So, here’s the situation. You spent an arm and a leg on some amazing property you just had to have, and now it’s beyond essential that you protect your asset so that you can win-out in the end and avoid flushing money down the drain in the process. This is the song that never ends.
Real estate is a tricky business, but your investment can be lucrative if you’re smart about it. Presented here is a list of strategies to protect your investment (none are without their caveats). Here’s how to avoid money-hungry creditors some of the time with four crucial real estate investment protection strategies.
1. Utilize Your Insurance
Home insurance gives you clear insight into the kinds of exposure protection your property needs to stay out of harm’s way. It also protects your property against unforeseeable catastrophes and, depending on the real estate type, you can find policies that fit your budget and contribute towards the protection of both your home and commercial properties. The one catch is that insurance coverage costs generally increase as your portfolio grows.
There are, thankfully, many different umbrella policies out there to assist with any growing assets. As with all major purchases, remember not to settle on the first good deal you find.
2. Screen Tenants
If your real estate investment is housing tenants, make sure you know exactly who is living in your property before you rent to them. Be sure to screen every tenant thoroughly, no matter what your gut instinct might be telling you. Thorough background checks give landlords insight into a prospective tenant’s financial history, criminal background, and eviction records, allowing you to make the best decision and avoid costly turnover or property damage expenses.
3. See Debt as an Asset
Let your debt score you big time in the tax-free game of keep-away-creditors. Please, please, please, continue using all of your property equity and reinvest money into other things to show your desperation and financial irresponsibility. These “poor” decisions prevent you from accumulating excess equity which is what causes creditors to swarm like flies in the first place. Hey, it looks like beggars can be choosers, after all.
4. Homestead Exemptions are a Secret Weapon
If you’re interested in becoming a real estate investor, know that investing in houses is perhaps the greatest kind of investment because homestead exemptions give you equity protection. State laws differ on the degree of home equity protection, and some don’t offer any, so you’ll really need to know the requirements of your state to determine just how covered you are. You can also increase your mortgage payments to protect your funds if the exemption is outrageous. There is much more protection thrown your way when you invest in a home as opposed to commercial property. Use this knowledge to your advantage.
5. Use Titling as a Protection Strategy
Your personal residence can be protected using the titling of your home. Once your spouse is listed as an equal tenant, creditors are unable to claim your home due to your indivisible interest. Again, state titling exemptions vary, so be sure to read up on your state’s provisions or contact a local real estate agent for more information on the specificities of your state property protection laws. The legalities for commercial properties are typically much more rigid, so be sure to brush up on your state’s requirements for this kind of real estate.
Ideally, you’ll do your part and pay your mortgage every month. You won’t spend exuberant amounts of money on other projects and you’ll find an insurance policy that works for you. Yes, protecting your real estate investments is not easy and the watchful eyes of creditors never really go away; however, if you follow these five tips, you can protect your real estate investment and grow your profits over time.