It’s a cold and snowy night, and you get a call from your tenant at 2AM. The boiler has stopped working and there is no heat. If they call the Building Department, you may face steep fines and a loss of income. How can you avoid this?
As soon as you get off the phone with your tenant, you call in a repairman. He tells you that you need a new boiler, at a cost of $8,000 for an emergency replacement.
If you don’t fix the boiler, the Building Department may declare your property unfit for habitation and force your tenants to find alternate accommodations. You may also face a ticket and Court action for violating the heat law.
If your tenant cannot be on the premises for lack of heat, you may not collect rent for that time period.
If you rely on monthly rent income to fund repairs, you will be caught in the ultimate landlord catch-22: you cannot rent out the property without making repairs, and you cannot make repairs without renting out the property.
There are two ways to avoid this problem:
- Invest in a home warranty. Make sure that the warranty covers expensive systems such as boilers or heaters, and has provisions for emergency repairs. If the warranty company takes months to fix the problem (during which you are losing out on income), the warranty is worthless. You must also make sure the warranty is applicable for investment properties, and that you keep up and document any required maintenance or inspections.
- Establish an emergency cash reserve, separate from your rent income account or property maintenance account. This fund is set aside for emergencies only, and should be large enough to fund most or all of the replacement of the most expensive equipment on the property (e.g. the boiler, or water heater, electrical system, etc.). The more you can put into this fund, the more cushion you will have in a worst-case scenario.
Many of these nightmare scenarios can be avoided with proper inspections and maintenance of your property’s systems. Make sure you have a qualified technician inspect your equipment as required by the manufacturers. Don’t rely on your tenants to check equipment or change consumables such as filters. Your property and your equipment means it’s your responsibility.
At the Law Office of Andres J. Bermudez Hallstrom, we have the legal skills to help keep your investment property safe and profitable. Simply call our office at 914-341-1364, and an Attorney will be available to help.