August 2010: Are You Prepared?

Saturday, July 31, 2010

We continually work on educating tenants for any event that could happen during their tenancy. This includes making rental payments, reporting maintenance, handling emergencies/disasters, checking smoke alarms, practicing good neighbor policies, buying renter's insurance, and more. Of course, we hope that they always follow our advice, but we know that it is human nature to avoid or ignore the possibility of emergencies or disaster situations.

It is just as important for property owners to prepare for all possible contingencies. No one likes to think about the possibility of evictions, tenant damage, disasters, and emergencies because it can be disruptive both financially and emotionally. However, being prepared can make a bad situation tolerable for both owners and tenants. There are several areas to consider.

Review Your Insurance
This is probably the most obvious and important item to have in place for unwanted events. It pays to review possible scenarios and coverage with your insurance agent at least once a year. Insurance policies are subject to change, particularly when disasters occur. With all the disasters that have occurred in the last few years and the resulting high losses, insurance companies are continually making major policy changes. Often notifications are obscure on in "small print." Too often property owners find out that their insurance does not apply to a particular situation until "after" it happens. Find out specifically what disasters, emergencies, tenant damage, and rent losses are covered or not covered.

Keep Good Property Records
Another area that everyone dreads is an audit by a government agency, particularly the Internal Revenue Service. The best way to prepare for an audit is to create and maintain your investment records consistently and accurately. Keep all tax returns, property management reports, maintenance records, financial receipts, and property documents organized in one place where you can easily retrieve and review them if you have an audit. Maintain them yearly and when you need this information, you will have it for any situation, such as an audit or sale of the property. It is much easier to maintain files than try to recreate them later. In addition, they will probably be more accurate.