The two biggest threats to a landlord are non-payment of the rent and damage to the property?
Rising living costs are pushing an increasing number of people into arrears on their rent payments, according to figures from a major debt charity.
The Money Advice Trust says the number of calls it has received from tenants struggling with rent arrears has increased by over 35% over the past two years, and more than half the calls it receives are from tenants struggling to pay their rent.
Recent figures (Dec 2013) from the Office for National Statistics has reported that rising energy and food costs are rapidly reducing disposable incomes.
You insure your car, because it’ll cost thousands if it’s badly damaged. Your property is no different. When it goes wrong, as we’ve already mentioned, it isn’t always loose change to put right.
How will you make your mortgage payments if your tenant doesn’t pay the rent or wrecks your property?
The good news is there is a way to avoid this, and it’s not really expensive either.
Firstly you must prepare a good quality and thorough inventory check-in schedule at the start of each new tenancy. These typically cost between £125 and £250, dependent on the size of your property, and we’d suggest using a Company that take photographs and use written descriptions.
We’d recommend using experts, such as Companies registered with the AIIC or APIP or ARLA, rather than carrying out your own report to save a few quid.
At the end of the tenancy you should use the same Company to carry out a check-out inventory and its purpose is to detail any change in condition over the course of the tenancy that could be chargeable to your tenants (taking into account fair wear and tear).
If you need to make a claim you’ll have the supporting evidence of chargeable damages.
Secondly, specialist landlord insurance Companies can offer a ‘rent protection and legal expenses’ insurance policy. Of course your tenant must have passed applicable initial tenant background checks to be able to arrange one, but anyone can fall into long-term sickness, be made redundant, get sacked or split up with a partner.
These are the types of events that often lead to landlords experiencing serious rent arrears. And you won’t be able evict a non-paying tenant particularly quickly.
Having a rent insurance policy would mean you’ll receive your rent and the burden of evicting this type of tenant is out of your hands, and left to the experts.
These insurance policies can set you back anywhere from around £150 - £350 for a years cover, dependent on the supplier and the covered being offered. As with any insurance, check and compare the products.
Google rent insurance policies for lots of information.
You usually have 30 days from the start date of your tenancy to arrange a rent insurance policy.
Some of these insurance policies will begin to pay your rent as soon as the tenant stops paying, meaning you won’t suffer any arrears at all, and some will even pay until you have the property back in your possession, regardless of the time taken to evict tenants.
When fishneedwater manages a property for a landlord, we supply this type of insurance as standard, and at no extra cost in the first year of management of your property. We think its better to be safe than sorry and risk losing potentially thousands in recovery fees. It can turn being a landlord from a life dream into a living nightmare.
Do both of these things, and your property is ‘bullet-proof’. You are protecting yourself from the biggest and most costly threats you face as a landlord.
And remember, you can take these types of products even if you are self-managing your property, you just need to follow some strict rules when you reference check your tenants.
Not too long ago we were asked to find tenants for a client of ours (who is now a loyal customer) for their house in SE23.
We found excellent clients, both with city jobs and combined salaries of almost £150,000 per annum. They passed reference checks without fuss and moved in.
About 6 months later the landlord contacted me unsure what to do as both tenants had been made redundant and had told her they couldn’t pay the full rent.
Although we weren’t managing the property, I had convinced the landlord to arrange a rent protection policy at the start of the tenancy, so the landlord made a claim to Paragon FCC.
They subsequently recovered the missing rent within a few weeks, as well as receiving nearly £4000 in further payments, which left them without any rent arrears whatsoever.
The tenants were not evicted as they had managed to find new employment and they repaid the insurance Company in full. They found a guarantor, were re-referenced by Paragon FCC and a new insurance policy was issued.
In our next email we’ll talk in more detail about why an inventory is so important and what the ramifications are if yours isn’t good enough.
We're always willing to offer our knowledge and expertise about lettings and property management. So if there's anything at all you need to know, please get in touch for a chat as we're nice people.
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