Insurance essential for landlords
IT'S essential to protect your investment with the appropriate insurance, which includes building, contents, public liability, workers' compensation and loss of rent due to damage or tenants simply not paying.
Insurance is a very low-cost item for a landlord, yet one in five Australian landlords don't have it, according to a survey by research house, BDRC Jones Donald.
Skimping on insurance will save you a few hundred dollars in the short term. But if you have an issue with your investment property or tenants, having no insurance could result in a significant proportion of your income being wiped out.
At McGrath, we recognise that insurance products can be tough to compare and most landlords don't have the time to trawl through product disclosure booklets to identify which policy is best.
So we got together with a reputable insurer to develop an insurance offer for our clients, and we believe it's one of the most comprehensive policies of its type in Australia.
The policy covers all the necessary items, plus some other situations we wanted included for our clients. This one package costs a tax-deductible $310 per annum.
In the event of a tenant leaving without giving notice, the insurance covers you for at least 15 weeks of rent while we find you another tenant, which may only take a few days to a week.
If there's damage to your carpet, curtains or blinds, our policy offers up to $50,000 in repairs minus a small excess.
Accidental damage is also covered in this policy, so make sure it's covered in yours.
It's also worth noting that insurance doesn't just take the form of an insurance policy. There are some other ways you can "insure" yourself against costly problems.
Hire a great property manager who is going to vet your tenants thoroughly. A mature and responsible tenant with a clean history is unlikely to suddenly stop paying rent or cause malicious damage to your property.
A good property manager will also conduct regular inspections and look for issues that might require small repairs now to prevent a much bigger problem later.
When fitting out your investment property, make decisions that will reduce the impact of accidental damage.
Spilled red wine on a white carpet is going to be an issue. If it spills on a dark carpet, you're less likely to have to replace it. There are many different types of carpet out there and some are more resistant to spills, depending on the material they're made of, e.g. nylon versus wool. Check these things out before deciding what to buy
Finally, don't over-capitalise when renovating an investment property. Say your investment is worth $500 per week. Don't spend thousands of dollars on an expensive look that you don't need for this type of property.
A $500 per week tenant is not going to care whether you have Caesarstone benchtops or a great-quality laminate benchtop with a Caesarstone pattern.
Before you renovate, talk to your property manager about which enhancements will make the property rent for more and which ones are unnecessary.
John McGrath is the chief executive officer of McGrath Estate Agents