Warning: Your landlord insurance policy may not be up to scratch
Keep things official
You need a tenancy agreement. Some insurance policies will not cover you if there is no official tenancy agreement signed by both you and the tenant. This is especially true if you need to claim for rent default and theft by tenants.
What’s more, if you don’t have an official tenancy agreement you will probably not be able to recover your losses through the courts, either. It could be a big mistake to just take someone at their word and shake on it.
Watch out for pets
Some policies do not cover damage by pets – including the pets of your tenant or their visitors. Your tenant might not have pets, but if their mother brings her pet bulldog whenever she visits, you may not be covered if it … “has an accident” and damages the carpet, for example.
Damage caused by animals is a common exclusion so it’s important that you always read the product disclosure statement before choosing an insurance policy.
Other policies only exclude damage caused by certain types of pets – say dogs, cats, or birds – so you might be able to get away with renting to a guinea pig or a bearded neck dragon. But it’s always worth phoning your insurer to check before opening the door to a tenant with a pet.
Where are all the tenants?
Some policies may not cover extended vacancy, so that the insurer won’t pay if you’re between tenants for a while and there is a flood or a burglar breaks in and steals your TV. Look carefully for a policy that will cover you whether there’s a tenant there or not. If you’re expecting to have a “gap” in your rental year during a certain period, or you’re having trouble finding your next tenant, it could save you a world of financial hurt.
What are the conditions on claiming loss of rent?
There are a few potential traps when it comes to how a policy will cover you for loss of rent during tenant vacancy.
Some policies do not cover an extended period of vacancy, while others we’ve rated cover you for up to a year. So landlords need to check carefully the terms and conditions around how long you can claim loss of rent for.
Some policies require you to be actively searching for a new tenant, if you want to be able to claim loss of rent for the full time that the investment property is vacant. There’s no time to sit around waiting for a new tenant!
Does it cover your legal costs?
Some policies do not cover your legal or representative costs if you have to go to tribunal, court, or a sheriff/bailiff in order to evict a tenant or pursue other damages from a tenant.
Get insurance before they move in!
One last trap to be aware of is that you cannot simply take out an insurance policy once you realise a tenant has gone rogue. If they are already defaulting in paying rent before you take out the policy, the insurance provider might not cover you for any loss of rent.
Compare Landlord Insurance with CANSTAR
Source: CANSTAR
Warning: Bad Tenant Ahead
They don’t fill in the application fully
If someone questions the need to fill in an application at all, or only fills in bits of it, there may be a reason they’re reluctant. Either they’re too lazy to fill in a form and they won’t treat your place well, or they’re trying to hide something by only giving you half the story you’ve asked for.
You may come across this when renting to family or friends, but even when you know someone well, the best approach is still to do things “by the book”. If they question your application process and they think they know better how the process should be done, chances are they might question you the same way about other situations down the track. Don’t make anyone think they can get around your usual application process, or they’ll think none of your usual rules don’t apply to them.
Look at it this way – your rental property is a source of income so you should treat them as if you were a business hiring an employee. Would you hire someone who didn’t fill in the job application fully?
They show up late or are slow to call you back
If they can’t make a time to meet you and stick to it when it’s something as important as finding somewhere to live, how do you think they will respond to other needs? They may be inclined to pay their rent late, too.
And if someone doesn’t call you back when you call to offer them the tenancy, it’s a pretty sure indicator of their level of respect for you. When you call them because their rent is overdue, they may wait a few weeks to call you back once they’ve paid you – or they may not call you back at all.
They show up with a posse
How many people will be living here – two or twelve? Are you looking at loud parties every weekend followed by you having to deal with complaints from all their neighbours? On the flip side, be wary if they show up alone to an inspection but mention that several people will be co-renting with them. You need to meet and assess every person who will be living in your property.
Their car is a mess
Many landlords will take a quick peek at the backseat of an applicant’s car when meeting in the carpark or the driveway. It may sound crazy but apparently how people treat their car can be a good indicator of how they treat a rental property.
They move around a lot
Potential tenants who have had more than two addresses during the past two years may have broken leases or been evicted more than once – a big red flag.
This can also apply to changing jobs often. In the post-GFC economy, people are much more understanding of people who have multiple jobs, but you should still check that their current income is regular and they will be able to pay rent.
They don’t seem to care that much
A potential tenant who doesn’t seem to care what the place looks like probably won’t care about maintaining the condition of the place once they’re in. Especially if you have some minor repairs that will need to be done soon, their apathy about when or how the repairs will be made is a big warning sign.
They’re in a big hurry
Don’t let anyone rush you through the proper verification process. Some applicants might impose a sense of emergency on a potential landlord, who later – too late – might findg3 out that emergency was an impending eviction.
They weren’t on their previous lease
Someone who was living with a friend or partner and contributing to their rent may not have actually been listed on that lease. Dig deeper into what the real situation was and why they have had to move out on their own. How did they pay rent, and can they prove that they were regularly paying rent?
They don’t want to pay full price
Two types of people will haggle excessively over the price of rent and bond: someone who can’t really afford to live there, and someone who is used to bullying to get their way. Neither person is likely to have a good working relationship with their landlord.
This should be an even bigger red flag if they ask you about the “flexibility” of the price before they’ve even seen the property – it means they don’t really value your property.
And someone who haggles over the bond or asks if they can pay in instalments? Forget about it – either they don’t have the money and won’t be able to pay rent reliably, or they know they won’t leave the place in good enough condition to get the bond back so they want to pay as little as possible.
They ask about smoke alarms or sprinkler systems
Indoor smokers could ruin some of the value of your property, so be aware. You should be alert if they eye off your smoke alarms to see if they can disable them easily, or ask questions about whether the fire sprinklers in the ceiling “really work”.
They hear things you don’t hear
If they hear sounds or smell smells you don’t during the inspection, they’ll keep hearing and smelling them after they move in. You can live without those endless complaints!
They bag out their previous landlord
Tenants may complain about their previous landlord, or say they were “unfairly” kicked out. This kind of victim posturing can indicate a person doesn’t take responsibility for their own actions, and you may soon regret renting to them.
Their kids run wild and free
Kids who climb over things with sticky hands during an inspection will act at least as wild when the place is their home. And parents that let their kids treat other people’s property badly (certainly the minority) are probably not the type of parents you want as tenants.
They would have a long drive to work
It sounds odd, but if the breadwinner is going to be making a long commute to and from work, it means a lot of time away from family each day. If that adds up to a sudden realisation that it’s too much to handle, you might soon have a vacancy on your hands.
More Tips for Landlords on the CANSTAR website
The post Avoid the traps of landlord insurance appeared first on Canstar.