How a Property Investor Can Save Money in The Long Game.
If you are an existing property investor or are researching to get ready to be a first-time landlord, you will have either come across a range of stories or even experienced the dreaded worst-case scenario of a tenancy going awry.
As Murphy’s Law states, “whatever can go wrong, will go wrong.” If you are prepared by way of the right insurance, you will save yourself a lot of pain emotionally, and financially.
From the time I entered the industry as a Receptionist to now, a decade later, I have seen my fair share of tenancies not going to plan...
This has been at the hands of the tenants themselves causing damage (intentionally and accidentally).
Complete strangers cause a home to be uninhabitable after entering unlawfully and ruining walls, floors, and ceilings.
Even simply the age of pipes in the wall (those beautiful older Queenslanders come with hidden secrets!).
Then the incredibly painful situation turns uglier, even to the point of devastating in some instances... I have heard the frustrating line of “The owner does not have insurance”…
This upsets me, frustrates me and confuses me all at once when I hear or read the words, even today.
BECAUSE it is simply not necessary to be without insurance in 2019.
The competition between providers and the ease of access to swap and change policies is at its best and will only get easier and even better as more providers come on board with new ways to provide the services and make them more affordable.
I want to simply outline a reasonable approach to how a property investor considers looking after their asset, tenant and own back pocket if something should occur.
Because, if you are not covered, you can be sure something will happen.
Firstly, your current or particular property management agent you have in mind should have already touched on this subject to some degree – whether it be asking that you have an existing policy or to consider taking out a policy with a recommended provider.
If they haven’t I suggest downloading our “Property Management Health Checklist”.This checklist not only includes checking your insurance details (and which policies to consider) but also a full audit on your asset/assets from a macro level to keep you and the property on track for your goals.
This checklist will go through your property information to ensure from a macro level, you are on track to looking after yourself and your investment.
Secondly, these are the types of insurance you should be considering/researching for the cover of your asset and tenancy:
1. Liability InsuranceThis type of insurance protects you against financial loss if your actions, your negligence or the condition of your property is found to cause a person to be injured or killed, or a person's property to be damaged or destroyed or they suffer loss as a result of relying on your services or advice.
2. Landlord InsuranceLandlord Insurance covers you for tenant-related losses. Things like loss of rent due to a tenant breaking their lease or being evicted, or damage caused to your contents by tenants, like drink spills on carpets. Other insurance may not cover these events, and often, the bond won’t be enough to cover the associated costs.
3. Building InsuranceYou can’t control the weather or other unexpected events like theft or accidents. But you can protect yourself against the loss and damage they cause. Our Residential Building Insurance policy provides cover for the cost to repair the damage, as well as the loss of rent you incur whilst the repairs are being undertaken.
4. Contents InsuranceThis one is one that I see is missed or disregarded in a lot of management because of the misunderstanding of the meaning of “contents”. Although you personally do not live in the property or provide a “Furnished” property for the tenant, the contents covered are actually still in relation to what can be viewed as items that are covered under Building Insurances. Contents insurance extends to items such as but not exclusively to:
- Appliances (Air conditioning, Dishwasher, Oven
- Curtains/blinds/window finishes- Cabinetry
- Floorings such as carpet, timber or vinyl
- Even some aspects of joinery in the property that is not classed as a “structure” are also included in contents insurance and in some cases are excluded under building insurances.
Thirdly, you need to understand that although a policy/policy provider has been recommended to you by friends/family/ your agent, you still need to make sure the policy outlines its cover in accordance with what you need and want from it. Research and compare.
What one policy covers in Brisbane may not include certain items for their cover of a Toowoomba property.
Most providers have a great quick reference breakdown of their cover to help with comparisons as well. If the policy fee is cheaper than another, be sure that it is not because of certain items not being included (just like car insurance – windscreen replacement means your premium will be a tad higher than others that only add it as an extra cover).
An insurance premium may seem like a trivial item that you can sort out “later”, however, keep in mind what a $350 year premium in some policies cover can save you in excess of $3,000.00 in repairs to a property.
There is no time better than the present to make sure you have the right cover and carry out the quick health check checklist – you can download that here.
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Please Note****This article is for general informational purposes only and must not be taken as legal, financial or any other professional advice. We recommend obtaining advice specific to your situation before making decisions relating to your investment property and financial position.