This is my first post on this forum… I have been reading for quite some time and I still need to clarify some issues.
I guess I am already a bit involved with real estate. I have a house in Puerto Rico that is rented. I have a house in California that I will soon be vacating, and I am looking into keeping it as a rental. I am also looking into the possibility of buying a 2-4 unit property in the very near future.
My questions have to do with insurance and taxes.
- What type of insurance to you keep on rental houses in order to protect yourself from renters who slip on the stairs or do something stupid? What about negligence on the part of the owner? I ask because the rental my wife and I now have is with a management company. They have advised us all the way, and they don’t recommend that we do anything but fix repairs… no insurance… nothing. But then again, Puerto Rico has quite different laws from California. The house in California that we may rent is in the mountains, and on a dirt road. It seems that it could make some money, but the long fall from the balcony and the possibility of trees falling made me consider the importance of having insurance to protect myself.
- What are the tax implications of purchasing a third property? I understand that you get hit hard after your second home, but in what way?
Thanks for the information.
You need “Liability Insurance”…it is relatively inexpensive. YOu need as much as you can afford – $300K to $1 Million is probably not too much.
As far as owner negligence, your insurance will not normally cover your negligence.
Actually, in the U.S. there are tax benefits of owning investment properties…you can off-set the income that it generates with most of the costs of the property, plus you can depreciate it over 27.5 years (for the real property).
Keith
Keith
Thanks for the response. I guess I should pose the negligence issue as a question. What constitutes negligence?
For example, if my renter’s child is climbing on the railing of the balcony, and the board breaks and the child falls, is that negligence on my part? The reason I ask is that I perceive a difference between renting a suburban or inner city property and something like a cabin or a country property, where the weather can take its toll, and there can be more hazards. Am I correct in assigning more risk to such properties?
Thanks
it’s negligence if you knew or were advised that the board was weak and did not repair it. did the railing meet city ordinances or other codes? it’s your job to know. how long since you last inspected the property? it’s your job to do that. were the gate locks working? Did you advise the tenant in writing to cease tampering with the locks? you get the point.
proper and timely maintenance is vital.