Buying a home to turn it into an income property?
Have you done your homework?
Investing in rental properties and/or turning parts of your own home into an apartment to generate income is becoming more and more popular as the demand for rentals and housing prices increase.
More and more individuals are looking to buy, renovate and rent homes or condos so as to establish an income into retirement.
Here are three important considerations to think about in order to protect your own liability and to keep any tenant safe.
#1 DIY or hire a renovator?
- Be careful! It is one think to DIY cosmetic changes like paint or flooring. Anything involving structural changes, electrical, heating, plumbing should be done by a qualified contractor with all proper permits in place.
#2 By-Laws and Permits – Make sure you understand the laws surrounding your obligations as a landlord
- Smoke detectors – carbon monoxide detectors – fire extinguishers – hard wired or not?
- Fire safety – laws around escape routes from basements and upper levels
- Adding a kitchen to build a separate apartment
#3 Insurance – Consider the insurance requirements and costs associated with rental properties
- Property Maintenance – slip and fall – snow removal – balconies – Electrical, Roof, Heat, Plumbing
- Property Exposures – Alcohol/drugs – parties – type of renters (student vs professional or retiree) – Converted dwellings
The insurance market for property rentals is considered a hard class to place. In other words, it is not easy to get insurance, it can be expensive and the coverage can be very limited.
Is your policy an “All Risk” policy or only “Named Perils”?
Is your rental income insured?
What if your tenants vandalize your property – is it covered?
What is your limit of general liability? A minimum of $2M should be secured. What about umbrella liability insurance?
Why is it so important to insist that any tenant have tenant insurance?
It is extremely important to review your insurance coverage. Discuss your liability exposures and ways to prevent losses with an insurance broker. By securing the proper permits and using Renomark Renovators you can help ensure that any property you rent is safe and built according to the law.
Sylvie Forget-Swim is a partner with Assurances Palladium Insurance.