What will I need for my first rental? Insurance, banks, PM, etc

[Gina Coleman]

Made an offer on an off-market portfolio consisting of 2 duplexes and 1 SF. I’m planning on getting a Property Management company as I live out of State in CA. Just a few questions I’m hoping someone can help me with.

1) Do I need landlord insurance? Or is just the home insurance fine?

2) If I plan on using a PM for my properties, would landlord friendly companies like Stessa benefit me? Im wanting to open a separate bank account for each property and saw a lot of people recommending Stessa for bank services.

3) Do most use an LLC when having multiple rentals? Is this something I should look into?

Thanks in advance!

[Michael Smythe]

@Gina Coleman congrats! Hope you consider Detroit in the future if you buy more:)

1) Yes, you'll need a landlord policy or landlord rider. It will have coverage for tenants displaced by accidents that force them to temp relocate. Just be sure to ask WHAT HAPPENS IF PROPERTY VACANT FOR MORE THAN 30 DAYS!

2) Stessa is software for DIY landlords. Since your PMC will collect rents, pay vendors and then disburse balance to you, you only need a separate business account. You should pay property taxes and insurance plus any other business expenses from this. Speak with a tax professional.

3) Many investors get an LLC because they read about it or someone advised it, but don't set it up or use it correctly. If you have enough insurance, you don't need LLC protection. You may want to somewhat hide your identity from tenants though, which if set up correctly, an LLC can do.

You didn't ask, but... you should ask your PMC a LOT of questions about HOW they will execute their services and how they will communicate with you. There are a ton of posts here on BP from investors unhappy with the service of their PMC - most can be traced back to not understanding how their PMC actually operates! Ask a lot of questions about maintenance as that's where a lot of expectations are not met.

Good luck!