Hi Folks
Just been reading the other post on Landlord’s Insurance. They were all so busy recommending each other’s insurers, nobody so far has asked the obvious question: Is it worthwhile or just a ripoff?
I’m a fan of Peter Spann, who says he wouldn’t be without it for quids. This is going to be one of the few times where I beg to differ from another substantial and experienced property investor.
With over 20 years of being a landlord with a reasonably large rental portfolio, my wife and I have only ever had 2 bad tenant experiences. Because we don’t pay landlord’s insurance, we figure we’re well ahead.
What do others think? I’d love to hear from many of the long term, highly experienced landlords on this forum.
Cheers
GregHi Greg,
I for one don’t mind paying landlord insurance as for $220 a year its only a small expense.
Plus as you would know is tax deductable.
Every single property I buy I will have landlords insurance for.But can see your point if you had say 100 properties.100 properties is $22000 a year.
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http://www.growyourwealth.infoHi Greg,
Long time no speak!!! [biggrin]
Okay okay, back to business…..with regard to landlord’s insurance and the question of “is it worthwhile”??? Let me paint a picture for you:
I was an 18 year old kid eager to tissy up her first property (initally PPOR) thus spent a fortune restoring the old girl back to her original glory; it was National Trust material!!! Anyway, after a while I decided to keep moving forward and turn it into a revenue generating IP to recoupe some of the money poured into it. So far, all sweet right??? Wrong!!!
First lot of tenants ever, and just my luck, I landed the tenants from hell who after much legal intervention I finally managed to have evicted, but not before they took it upon themselves to leave me a parting gift…by totally trashing the property, and I mean REALLY TRASHING it!!! To the tune of 11k and whats worse, if that wasn’t bad enough, the next day they came back and finished the job…torching it to the ground; it was a total write off!!! [bawl]
Needless to say, building insurance covered the fire damage and most of the internal fittings / fixtures but not the malicious damage/vandalism which meant I was going to have to cough up the difference of about 9k!!! [blush2]
So now you tell me…that is, let’s do the math:
If I had paid (lets say as per Flash’s example of) $220 per year x 23 years I would paid approx. $5060 which is still alot less than the 9k I had to fork out. Furthermore, not only would this cost have been considerably less (as the premium would not have been 220 then) but I would have been even better off because the lost rental income for (at least part of) the 6 months would have been reminbursed by the insurer.
But hey, I know you’re thinking it only happened once in 23 years of investing; so guess I was lucky (although I didn’t feel so at the time). IMO a small premium like $220 per year is good value for my peace of mind (SANF). After all, it only takes one major event such as this, to illustrate the value of adequate coverage.
To that end, if you are going to be complacent for the sake of saving a few dollars, then that’s fine but just remember, don’t bitch about it later when (and if) tragedy strikes!!! Remember too that you are playing russian roulette, and that the larger the portfolio the greater the risk exposure which in turn can leave you with more than your ass out in the cold if the weather changes!! [eh]
Cheers,
Jo
Originally posted by Monopoly:Hi Greg, …I finally managed to have evicted, but not before they took it upon themselves to leave me a parting gift…by totally trashing the property, and I mean REALLY TRASHING it!!! To the tune of 11k and whats worse, if that wasn’t bad enough, the next day they came back and finished the job…torching it to the ground; it was a total write off!!! [bawl]
…just remember, don’t bitch about it later when (and if) tragedy strikes!!! Remember too that you are playing russian roulette, and that the larger the portfolio the greater the risk exposure which in turn can leave you with more than your ass out in the cold if the weather changes!! [eh]
Hi again Jo
Brrrrrrrr…… Ass out in the cold? And the weather changes? Love your metaphors. I get the picture (more than you probably realise).
Did you see the movie “The Race”? When the family of four escaped the neo-Nazis in Barbie’s Museum (ie., Klaus Barbie, the Nazi, not the Mattel Barbie) by driving Adolp Hitler’s Mercedes down the highway chased by a throng of vengeful “Dikes on Bokes”? ROFL!! LOL!! (see, I can do it!) I’m thinking of a few scenes before those comedy classics, when the father made his daughter stick her backside out the back window to go to the toilet? Ass out in the cold indeed…. Very, very funny. [cap] [blush2]
IMO? SANF? [blink] Help me out, will you Jo? I get ROFL, OPM etc but SANF and IMO leave me with that not-so-cute, “thank God his mother loves him” quizzical expression on my face (ie, DNC = Do Not Comprehend). I’ll get with the program one of these days!!
Boy, that’s some horror story!! 18 years old, and they TORCHED IT? MONGRELS!! Did the cops get them? Any prosecution? Or did they escape your vengence with some lame excuse? My mum had a similar story, but again, the real exception to her whole investing story.
I love your comment:
” …just remember, don’t bitch about it later when (and if) tragedy strikes!!! Remember too that you are playing russian roulette….”Maybe I’m just lucky with only 2 negative stories in 20 years (and these were mild compared to yours, only about $1500 – $2000 each = $4,000 over 20 years = bulk savings).
