We all want to get on the property ladder, and for some of us, the first rung just isn’t enough. We want to build a property empire and be landlords and let out our properties and just let the money flow back in. It might sound easy, but it isn’t that easy.
Have you ever watched the TV show Homes Under the Hammer? My partner and I watch it from time-to-time and enjoy it.
The presenters show various properties going to auction and who buys them and why they buy them. Many of the buyers are already landlords or property developers looking for new properties to refurbish and let back out. Some of the properties are in major distress and require a lot of work and money to finance the repairs.
It is amazing at the end of the show to see how some of the properties are transformed from inhabitable shells to lovely proper homes. And some are kept by the owners for themselves they are so nice, and some are to be let out.
One thing as a landlord you do need to keep in mind is having a specific mortgage for properties you plan on letting out, or a buy-to-let mortgage. These mortgages are for non-owner occupied buildings. Also, as a tenant your specific rights can be affected by the type of mortgage a landlord has if the landlord ever experiences financial difficulties.
But what could cause a landlord to have money problems, empty properties for one, or tenants not paying their rent. Landlords rely on the rent paid to them to pay the mortgage and the costs associated with maintaining the properties they have.
That is where landlord insurance comes into play.
There are various types of landlord insurance and different coverages based on the policies. Some policies may be for commercial buildings; office space and buildings let out to companies. There also is landlord insurance for private properties that are let to tenants living in the property, and also insurance to cover a landlord that may take in lodgers or rent out rooms in their own home they live in.
Getting the right type of coverage is important and will depend on the type of property and also the landlord’s needs. The main thing a landlord may want the insurance for is to cover their costs if there is no tenant living in the property, such as when one tenant moves out and there can be a delay in locating a new tenant. The insurance at that point may provide a certain amount of coverage or payments to the mortgage for the landlord, so the landlord is not out of pocket.
The insurance may also cover any damages the tenants may have caused to the property. Of course the landlord may have required a security deposit when the tenants moved in, but this security deposit may not cover all the damages that may have ben made to the property.
I let my house out a few times many years ago as I was working in another city and it was too far to commute to work. The first time I let it out was to a single mother with two children, and I thought that would work out well. She stayed one (1) month and left, basically breaking the tenancy agreement. But what was I really to do, pursue her for the remaining five (5) months? No, I just let it go, but it left me with a mortgage to pay and my rent at the flat I was now living in the other city.
The next tenant I had in was pretty good and lived there for a year; they paid their rent on time and left the house in decent shape. It was the last tenant I had that made me decide being a landlord was not for me. This tenant was perpetually late on their rent and fell into arrears at one point. I then had to go through the legal process of eviction, which was costly to me, and when the tenant from hell finally did leave, by being evicted, they had left the house trashed! No damage like holes in walls or broken windows, etc, but the house was filthy! It took me and my partner a few days to get all the garbage out and clean it to a decent standard again.
Had I taken out landlord insurance, if I was eligible, it would have made life a lot easier.
So if you have one (1) property to let out, or if you have 10 properties, or even if you are letting rooms out in your home, landlord insurance may be a good investment.