you can be exposing yourself in ways you never knew.
Ask yourself the following 6 questions:
1)Do you have more than one rental property? If so, a single policy with all your properties on one policy may be available to you. Tracking your renewals and keeping up with them can be a difficult task for most, and this single policy solves that problem.
2) Is your property deeded to an LLC, corporation, IRA, or trust? If so, you definitely need to consider a commercial rental policy to be sure you’re covered correctly.
3) Are you in this to grow wealth? If so, a commercial policy may be best for you.
4) Does your liability portion of coverage cover liable, slander, and invasion of privacy?
5) Does your loss of rents come out of your dwelling limit or a separate sublimit?
6) Is your liability limit sufficient to prevent access to you and your family’s income, assets, retirement, etc.?
Insurance and protecting your family isn’t a quick 15-minute call “to save you 15% or more” despite what advertisers promote. Is your program tailored to you needs? Did anyone even ask about your needs when you insured your rental property? A good agent’s goal is to provide you a plan tailored to your needs.
So the question always is, do I need a personal or commercial rental property policy? The answer is that it really depends! We’re not comparing apples to apples. You need to sit down with your trusted insurance advisor and determine the right plan for you. Remember, insurance isn’t as simple as “apples to apples” like some might try to make you think it is. Contact us or your insurance advisor for further detail and help.
Zach Bartness, CLCS – Founder and President of Shared Alliance Insurance, Inc. Located at 2854 Wade Hampton Blvd Suite B, Taylors, SC 29687. Contact us at: 864-609-5550, www.sharedalliance.com, or via email at firstname.lastname@example.org.
Proposed tax changes could change the home ownership benefits that investment home owners incur. With the removal of some tax benefits for home owners the rental property ownership market may flourish. The below article explains:
ATTOM Data Solutions recently conducted a survey to name the top 25 zip codes in the U.S. to purchase a single family rental home. The survey took into consideration that the zip code had a vacancy rate of 5% or lower and all posted a continuous increase in rental rate. The below link explains more about the research lists out the top 25 zip codes.
Good Luck to Kit Garren, tonsofrentals.com Founder and CEO as he departs for his Water Cycle 2015 bike trip across America in an effort to raise money and awareness for Jessie’s Well Foundation! To learn more about this program or to make a donation, visit their website: Jessie’sWell.org. To keep up with his blog posts, see photos, videos and to follow Kit’s progress across America on his Water Cycle adventure, visit the Jessie’s Well Foundation Facebook page!
Since 1986 tonsofrentals.com has been focused on delivering hassle-free investment returns to our clients. Our technology and delivery systems are second-to-none and our team works diligently to serve our clients and customers, learn from our mistakes and improve personally and professionally. So all that focus means our world here at tonsofrentals.com® is built around providing quality rental investment returns for our owners and quality rental homes for our residents.
There is another important facet of tonsofrentals.com®, however, that is not as well known to the public but extremely vital to tonsofrentals.com® and our greater community. It is Team TOR Cares®. TOR Cares® is the service arm of tonsofrentals.com® made up of the caring individuals who you speak with on a regular basis.
Most recently the TOR Cares team adopted a Habitat House in the Asheville, NC area. During a recent construction day on-site we met “Nancy”. Nancy was working on her home alongside our team so we got to know her and learn how excited she was to be able to complete the house by Christmas 2015 and move in with her two boys – a dream-come-true for this hard working single mother.
There is no tangible value to be placed on the opportunity to serve others. Words cannot express the enjoyment our team experienced to be a part of That’s why TOR Cares exists, so that we can be hands and feet to those in need – both near and far.
This fall, tonsofrentals.com® founder, Kit Garren will be cycling across the nation from Seattle, Washington to Jacksonville, Florida. The 3400+ mile trek will cross 12 states over 46 days to raise funds and awareness for clean water to children in the Dominican Republic. Tonsofrentals.com® is a corporate sponsor for the event along with Jessie’s Well Foundation and Compassion International. You can learn more about the event at www.jessieswell.org.