I know it’s all about sleeping happily at night, but when I’m that far ahead, I figure one of these days I’ll be adding a horror story like Jo’s to my portfolio. And you’re right, if and when it finally happens, I’ll have no grounds for grumbling, it’s just that I figure even then I’m still way, way ahead.
Can I be cheeky and suggest that your maths is a bit skewed? I KNOW you’ve got more than one property in your portfolio Jo (congratulations!) Surely all of us have got to do our actuarial calculations like the insurers do (ie, over the long term, and across our whole portfolio). We can only beat them by doing it the same way they do, right?
How about including in your calculations all the money you would have saved over those same 23 years if you hadn’t paid Landlord’s Insurance on all your other properties.
For my money, it’s a bit like those smart cookies who don’t have to pay health insurance premiums because they’re so disciplined that each week /month they put aside the equivalent premium into a separate investment account over 20 – 40 years and save heaps (I’ve never had the discipline to do it, but I’ve sure enjoyed using the cashflow savings by not paying landlord’s insurance to buy more and more +CF properties) [buz2] [cigar].
What do others think? More importantly, how would everyone’s savings have stacked up ACROSS YOUR WHOLE PORTFOLIOS in the long term?
Cheers
GregOriginally posted by Greg F:I’m thinking of a few scenes before those comedy classics, when the father made his daughter stick her backside out the back window to go to the toilet? Ass out in the cold indeed…..Very, very funny.
Can’t think of the first one off the top of my head, but the one mentioned above I watched only recently yet still can’t think of the name [blink] something about a race…yes it was very funny; loved it!!!IMO? = In My Opinion
SANF? = Sleep At Night Factor
Did the cops get them? Any prosecution? Or did they escape your vengence with some lame excuse?
Yes they were prosecuted and jailed (not for long though; I remember thinking they would be out in less time than it would take to build my new home) [glum]Can I be cheeky and suggest that your maths is a bit skewed? I KNOW you’ve got more than one property in your portfolio Jo (congratulations!) Surely all of us have got to do our actuarial calculations like the insurers do (ie, over the long term, and across our whole portfolio). We can only beat them by doing it the same way they do, right?
Yes Greg you are quite correct, and yes the figures were relative to ONE IP, and that when you do the math for “multiples” it adds up to a pretty penny.Okay chief, let’s run with that…..let’s assume UN-AVERAGE investor with a sizeable portfolio of say 20 x IPs @ $220 each annually x 20 years…shocked2]WOW!!! Yes it’s a sh**load…a staggering $88k…(or a nice little deposit on another IP, if not another IP depending on where you buy) but don’t forget, insurance is a claimable tax deduction, so that changes things slightly.
When you are calculating cost of annual premiums for multiple properties don’t overlook their tax deductiblity (tangible savings) as well as the obvious SANF (non tangible saving, to one’s sanity!!)[wacko]
It is always easier to see the advantage of money saved while all is going smoothly, but it’s only when your hand is forced into your pocket that you really appreciate the benefit of having stitched up the lining in your pants early!!!
But at the end of the day it is up to the individual; the ball(s) are in your court; play it as you see fit!!! As long as you play by the rules that satisfy your peace of mind, then you are a winner every time IMO. [sunny]
Cheers,
Jo
I have landlords insurance for the public liability side of things. eg. if the tenant electrocutes himself or something like that I am covered.
I dont have rental insurance. I always employ a property manager and its their job to ensure we have reasonable tenants. The only rent I have ever lost was from my brothers ex-girlfriend and you can read about my experience in the Tell Tales Forum.
Yack,
Why pay for landlords insurance for the sake of public liability which is part and parcel of most building insurance cover???
You could be saving yourself some money.
As for rent defaulting, I don’t take out landlord insurance solely for this reason (in fact, I could not care less about this aspect) it is more about “malicious damage” which many insurers do not cover, or if they do, it is not adequately enough for my liking.
Cheers,
Jo
Hi All
I had Landlord’s Insurance with St George but when my tennant did a runner they wouldn’t pay out for loss of rent because he wasn’t courteous enough to leave a forwarding adress for me to send a breach notice to as per W.A. Tenancy Act.
So after learning the hard way I still have Malicious Damage Insurance but decided against Loss of Rent insurance.
Fitz
Fitz,
If you go through the correct procedure with the serving of the breach notices ( or your PM does) then when you front up to the magistrate he will find in your favour….hence this should be sufficient grounds for the insurance company to pay up…Reagrding the premium for a portfolio of 20 IPs’….
surely you would be in a good poition to negotiate a discount on a bulk policy ?Hell!! you could almosy underwrite it yourself and start up your own insurance company !!
Cheers
Kevin..Hi KP
Have been thru the courts. Tennant was a no show and the magistrate found in our favour but even this is not good enough for the insurance company.
FITZ
Originally posted by kp:Regarding the premium for a portfolio of 20 IPs’…. surely you would be in a good poition to negotiate a discount on a bulk policy ? Hell!! you could almosy underwrite it yourself and start up your own insurance company !! Cheers, Kevin.
