Housing News Blog

Do you dream of being a landlord and collecting a paycheck every month, basically making money while you sleep? Sounds like a great way to get paid. However, being a landlord can also bring a lot of liability issues, but taking the right precautions may keep you out of the courtroom.

"It's a higher risk to own a tenant-occupied property," says Mary Eblen, owner of Allstate Insurance Company in Encintas, Calif.

Often neither the landlord nor the tenant is carrying the right amount of insurance. According to a survey by Agents and & Brokers of America, nearly two-thirds of those living in United States rental properties do not have renter's insurance.

Eblen says when you become a landlord taking vital precautions are a must. Top of her list is to make sure that as a rental property owner, you have a landlord policy rather than a homeowner's policy for your rental.

"The landlord's policy really protects you for issues such as, let's say, there were a fire. If there were a fire the tenant obviously couldn't live there any more and couldn't pay rent, so the landlord's policy would pay fair loss of rent. In other words, if it took six months for the home to be fixed due to the fire, the policy would pay six month's rent until the tenant could get back in," explains Eblen.

The landlord policy package covers not only the dwelling but also things such as if the tenant sues the landlord and loss of rent for certain incidents, such as the example just mentioned.

When you're a property rental owner it's not just the tenant that poses a liability to you. Landlords face liability risks from several other factors such as uninsured or under-insured repairmen working on the property, aggressive animals and occurrences from slip and fall accidents to the tenant or guests.

Eblen says landlords "need to make sure they have the adequate liability limits ... . They're not there everyday and the odds of something happening at the property are higher [than if they were]."

Here are five pointers to consider if you're going to be a landlord:

The following was taken from the Business Journal of Phoenix regarding the city of Maricopa in Pinal County. Some interesting statistics:

Since the city’s first census just less than three years ago, it has grown from 4,523 residents to an estimated 31,490 — a staggering increase of about 596 percent.

Though housing permit rates in the city have cooled significantly from the mid-2005 boom where some months saw more than 700 new-home permits issued, Maricopa still issues a healthy 200 permits or so a month.

Nearly 50 percent of Maricopa residents commute 21 to 30 miles into the Valley each day for work, according to an October survey of 1,041 residents, many to jobs at south Scottsdale employers such as Motorola Inc. Now, Maricopa is trying to bring employers to these workers, said Maricopa Mayor Kelly Anderson.

Congress passed long-awaited legislation to prohibit the IRS from demanding income tax payments from home sellers whose lenders write off a portion of the outstanding debt balance owed on the loan.

The big plus for investors and Realtors here is that the legislation -- which took effect immediately -- should relieve fears among financially-stressed home owners that participating in a short sale will leave them exposed to heavy taxes the following year.

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This is great news for your clients who have been on the fence about whether or not to list their property to do a short sale as they would be taxed by the IRS on the difference as regular income. Now they will not be taxed on this “phantom” income by the IRS. This should be a win-win for everyone and especially sellers.

Thank you Kenneth R. Harney for this article.