Cultivating a loss-prevention mindset.
While tenants move every month of the year, peak rental season typically runs from April through September. Any time you experience a “changing of the guard” there is an increased opportunity for a loss to occur at your investment property. To lessen your chances of property damage or injury, you must cultivate a loss prevention mindset. First, you need to educate yourself on the circumstances which could put your property at risk. Then you can plan ways to minimize that risk and finally, put your mitigation plan into action. To help you apply this loss prevention mindset to your own REI business, we will explore three specific examples of heightened risk when between renters:
Increased foot traffic at your property:
Assess your risks: Is there anything needing repair that could cause someone to be injured during a property showing?
Hazard examples: sinkholes in lawns, uneven driveways and walkways, deteriorating stairs and loose handrails. Unhealthy trees can drop dead limbs unexpectedly.
Potential losses: slip-and-fall injuries. Falling tree limbs can cause physical injuries or damage neighboring homes or cars.
Weather concerns: rain can make surfaces slippery on exterior walkways and in entryways. Wind or lightning during storms can bring down dying trees or cause damaged limbs to fall.
Make your mitigation plan: Repair any uneven or deteriorating areas of the driveway, walkways or stairs. Secure handrails. Have your trees’ health assessed by an arborist.
Take action: Secure contractor(s) and schedule repairs to be made as soon as possible. Keep a log of repairs made to the property.
Allowing potential renters to view the property by themselves via an entry code or lock box:
Assess your risks: If you allow rental applicants to access the property without oversight, what are the risks?
Potential losses: Prospective renters you have not vetted who are unsupervised in your asset may damage the property or even commit theft. Someone could injure themselves and not have help getting critical first aid. A thief or vandal could dismantle the lock box and seriously damage your property.
Weather concerns: If there are areas where someone might slip, no one is there to help them avoid possible hazards. Unscrupulous applicants may make up a false injury story and threaten to sue you.
Make your mitigation plan: Plan for your property manager, yourself or another person to be present for all property visits. Eliminate slip-and-fall hazards prior to showing the property and anything else that may cause unexpected injury. Make sure nothing of value (like a lawn mower, furnishings or other valuables) is accessible to any visitors to the property.
Take action: Make ample space in your schedule so you can be present during all property showing appointments. Instruct your property manager to always have a representative present for any showings. Make neighbors aware that you are showing the property so they can report anything unusual that occurs during this phase.
Assess your risks: Are there ways a trespasser could easily access the property? Are there weather conditions that could affect the property while it is unoccupied?
Potential losses: theft, vandalism and arson, burst pipes and water damage.
Be mindful of these areas: Entry and exit doors, basement doors and windows, lighting around the exterior, lighting the interior at night.
Liability concerns: A thief, vandal or trespasser may try to sue you if they get injured on your property even though they have committed a crime by being there.
Make your mitigation plan: Ask neighbors to help monitor your property while you are in between renters. Keep the property looking as “lived-in” as possible; mow regularly and keep the mailbox free of overflowing mail. Visit the property weekly even if it is not being shown to make sure it stays locked and secured.
Take action: Schedule regular lawn maintenance and put site visits into your calendar with ample time to take a walk around both the exterior and interior of the property. Install an alarm and motion-sensor lighting.
It’s important to remember that insurance policies cannot cover every type of loss. Therefore, it is key to familiarize yourself with your coverages and any coverage exclusions within your policy. Did you know that wear-and-tear is a standard policy exclusion industry-wide? If your tenant leaves you with damaged window blinds, smudges on walls, stains on the carpet or broken locks, are considered wear-and-tear is not covered, which is why you collect a security deposit. It is also important for your tenants to carry renters’ insurance. Not only does it protect them from theft, it protects you from accidental damage they may cause, such as a cooking fire. Your agent should be happy to explain your coverages, so don’t hesitate to ask questions.
Benefits of the Loss Prevention Mindset
After walking through the above examples, you should have an easier time getting into a loss prevention mindset. Take a few minutes to think about a specific property and how you would protect it from physical damage and keep prospective tenants injury-free. A loss prevention mindset will bring you residual returns well into the future if you continue to practice it.