Hi Jo and all…
And kp… Long time no speak! [clown][bandana][bike2]
What you said about setting up your own insurance company is precisely what I was getting at once you own an impressive portfolio.[cowboy]
Jo, I’ve never actually crunched the numbers on my 16 properties, but I KNOW I’m way ahead. Please note:
1. Eight of my “16 properties” are 2 blocks of 4 non-strata units. Because they represent 15 incomes (1 property = PPOR), and my property managers still deal with 15 tenants, I see my 15 tenants as 15 separate assets.
2. I have no intention of stopping at 16 properties now I’m starting to experience the “snowball effect” [hairy2] A few hundred IP’s over the next few years is more my style! Some of us might even consider setting up an insurance company for all the people on this forum. [gossip] kp sounds interested… Waddya reckon, mate? Any other takers?Does anyone know a reasonably accurate price for landlord’s insurance on a block of 4 units?
And the 2 bad stories I mentioned I’ve had over the past 20 years? One of them is happening right now. My property manager is going through the tribunal etc on my behalf, but in the end it’ll probably end up only costing me around $1500 (tenants have domestic violence issues, husband flew into rage and put his fist or head through my gyprock wall etc etc and is behind in rent). Even so, I have no intention signing up for landlord’s insurance.
Great response so far guys and gals, but there are a heck of a lot of wise, experienced heads on this forum who DO have 200 – 300 properties right now who haven’t thrown their two bob’s worth in yet. I for one would love to hear your thoughts.
Cheers
GregHi All
Just a quick question Greg, Do you have any type of insurance like car, building etc or is it just landlord insurance you dont have. Do you have contents insurance for the properties.
The reason I am asking is that I see it as just another piece of the investment puzzle. I have comprehensive car insurance because I cant afford to be without my car. This is the same rational for all the insurance I have but to be honest I have probably only claimed on all of my insurances a couple of times. So if I had just paid all this money into a bank account instead I may be way ahead but it is only with the value of hindsight that I can say this, I could have boutght an investment property and had a tenant do a runner a couple of months later after smashing walls and trashing the place then I would look at this insurance as a life saver.
ErikaOriginally posted by Erika:Hi All
Just a quick question Greg, Do you have any type of insurance like car, building etc or is it just landlord insurance you dont have. Do you have contents insurance? ErikaHi Erica
Good question. We’re not anti-insurance, and have a whole battery of insurances in place, just no landlords insurance (i.e., no rent insurance, no malicious damage).
Over 20 years we’ve consciously developed the attitude of seasoned, FEARLESS investors who take all reasonable precautions via rigorous due diligence, and then act. When we were new at this game, we WORRIED:
1. What if interest rates rise?
2. What if we have long term, chronic vacancies?
3. What if tenants trash our place?
4. What if tenants don’t pay rent?The answers:
Question 1: Interest rates will always rise AND fall, just keep a comfortable buffer and don’t over-commit
Question 2: We enjoy over 99% long term occupancy rates by following 3 simple rules:
a) In the good times, charge market rents
b) In tough times, reduce our rents 10% – 15% below market to ensure we’ve ALWAYS got quality tenants
c) Never self-manage. Good property managers are worth their weight in gold.
Question 3: We take a calculated risk on it
Question 4: We take a calculated risk on itSo far, it’s paying off.
Cheers
GregOriginally posted by Greg F:What do others think? I’d love to hear from many of the long term, highly experienced landlords on this forum. Greg
Hi Guys ‘n Gals
May I repeat my earlier request for investors with REALLY LARGE RENTAL portfolios [toff](much bigger than our relatively modest portfolio) to give us your experiences, advice etc re landlord’s insurance?
I’d love to hear others either refute or support our relatively +ve experiences as landlords, leading us to look at Landlord’s Insurance with a somewhat jaundiced eye. [curtain][smarty][sneaky]
Cheers
GregI think landlord’s insurance is probably essential when you’re starting out. Despite doing all the right things with property managers, our first two tenants broke leases in our first place, and we had to evict a tenant from our 2nd. We claimed on all 3, they were each about $1000-2000. At the time that was a lot of money to us, and it hurt to have lost so much. Since then we’ve had no problems at all, and haven’t claimed again. Nowadays, with a much larger portfolio, I could absorb those few thousand dollars without much fuss. At the beginning, I’d have been stuffed without landlord’s insurance to cover the loss.
So yes, I do think your perspective changes with the size of your portfolio. However one thing is a must – I ALWAYS have building insurance, with an extremely good public liability cover.Keep smiling
Felicity
Originally posted by FW:However one thing is a must – I ALWAYS have building insurance, with an extremely good public liability cover.
This is the critical point – while we can all afford to cover a few thousand here and/or there to varying degree. Having a public liability claim come across your desk could run into the millions depending upon the situation – that is where the ‘insurance must have’ lies.
Derek
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Originally posted by FW:I think landlord’s insurance is probably essential when you’re starting out…. So yes, I do think your perspective changes with the size of your portfolio. However one thing is a must – I ALWAYS have building insurance, with an extremely good public liability cover.Felicity
Hi Felicity and Derek
BRILLIANTLY summed up, friends.
Thank ALL of you for refining my comments with really sound advice for the newbies as well as the old pros.
Cheers
Greg
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