Property Management Toolbox
Real Estate Investing
7 Ways to Limit Your Liability When Offering Rental Management Services - Part I
If you're a real estate agent looking to broaden your business offerings, you may have considered adding corporate rentals and property management to your services. While doing so is a great way to diversify your business, and add a new level of income, there are business risks to taking on rentals. In this two part series, we're offering tips you can employ to safeguard your brokerage business when adding rental management services.
Tip #1: Keep It Separate
If you're going to add rental management to your brokerage's offerings, you'll want to set up a separate legal entity. This provides you with two benefits:
- It will make your accounting easier - as you'll keep your books separate and you'll be able to analyze your numbers on both sides of your business individually.
- It will also minimize the liability on the brokerage side of your business and vice versa.
Tip #2: Go Big or Go Home
Don't offer rental management services only as a favor to a friend or client. If you're going to do it, make sure it's part of your core business model. You need to treat rental management like a business. Know your local laws when it comes to contracts, security deposits, background and credit checks, etc. Also, you must know how and when to disclose that you're a broker to any client you work with.
You'll also want to make sure you provide proper training to your staff with a procedure manual that everyone is responsible for learning and following. Remember, a small mistake can be a costly mistake, so make sure if you're going to be in the rental business, you're treating it like a real business, not a side hobby or favor.
Tip #3: Vet Properties Before Representing Them
You want to make sure any property you manage meets all legal and safety requirements, otherwise you could be putting a renter and yourself into a messy situation. Any deferred maintenance must be taken care of before a tenant moves in. Your client must have the proper insurance as well - and provide you with such paperwork. Also be mindful of regulations when it comes to amenities such as pools.
We'll share tips 4-7 in next week's blog post - to be continued...