Do I Need Landlords Insurance - Yes You Do
Nobody said that being a landlord was easy however with landlords insurance you can at least have a chance at making things easier for yourself. As a landlord you have a whole range of responsibilities and if you are just starting out – you will be wearing a lot of different hats which can be tough.
However we all know how ultimately rewarding being a landlord can be; both financially and from the sense of wellbeing that that derive from helping your tenant have a fulfilling tenancy with you. We all know that a happy tenant is ultimately one who pays the rent on time every month without fail. By dealing with tenancy issues promptly and professionally you reduce the risk of financial loss through the tenant not paying rent there are certain risks that are still beyond your control.
Unless you have a crystal ball and can predict the future (if so please tell me the lottery numbers for the next 9 weeks) then you will still be blindsided by problems that come out of the blue and this is where those without landlords insurance flail around in a panic like a trapped wild animal; however those who have taken out buy to let insurance can just relax with minimal stress knowing that your insurance company is dealing with the issues.
Landlords insurance varies in the depth of cover and depending on which policy you take out obviously defines what you are covered for. Personally I always go for the most comprehensive policy that money will allow because it’s sods law that if you leave off the legal protection then you will suddenly be presented by a situation where you need it.
There are some policies that every landlord should take out, these might include -
- Employees Liability Insurance
- Public Liability Insurance
- Material Damage Insurance
- Motor Insurance
If you are a landlord and you haven’t got some or all of these then you might want to consider getting them pretty sharp-ish.
What you ultimately need to realise that you don’t play at being a landlord – you need to take it seriously because you are responsible for people’s homes; even if they are only temporary and without proper protection you could be leaving not just them but also yourself up the creek without a paddle.
The problems that you ultimately encounter as a landlord are common and that’s why you need to be fully covered - don’t think that you won’t experience a property being broken into or flooded or damaged because on a long enough timeline you will and when you do; you will be grateful of all the insurance that you took out.
A Beginners Guide To Buy To Let
After a few emails from friends and family I have finally decided to put together a beginners guide to buy to let.
So how does the buy to let work? Well basically it’s exactly the same as buying a house - you find a property you like, you pay a deposit and then you mortgage it. Actually it’s not that simple and the mortgage type does vary a little. But basically the main aim is to get the monthly rent payments to cover the mortgage costs plus a little more. Most lenders will look for the gross rent to cover at least 130% of your mortgage payments.
Easy right? Well actually no it’s not that easy - the first major trapping is the mortgage itself; if house prices fall (as the have been) or you struggle to rent the property then you would either have to inject cash yourself or even worse have to sell the property for a loss.
Another thing you don’t want to forget about is periods when you can’t get a tenant; during these periods you will be responsible for covering the rent to make mortgage payments. Another matter to consider is having a budget set aside for repair work, legal issues or furnishing the property.
Fool.com suggest taking on more properties in your portfolio to cover the possibility of having an empty property but this also means you are ramping up your financial risk, debt and maintenance work.
You can reduce your risk by having more several properties, allowing you to ride out periods when you don’t have tenants in one property, for example. But obviously this means you have to take on more debt and it will take some time, possibly a few years, to find and buy a small portfolio of properties.
Fool.com
Using a Buy To Let Agent
So you have your property and now you need to fill it with a tenant; personally I use buy to let agents to help me save time but obviously there is a cost involved with this (10%-15%). However there are a number of websites on the internet that can help cut out the middle man and help you find a tenant. If you do choose to use an agent make sure that they are registered with a proper industry association, such as the Association of Residential Letting Agents (ARLA).
Property Tax
Any profit that you make from your property is subject to capital gains take. You also have to pay tax on the rent you receive, after deducting for interest payments, letting fees and so on. Again, personally I have an accountant to who takes care of everything for me and believe me; they are worth their weight in gold.
Landlords Insurance
Finally you will need landlords insurance (a topic we have discussed in depth in the past.)
House Insurance For Landlords
House Insurance For Landlords differs substantially from house insurance for house owners; mainly down to the fact of what you are using your property for.
Home owners live at their home and so don’t draw any direct income from the property; the only time they are likely to see a direct financial benefit from their house is if they sell it and make a profit on that sale.
However landlords are different from home owners due to them extracting an income from the properties that they let. Naturally you will want to protect this income should the worst happen. This is why you need House Insurance For Landlords or as it’s commonly known landlords insurance.
What Landlords Insurance Covers
So what does landlords insurance cover? Well as we touched upon in our landlords insurance basics post - house insurance for landlords covers you both financially and covers you for any damages or costs that you may be hit with.
Getting The Most From Insurance For Landlords
Basically as we have said many, many times before on this site; the best thing that you can add to your policy is legal expenses cover. You only need to have one bad tenant who refuses to pay rent or causes you to take legal action and you will be grateful that you have it.
We will discuss legal expenses cover in another article because it really is a vital addition to any house insurance for landlords.
Landlords Insurance - The Best Policy
To find truly great landlords insurance, you will need to really take some time to educate yourself and discover the best policy for you. We, of course, will help you with this journey by bringing you everything that you need to know to find the best landlords insurance policy for you.
During the next few posts we will be helping you find the best landlord policy. To do this we will be gathering landlords insurance information for you and putting it all up right here for you to consume.
We will be bringing you some great exclusive prices that you wont find anywhere else, as well as news and reviews. This will hopefully give each of you a chance to see what’s out there and can help you to get to know some of the options available to you.
Landlords insurance can differ from company to company so we aim to help you find the right insurance for you. By finding the right policy you know that you are safe should the worst happen to your buy to let property.
In order to get the most from this site you will need to check back often. We don’t have all the best offers up yet but we will in the near future. We will also keep you posted with news and information about the buy to let market and tips on how to get the most from the market.
Landlords Insurance Basics
Landlord types vary from person to person. At one end of the scale we have the individual who is renting out a second home and at the other end there is the hight flying property tycoon with an diverse and profitable portfolio of trendy dockside apartments. Regardless of the type of landlord or how many properties they own every property owner who is buying to let needs landlords insurance.
As a landlord you are seen to be using any properties as an extra source of income and you will need to protect this; however a standard home insurance policy isn’t adequate cover for a property that you are driving income from. For a residential property you need landlord insurance policy is what is required.
Once you have you landlords insurance policy in place, you can relax; safe in the knowledge that should any damage occur to the property you will be adequately covered and saved from any financial inconvenience.
What Landlords Insurance Covers
One of the best ways to understand how lifesaving landlords insurance can be is to think of it like this -
A property you own is destroyed by a fire, flood or any other disaster that would cause your tenets to move out; the builders take six months repair all the damage. Well landlords insurance covers not only any costs to repair the property but it also covers any loss of rent that you might incur.
Landlords Insurance Legal Expenses
Another great benefit of landlords insurance is that it also covers you for any legal expenses that you may be hit with. Say you have some kind of fall out with your tenets and they refuse to pay their rent. All the legal costs that you acquire are paid for; this is of course based on you adding the additional legal expenses cover to your policy.
As you might have guessed; I always add legal expense cover to my policies - as anyone who has experience of the buy-to-let market knows; not all relationships with clients go so smoothly and it’s times like this that landlord insurance is worth its’ weight in gold for the little extra it costs to add your policy.