At tonsofrentals.com® we continue our commitment to serve our clients and customers in our growing markets. Through this success, we are also proud to give back by serving our local and global community through Team TOR Cares®.
Finding quality residents for your rental home is an important step in ensuring a successful investment experience. Today’s residents are more savvy, better informed and have more options available to them. They are modern consumers who browse product availability (available rental homes) from their smart phones, tablets and computer screen. They will spend more time in self-discovery from the Web and less windshield time visiting property. By the time they make an appointment to visit property they have narrowed the search down to a very few properties and are well informed about the community, schools, transportation and neighborhood. They have typically read blogs and compared amenities leaving the site visit to simply affirm what they already know about the property.
Assuming the rental home is well presented and ready to rent then the next steps are to advertise and qualify the resident with consistency and to communicate the leasing process with clarity.
- Advertising: Online advertising is now the standard with over 85% of prospective residents searching for available rentals online. Mobile is now quickly becoming the new standard so having your rental home information mobile friendly is also important. Providing abundant information about the property, neighborhood, schools and region are extremely important. Online video of the property will attract increased interest from prospective residents.
- Application: A well designed, written application should be completed by each prospective adult occupant to include permission to obtain credit, criminal, employment/income and rent history – all of which are vital to help determine a resident’s ability to successfully fulfill the lease requirements. Any of these by themselves will only present a partial picture. The results should be measured through a written and consistently applied standard of occupancy. Although the application has been traditionally completed by filling in a hard-copy form, today’s resident’s prefer to complete the application securely online. Online processing has dramatically improved the turnaround time for leasing a property.
- Know the law: Federal Fair Housing Laws provide express guidelines applicable to all residential landlords. The laws are well written to protect the renting public from discriminatory actions by landlords. It is extremely important to know the law and put it into action for every part of the advertising, screening and showing process. Landlords must also understand and apply the Americans with Disabilities Act within the leasing process. A visit to hud.gov is a good first step in familiarization but implementing these and other required laws into the leasing process will be critical for compliance.
This is a great time to buy an investment rental property in the Upstate. There are many good purchase values available, interest rates remain at historically low levels, the job market is growing stronger, rental demand remains strong and home prices are beginning to rise.
In July of 2010, Barron’s published a cover article about the growth of home rentals stating “the recession and shifting demographics will swell the ranks of people who will rent, not buy, housing over the next five years.” Barron’s projected an increase in the U.S. rental rate from its current 33% to 36% by 2015. According to a January 2011 report from CB Richard Ellis, “the U.S. economy and housing market are slowly coming out of a deep slump, and there is a good chance that a combination of improving household growth and a steady or falling homeownership rate will produce the strongest growth in rental demand since the 1980s.” An October 2011 Morgan Stanley report titled “Housing 2.0: The New Rental Paradigm” states, “across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us. But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single family.” Demographic trends have tilted to single family home rentals. Simply said, those who return to rental housing from home ownership prefer renting a single family home.
In the most recent 2015 “Investment and Vacation Home Buyers Survey” published by the National Association of Realtors®, sixty-eight percent of investment buyers are likely to buy another property and seventy two percent plan to own the investment for more than three years.
Owning income-producing residential real estate remains a strong and viable investment vehicle. When considering the purchase of an investment rental, it is important to remember, as with any investment, that there are risks and rewards. If you are new to residential rental investing, start by consulting a knowledgeable Realtor®, tax advisor and property manager. The Realtor® will help you find value and guide you through the purchase, the tax advisor will help determine how the investment may work to your after-tax advantage and an experienced property manager will help build value in your investment through the years. Investing in residential rental property can be financially rewarding, but keep in mind that slow and steady wins the race.
