As with most investments things can go wrong, damage can be caused by tenants accidentally or perhaps intentionally, pets can damage properties, plumbing can break or your property may not be rented for a period of time leaving you exposed to rental shortfall. Protecting your asset is the best way for investors to secure their financial and capital growth.
Carol Peach from Coverwise, has seen first-hand the impact not having insurance, or having the wrong insurance cover, can have on a landlord and the big out of pocket expenses they are expected to cover immediately.
She said “A property manager on a regular site inspection found a tenant, suffering from a relationship breakdown, had maliciously destroyed his rental apartment causing $44,000 worth of damage!”. The landlord was not insured with the correct policy and had to find an enormous amount of money quickly to fix the destruction and to protect his asset.
She said “Whether it be because of personal hardship, redundancy or job loss, illness or relationship breakdown things can change quickly with tenants and they may not be able to pay their rent leaving the landlord exposed”.
Additionally “many landlords are not aware of the intricacies of strata law and the fact that they may be held responsible for an injury inside the premises, if it can be proven that negligence on behalf of the landlord or the property manager caused the injury.”
She said “many landlords believe they are covered under bundled insurance / home loan policies so it’s critical to read the fine print of these policies as you may find you are not covered for everything you need to be, therefore exposing yourself to unnecessary risk.” Carol urges all landlords to check their insurance cover now as you don’t want to find out you’re not covered when it is too late!
A well designed insurance policy can protect you from lawsuits by tenants for injuries or from losses to your rental property caused by everything from fire and storms, to rental arrears…all the way through to illegal drug labs, tax audit and covering the costs to change locks.
Whilst insurance premiums vary, you should expect to pay less than a dollar a day depending on state premiums, but considering this expense is tax deductible and how much you would have to pay for unexpected repairs or issues if you weren’t covered, it is an important investment.
Protect yourself and your investment by arming yourself with the right kind of insurance. It may seem like an unwelcome extra expense, but you will be so grateful you have it if and when things go wrong.
Proactive property maintenance
- Whilst insurance is critical so too is ensuring your property is maintained to the best standard possible.
- Use a documented checklist to inspect the premises and fix any problems before new tenants move in.
- Encourage your tenants to immediately report if they have any security or safety concerns with regards to your property or the common areas such as entrance ways, garages, fire stairs etc
- Ensure you keep a written log of all tenant complaints and repair requests and detail how and when the issues were fixed
- Make sure you fix any urgent repairs as soon as possible and if they are safety issues address these within 24 hours.Keep your tenants informed as to how and when the repairs will be made
- Two times a year provide your tenants with a checklist to report any potential safety hazards or maintenance issues that may have not been addressed. Make sure you use this checklist when you personally inspect the property once a year
- Ensure your repair and maintenance procedures are clearly set out in the lease or rental agreement.