If you're like many Americans who still have a few decades before retirement, you may not qualify for a pension or other defined benefit plan that will provide you with a regular monthly income in your old age. As a result, you may be interested in diversifying your portfolio by investing in rental real estate that can provide you with a steady stream of tax-advantaged income. However, being financially and legally responsible for a home you've entrusted to renters can sometimes be a risky proposition, and you'll want to be prepared for any emergencies that can arise -- from a burst pipe to a failing roof or air conditioning unit. What should you do to help get your ducks in a row before purchasing a rental property, and how can you minimize the risk of expensive repairs? Read on to learn more about securing your investment.
What backup arrangements do you need to put into place before renting out a property?
Even if you perform most maintenance and minor repairs on your home yourself, you'll need to familiarize yourself with the availability and cost of emergency repair services in your area. If you are unable to quickly fix an issue that is making the home temporarily uninhabitable (like a hole in the roof, a leaking septic tank, or a malfunctioning air-conditioning unit), you may be responsible not only for the cost of these repairs but the cost of a hotel room or other temporary lodging arrangements for your tenants. Because you'll need to think on your feet and take decisive action in these situations, it's in your best interest to already have done the necessary research on services and prices in your area so you won't find yourself backed into a corner with few options.
Most small to mid-sized cities have at least one company, such as Elite Heating, Cooling and Plumbing, that offers plumbing repair, heating, ventilation, and air conditioning (HVAC) repair 24 hours per day. In cities where the emergency home repair market has some competition, you may want to call around to each specific business to get some information on prices and availability guarantees. For example, you may find that one business charges higher prices than others but offers a money-back guarantee if a repair person doesn't begin work in your rental home within an hour. You can then use this information to decide whether a specific situation justifies a higher price for quick action or whether the repair can wait until a more inexpensive service is dispatched.
What maintenance should be performed on a regular basis to prevent expensive issues?
The market in some areas (particularly college towns) can provide a regular enough turnover to allow you to do a full deep-cleaning of your rental home and perform any exterior maintenance once or more per year. However, if you have long-term tenants, you may be leery about letting them handle maintenance issues on their own without supervision. As a result, it's usually a good idea to work with your tenants to schedule a day each year where they'll allow you access to inspect your home and perform any minor repairs that may be needed. Doing this during the fall or early winter can let you winterize your rental home while simultaneously checking for existing issues.
You'll first want to examine the plumbing, as this can be one of the most common sources of trouble for landlords. Walk around the outside of the house (including over the septic tank) to look for marshy places in the yard that could indicate a leak in the water supply or sewer pipes. Turn on each faucet briefly to ensure they're draining as they should, and use commercial drain cleaner to tackle any small clogs.
You'll also want to inspect the furnace and air conditioning unit. If your rental home has an exterior air conditioner condensing unit, take off the grate to ensure that the flow of air isn't being blocked by leaves or debris. You may also want to check for any frayed wires that could have been chewed by pets or rodents. By taking these few simple steps, you can significantly lower your chances of receiving a midnight phone call from a panicked tenant dealing with a major home repair issue.