How to Mitigate Financial Risks as a Building Owner


Despite the benefits of renting out a property, there are considerable financial risks that every building owner must consider. Here are some of the basic risks that building owners face and what they can do to mitigate the damage of these potential situations.

Going Without Tenants

Purchasing a rental property doesn’t guarantee you profit. After preparing a property for renting, you may struggle to find tenants. If you aren’t able to find tenants, you can potentially lose out on rent, which can be particularly risky if you’ve taken a loan from the bank to purchase the property thinking the monthly rent would cover the mortgage.

In order to find good tenants, it’s important to do your homework. First and foremost, it will always be easier to fill vacancies when your property is modernized and in a location with high demand. But even after you’re past the buying stage of your property, you can increase your chance of finding tenants by using savvy advertising. If you’re unsure of how to do this yourself, a property management company can often help.

It’s also important to find responsible, respectful tenants the first time around to prevent high turnover rates and the constant risk of going without rent. Requiring tenants to provide personal recommendations and proof of income and requiring background and/or credit checks can help you find long-term tenants.

Damage to Property

Another important reason to find tenants you trust is that you want renters who will maintain your property well and not cost you in damages.

But there are other aspects that can seriously damage your property in addition to the residents. Burst pipes is one of the most common damages property owners face, but there is also the risk of natural disasters like earthquakes, fires, or floods.

This is why having building owner’s insurance is so important, as it can cover property damage, theft, and other damaging incidents. If your property is in a specific area that is likely to run the risk of flooding or other damages, you can add specific coverage to a policy to cover the specific liabilities you face.

Unpaid Rent

Bad tenants who refuse to pay rent is one of the biggest problems building owners can fall foul of. Renters who don’t pay not only cost you in lost revenue, but if you are trying to resolve the problem of unpaying tenants through the courts, this can prove very expensive and may take a long time to resolve.

Specific rent insurance policies can provide relief by covering unpaid rent for landlords.


Finally, lawsuits make up a final category of financial risk that building owners need to be prepared for.

Lawsuits can be instigated by tenants for numerous reasons. The tenant can blame you for an injury that occurred on the property, a dispute with the contract, or another disagreement. Even if you have a good relationship with a tenant, this doesn’t preclude them from taking legal action if they feel they have a case.

But this is where general liability insurance can protect you. As general liability insurance will cover the cost of these types of lawsuits, you are not just protecting your finances; one of the biggest risks in being taken to court and losing is that you may lose your reputation, too, and alienate potential renters in the future.

Mitigating financial risks as a building owner is essential. These four components are some of the most common, but you can use the tips given to be proactive in protecting your financial investment.