Prevention is better than cure. Before you rent out your property, make sure you have the right insurance cover. According to Terri Scheer Insurance, the largest provider of landlord insurance policies, only one in five landlords has landlord insurance.
Proper insurance is the most fundamental of the steps investors must take to protect themselves from the problems of owning tenanted properties. The most common problem with tenants is rent arrears, followed by malicious damage – basic items covered by standard landlords insurance policies.
As well as building replacement in the event of fires, floods and natural events, most landlord insurance policies will cover issues such as loss of rent, death of a tenant, replacement of keys and lock repairs, legal expenses and rubbish removal.
Investors need to be careful about what is and isn’t included in their insurance. The policy may not cover damage caused by pets or vermin. Maintenance and repairs carried out by the tenant may not be included. And short-term rental situations, such as Airbnb, may not be covered.
If the rental property is a unit, landlords need to sure about what the body corporate insurance does and doesn’t cover – and ensure that the premiums on the body corporate’s insurance are kept up-to-date.
The next consideration is the tenancy contract. The right tenancy agreement will save a lot of frustration and angst.
Each state or territory has specific tenancy laws which protect both the landlord and the tenant, and there are various terms that you can legally include in your tenancy agreement. If these laws are breached by the tenant, you will have the right to issue a breach notice.
Some terms to include are:
- The rental amount and how frequently it must be paid.
- The tenants’ duty to inform the landlord or property manager of maintenance issues.
- The tenants’ duty to pay for any damage other than fair ‘wear and tear’.
- The tenants’ names, and the number of those who can live in the property.
- The tenants’ rights and responsibilities regarding visitors and their conduct.
While some landlords like to control the management of their asset themselves, appointing a specialist property manager makes sense. A good property manager offers experience and knowledge of the various tenancy laws. They can quickly identify and resolve problems.
A good property manager will vet prospective tenants by checking databases which list tenants who have caused problems with rented properties. A diligent property manager will also check references and sight original identification documents before accepting a tenant.
Once the tenant has moved in, regular inspections are vital to ensure the property is being well-maintained. These are normally arranged through the property manager who should follow correct procedures by giving the required amount of notice prior to the inspection and carrying out the number of inspections prescribed by the law.
Of critical importance to landlords is keeping and maintaining accurate records such as: the lease agreement, receipts for rent paid, receipts for maintenance carried out, processing the bond payment correctly, keeping track of specific dates if the rent does fall behind and the date that any breaches were served on the tenant.
Once again, this burden can be lightened by engaging a property manager who uses technology to check their rent roll or trust account on a regular basis, and has strict collection policies which adhere to the state’s legislative procedures.
However, once the right tenant is found, you need to keep them happy. “If tenants are happy they may be more likely to pay their rent on time, stay in your property longer and look after it as if it were their own,” says Carolyn Parrella, Terri Scheer Insurance executive manager.
And a well-presented property is more likely to attract a good tenant. Parella urges landlords to attend to maintenance issues promptly and be aware that injury or loss as a result of a safety hazard might result in costly legal claims.