When you are hired to manage a property, you must do a thorough inspection of the property to assess it for risk. This can be done during the standard inspection to gauge what shape the property is in and what needs to be repaired. You will be looking for any situation that can cause personal damage to tenants or physical damage to the property. After a report to the client, there are various options available depending on the risk.
Remember that the world is a lot different than it was 30 years ago. Our society has become increasingly litigious.
Remove the risk altogether
There are many risks that can be remedied by removal. For example, a piece of playground equipment may be outdated or in bad repair. There may be apparatus that children can climb that are so tall they violate the Australian Standard for Critical Fall Height. It could be as simple a problem as a pile of rubbish or a fallen limb.
Control the risk
This is most effective with natural or weather-related risks. Obviously, you can’t remove the risk of a cyclone, a flood or a bushfire, but you can try to mitigate or control the risk. Providing an evacuation plan, installing windows that withstand cyclone winds and taking every possible precaution against property catching fire are all examples of mitigating risk.
Reduce the risk
Risk is a part of life. It is impossible to completely remove the risk that a heater, furnace, stove or your household wiring will catch fire, for example. It is impossible to guarantee that a child won’t fall down a flight of stairs in a two-storey house. While you can’t remove risk, you can reduce it with consistent, periodic inspections to make sure that everything is in good, workable condition and doesn’t present undue risk.
No matter how great a job we do and how much we delve into a prospective tenant’s background, a 'bad' tenant is eventually going to sneak through. Bad tenants cause deterioration in properties through neglect and bad behaviour. They can turn a perfect investment property into a run-down property in a short period of time, even though you are taking every precaution necessary.
This may be the most important factor of all: adequate insurance. When bad things happen to renters, it is almost a cliche to sue the landlord. One way to make sure that your clients don’t lose everything over a lawsuit is to make sure that they are insured against every foreseeable event.
Above, we mentioned fire, weather, flooding, bad tenants and the risk of children hurting themselves. Your client should always have enough liability insurance to protect them against a lawsuit. The property should also have building insurance against all of the aforementioned risk factors. As for the bad tenants, we also strongly suggest that landlords take out landlord protection insurance.
You can’t always protect an investment property from damage, but you can ensure that your clients emerge unscathed if it does occur.
Do your homework first, then be vigilant and consistent in protecting your clients’ investments.