Landlord Insurance - Don't Forget What Isn't Covered!!

[Kristine..]

Yeah, so over this weekend the Property Manager has organised for a walk-in container sized skip plus a carry and cleaning crew of six blokes to empty out one of our houses, strip it back and scrub it clean

That is so that the plasterer, painter and electrician can get in next week to do the repairs from the wilful damage rampage

The nearly $8,000 in unpaid rent and a few extra thousand in wilful damage will be covered by insurance

But the nearly $4,000 in cartage and cleaning will be charged to us

This is a character Edwardian cottage and the last time this property was valued it came back at the prestige property level.

Looking at it today, even with professional property management, it only takes an hour and a deliberate decision to wreck a house for the damage to be done. Throw in tenants doing a runner and abandoning serious quantities of furniture, junk, recreational equipment (including a boat!) and soiled personal belongings and we are off to stock up on supplies of spinach!

Property investing is not for the feint hearted. If it was easy, everyone would be doing it.

Most people treat a property with the respect it deserves but you get the occasional tenant/s who behave appropriately for years, and suddenly turn feral. Must have been something in the water.

Make sure that you have sufficient and appropriate Landlord Insurance and that your Property Manager conducts regular inspections. You can't insure against rubbish removal or general filth but at least you can make sure you are insured for what you can cover

Oh, well, I was just about ready for the next challenge.

Urk.
Kristine

 

[Shahin_Afarin]

You are so right Kristine especially about the Property Manager conducting regular inspections. I have multiple IP's and I have had to let many PM's go as they were simply not inspecting the property once every few months.

Unfortunately I have personally experienced this (on this scale) and have had many investors in a similar situation.

 

[fisherman]

My impression is that PMs are not supervised and supported. The tradition continues that the rent roll is there to pay for the office for the property sales windfalls.

The work of PMs is demanding and they are up against professional tenants and others who simply cannot manage their own lives. Regulations and interpretations by Tribunals have made the task of management very complex and error prone, with free kicks easily available to a canny tenant.

What should a professional PM be paid and what business model delivers that? Certainly not the traditional ones that are about where the property management hangs off a sales office and the staff turnover reflects the unsatisfactory nature of the arrangement.

In the last year we had a recently renovated house destroyed (Gold Coast). Last week we had two demands from different PMs for plumbers, both for blocked drains. One was from fat down the sink and the other was the usual accumulation of hair in a shower drain. The PMs were young replacements who had never managed a household themselves.

We gladly pay for professional management, but we cannot do anything about the many (and it is many) REAs who will not do any day to day supervision and succession planning.

 

[jim1964]

This happened also to my 1st invetment property in 2001,Aberfoyle Park SA.The PM,s at the time couldnt have cared less.Yes,the insurance covered a lot,but not the rubbish etc.This put me off for life,i thought.I didnt venture back until 2008,and now keep a cloce eye on the 4 ip,s.
Also i now only buy closer to home,within a hour,to do my own checking up.Works for me!

 

[SeafordSunshine]

Don't forget what isn't claimed


Dear Kristine,
Sorry to hear about the mess, from an empathetic position, I would have to say that for me at the time, I could only see a way forward by moving in myself to clean up room by room.
Middle of Melbourne winter, they wouldn't connect the electricity and phone for me for weeks, because of the tenants default in payment.
It just needed a good scrub (down to floorboards , as in lift the carpet and underlay, plaster the holes in walls, replace punched in door and sugar soap and paint walls and ceilings) to get rid of the dog smell kind of good scrub,
I did it, and rented it out.
I liased with the GIO LL insurance person.
What didn't kill me made me stronger,
and I kept my eyes on the prize,
sold December '10 handsomely
I hope this helps
Cheers Seaford Sunshine

 

[mystery]

I spend half my life these day's going in an cleaning and reno-ing our IP's after tenants have left a filthy mess with damage. It just seems to be the norm unfortunately and the PM's just shrug. We have changed PM's so many times, but I don't know, .. they all seem afraid to confront the tenants and all talk the talk when they meet you.

I have to go up to SE Qld shortly to completely go through a property due to the mess the tenant left, .. as we live on the far south coast of NSW it's a very long trip. Bugger the cost in future, we will be going on at least 2 IP inspections with the PM's at each property to ensure they do the inspection to our satisfaction, .. it's still cheaper than me having to fix them up.

It is getting to the stage where I think in a few years when we have seen some more growth we will sell the lot and re-invest in another form of wealth creation with no tenants.

Mystery

 

[Kristine..]

Yeah well ....

Final estimate of out of pocket costs to us is just a smidge over $10,000.

3 x walk in bins

10 hairy blokes working all weekend - the labour costs were over $6,000!!

carpet nuking yet to come

And this doesn't include the Rent Default and the Wilful Damage (plaster, painter, electrician) covered by CGU. All up cost probably close to $30,000.

For this, and may God forgive me, I shall pursue them to the ends of the earth.

Add to this the ongoing Commercial rental debacle, and the Land Tax bill (for which I don't even get a Library card!) and believe me, words have absolutely failed me.

Maybe I should just get a haircut and get a real job?!?

And I never thought that I would be saying this, but there must be an easier way to plan for not being on the Pension?

 

[missgreeneyes]

I'm with AAMI. I paid extra for 'tenant protection' which covers malicious damage.
I'm thinking of switching to Terri Scheer, which covers accidental.
But I'm still trying to find an insurance which has a 'close-the-gap' clause. I am looking for insurance which will pay out a landlord for the difference between the LL and strata insurance. eg if the strata doesn't pay the insurance and the building burns down, LL insurance will pay the different.

I have a question - If insurance doesn't cover malicious or accidental damage, what exactly does it cover then?

 

[brettc]

I'm with AAMI. I paid extra for 'tenant protection' which covers malicious damage.
I'm thinking of switching to Terri Scheer, which covers accidental.
But I'm still trying to find an insurance which has a 'close-the-gap' clause. I am looking for insurance which will pay out a landlord for the difference between the LL and strata insurance. eg if the strata doesn't pay the insurance and the building burns down, LL insurance will pay the different.

I have a question - If insurance doesn't cover malicious or accidental damage, what exactly does it cover then?

I'm not aware of a landlord policy that includes what you have referred to as a 'close-the-gap' clause but this sounds very much like Mortgagees Interest insurance. Essentially it is a cover that will pay if the body corporate/owners corporation fails to insure the property correctly, as far as I'm aware. In insurance terms I don't believe it is particularly expensive but not many people take it out, it used to be required by some lenders so that they knew they were protected in case of the body corporate/owners corporation insurance not covering the loss.

You can call one of our team on 1800 661 662 if you wish to get a quote.

As for your question regarding malicious/accidental damage. These terms in a landlord policy generally mean:

Malicious = Malicious Damage by the tenant
Accidental = Accidental damage by the tenant as many things cannot be proven to have been caused "maliciously"

These shouldn't be confused with what are covered under a "normal" home/contents policy. A normal "defined events" or "insured events" policy will not cover these, they will generally cover malicious damage by an intruder (but not the tenant), and will cover risks such as fire, storm and water damage etc. These are all listed as "insured events" in this type of policy. That's why investors need a "landlord insurance" policy, so that they cover damage by tenants, as well as loss of rent (due to tenant issues) as well as the defined events.

Landlord insurance policies then still of course vary as some will cover Malicious Damage only (by tenants), whereas others cover both Malicious and Accidental (which is critical).

Happy to provide any further info or clarify further if you wish, as it is a bit of a minefield.