Renting Home With A Swimming Pool?
Hello,
I am new at this and would like to rent out my current SFH in the Twin Cities and purchase a new one. My concern is that my home has a swimming pool, I am concern about the risk of being sued in case someone drowns? I do have insurance on the pool, but whay else can i do to protect myself? PLEASE HELP!
Thanks!
lichenhailweb :-?
Great question! I'm closing on a house Wed. that has a built in pool and I was thinking the same thing.
are you going to rent it out too then?
I am thinking about buying a house that has a large indoor pool in its own room. It has been on the market for almost a year. I was wondering if I could eventually use it in various ways if I don't want to live in it full year or half year.
If I were you I would chat first with a few insurance agents.
This is definitely a major liability issue. Before you got the route of renting units with a swimming pool, go have a long talk with your insurance agent. If you can even get insurance, the premium will likely shoot up because of the pool (likewise for trampolines, some breeds of dogs, etc). Besides standard insurance, I'd also consider a separate umbrella liability policy, somewhere in the neighborhood of at least 1 million dollars. Lawsuits for accidental drownings will get expensive.
Besides the insurance, there is also a maintenance issue. Who will be responsible for the opening, closing, and general upkeep of the pool? I'll tell you, it shouldn't be left up to the tenants. And if not, will the tenants be willing to pay extra for the "bonus" of a swimming pool? If not, it's not worth it. Cheaper to fill it in and make a play area out of it.
BTW, personally, I never touch a house with a swimming pool.
Roger
Hi Lichenhailweb and DaShow, the house I live in now has a pool and when I move, I'll keep it as a rental. The insurance premium will be higher than without a pool, but so will the rent and resale. Having a fence taller than 3-4 ft around the immediate pool may help the insurance rate, but if you want more personal liability protection make sure that before any renter steps foot in the place, that you have transferred deed to the property into another entity (I use LLC, but S Corp is okay too - consult an attourney and Accountant for local benefits/downfalls). Make sure you have covered your grounds (established entity with all paperwork done properly, recorded quit claim, insurance in the entity name, book-keeping for the entity, etc.) This will be important for both liability in the event of a lawsuit, as well as taxes deduction proof for an IRS audit. As long as you keep the entity up and legit, it will be difficult to pierce it in court (depends on state case law) and your liability will be limited to your equity in the property (and any other assets in the same entities name). So if you have 20 rental properties, you may want to have 1-20 entities depending on your tolerance of risk vs. tolerance of an abundance of paperwork. I like to keep no more than 5 rentals or $100,000 equity in any single entity, which usually means $500,000 to $1,000,000 in market value. You will still be able to pass all of the tax benefits along to your personal taxes to the amount allowable if they were in your personal name.
In the event of a suit that you lose that exceeds your entity insurance and cash on-hand, you will likely follow this process. Bankrupt the entity claiming your liabilities are greater than your assets. Then the bankruptcy attourney will oversee the sale of the entity assets in a timely fashion. The property mortgages and primary debts will be paid off, and the plaintiff gets the rest up to their settlement/judgement. Once all the assets are gone, they have no claim left against the entity and you just close it up. They will likely sue you as well to try and pierce the "corporate veil," but that should be unsuccessful as long as you have your paperwork in line, a good attourney, and there is always the factor of case law for your state. Nevada and Delaware are havens for corporations because of solid case law in favor of protecting owners and shareholders.
I will note that I would prefer not to rent my pool property to someone with small children. $$$ set aside, I don't want to see anyone drown and children tend to fall victim to that more often.
Finally, move to the southwest where we don't have to worry about opening and closing our pools! I am a Mainer originally know all about the long winters. Long summers and mild winters are better!
Concrete anyone?
[addsig]
Thanks for the info!