Real estate is a business where risk is ever-present. The most common real estate risks often involve unknown factors about the condition of the property and the instability of the real estate market. In some cases, especially if you are purchasing rental properties, the main risk has to do with the reputation and responsibility of the tenants you allow to move in.
Irresponsible tenants can cause thousands of dollars worth of damage in the short span of a year if they don’t take proper care of the property. Real estate insurance may cover some of these losses if you have the right type of coverage. If you don’t, you may have to pursue legal action against the tenants to recover your losses. If your insurance company pays for the damage, they may file a lawsuit against the former tenants. Thoroughly screening your tenants before the lease is signed will reduce your risk of accepting tenants that are irresponsible.
An unpredictable real estate market is often the biggest risk factor when buying a new home or commercial building. If you buy a home when the market is soaring, your property will hold its value rather well. On the other hand, if you buy a home for a low price and the market doesn’t gain enough ground or recover from the slump by the time you are ready to sell it, you may end up losing money on the deal. It’s important to keep a close eye on the real estate market for several months before you choose to buy or sell a new property.
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