By the Numbers:
19% Percentage of investment properties purchased in total home sales
$125,000 Median investment property sales price
37% Percentage of investment properties purchased in the southern US
61% Percentage of total investment properties purchase that are single family homes
41% Largest segment of investment properties being purchased by size range (1,001 – 2,000 sq. ft.)
45% Percentage of investment properties purchased within 50 miles or investor primary residence
72% Investors who plan to own their rental property more than 3 years
86% Percentage of investors who believe now is a good time to purchase
How can I maximize rent for my investment rental property?
Last post I began a two part series on maximizing rents by reviewing the importance of reducing vacancy and ensuring your property is market ready by increasing curb appeal. The next two factors can provide added rent value as well as help maintain market value.
- Quality maintenance and repair: Industry surveys consistently find that nearly one fifth of residents choose not to renew their lease due to poor response and quality of needed maintenance and repair. In other words, a landlord can reduce vacancy (expense) by simply responding to legitimate maintenance needs in a timely and professional manner. Residential real estate is a naturally depreciating asset. If it is not maintained it will most likely begin loosing market value. Regularly servicing heating and cooling equipment, sewer lines, gutters and other components of the house will help prevent more costly repairs. Keeping an investment property in good repair as needs arise prevents larger, deferred maintenance expenses and can also reduce liability exposure.
- Property upgrade: There are times when an investment property could use an upgrade. It may be as simple as a fresh coat of paint or as involved as a major remodel. Upgrades help ensure that your property remains competitive in the market place. Painting may be the most common and, perhaps, cost effective upgrade. An interior paint gives the property a fresh look and smell on the inside. An exterior paint can provide needed protection of the exterior surfaces (reduce future repair costs) but can also give the house a needed facelift. Changing exterior colors to a more contemporary color palette can have a remarkable effect on curb appeal and reduce vacancy costs. There are times when a more aggressive upgrade may be profitable to correct what is known as functional obsolescence. Common examples are adding a second bath to what was previously a 3 bedroom, 1 bath or adding a laundry room to accommodate full size washer/dryer plus folding area. The list can be endless so it is important to evaluate the market to determine if the upgrade will add market value to your property. The answer can be determined by a fairly simple calculation that considers the cost of the upgrade and resulting increase in net income and asset value.
Consult your tonsofrentals.com® property management professional for more detailed information about maximizing rents for your investment property.
Rent income is the life blood of residential investment properties. Making sure you are getting the most rent for your property is one of the most important factors in successful investment ownership. In this two part series we will explore four important elements to ensuring your best investment return. Here are two of the four:
- Reduce vacancy: Vacancy obviously results in no rental income making it the greatest expense you are likely to experience in a typical investment year. There are multiple factors in minimizing vacancy and we will touch on just a few of the major points.
- Establish market rent: Make sure your rental property is priced right for the current market. You may think that renting your property below market rent will get it rented more quickly but you’ll be leaving good money on the table and may not be renting your property any faster than a market ready rental that matches the market price. Holding out for a rent that is higher than the current market will typically add vacancy or “time-on-the-market” leaving you in an investment hole from which it is hard to climb out.
- Effective marketing: Once market rent is established you will want to attract the most qualified prospective residents possible. A sign in the yard is a start but in today’s world online advertising is critical. Over 90% of prospective rental residents now search online for housing. Having your property represented effectively online will draw qualified traffic faster than any other medium. Make sure you include abundant, helpful information that enables the prospect to determine whether the property suits their needs. Quality photos that represent the true features of the house, videos, neighborhood information, community and school information are all important elements to an effective online ad.
- Create curb appeal: A prospective resident will quickly make a decision to either rent or not rent based upon the physical appearance of your property. Make sure your property shows well. Start with the view from the street then work through the rest of the house. Simple things like keeping the lawn maintained, mulching the shrub beds, pressure washing the walks, decks or siding and planting a few seasonal flowers will go a long way to inviting a prospective resident inside to check out the rest of the house. Once inside, make sure the property is clean, walls have been touched up or painted and appliances work properly.