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Rental Property Insurance: Protect Your Investment Today

September 12, 2023 by Marco Santarelli

Rental Property Insurance

What is a Rental Property Insurance?

Rental Property Insurance

Rental property insurance is a type of insurance policy designed to protect property owners who rent out their properties to tenants. It provides coverage for damages or losses to the rental property caused by certain perils, such as fire, theft, vandalism, and natural disasters. Additionally, rental property insurance can provide liability coverage, which protects landlords from legal claims and lawsuits brought by tenants or other third parties who suffer injuries or property damage while on the rental property.

The coverage provided by rental property insurance typically includes the physical structure of the rental property, as well as any personal property that is owned by the landlord and kept on the property for tenant use, such as appliances, furniture, and fixtures. Some rental property insurance policies may also cover lost rental income if the property becomes uninhabitable due to a covered loss.

It's important to note that rental property insurance is different from renters insurance, which is designed to protect the personal property of tenants rather than the property itself. If you own a rental property, it's important to consider purchasing rental property insurance to protect your investment and financial interests.

Understanding Rental Insurance Coverage Options

Rental property insurance is essential for landlords who want to protect their investments from unexpected losses and liabilities. There are several types of coverage available with rental property insurance, each of which is designed to provide protection for different risks that landlords may face.

One of the most important types of coverage is property damage. This coverage helps landlords pay for repairs or replacement of their rental property if it is damaged by a covered event, such as a fire, storm, or vandalism. This coverage is essential for landlords because repairs to rental properties can be expensive, and damage can lead to lost rental income [1].

Another important type of coverage is liability insurance. This coverage helps landlords pay for legal fees and damages if a tenant or visitor is injured on their property. Liability insurance can also cover damages caused by a tenant’s actions, such as if they accidentally start a fire. Without liability insurance, landlords could be personally responsible for these costs, which could be financially devastating [2].

Finally, rental property insurance can also include coverage for lost rental income. This coverage provides landlords with compensation if their rental property is uninhabitable due to a covered event, such as a fire or flood. This coverage can help landlords pay their mortgage and other expenses while repairs are being made [1].

It is important for landlords to understand which types of coverage are included in their rental property insurance policy and which types of coverage may be necessary to add. Depending on the specific risks that a landlord faces, additional coverage may be required to fully protect their investment.

Choosing the right rental property insurance policy can be challenging, especially for first-time landlords. There are many factors to consider, including the size and type of property, location, budget, and specific risks that need to be covered. Here are some tips for choosing the best rental property insurance policy:

  1. Understand the coverage options: As discussed in the previous section, there are several types of coverage available with rental property insurance. It is important to understand what is included in a policy and which types of coverage may be necessary to add based on the specific risks a landlord faces.
  2. Shop around: It is important to compare policies and prices from several different insurance companies before choosing a policy. This can help landlords find the best coverage for their budget and specific needs.
  3. Consider the deductible: The deductible is the amount that a landlord must pay out of pocket before insurance coverage kicks in. A higher deductible will generally result in a lower monthly premium, but it may also mean higher out-of-pocket costs in the event of a claim.
  4. Look for discounts: Some insurance companies offer discounts for landlords who have multiple properties, have installed safety features in their rental properties, or have a good claims history. It is important to ask about discounts when shopping for insurance.
  5. Work with an insurance agent: An experienced insurance agent can help landlords understand their options and choose the best policy for their needs. They can also provide guidance on how to reduce risks and prevent claims.

How to Choose the Right Insurance for Your Rental Property?

The number one goal of your rental business should be to make money, not give it away.  One way to protect you and your investment is to have proper insurance in place. Let me introduce you to four insurances that you should consider.

A Good Lease

The first insurance that I possess is the insurance of a good lease and a thorough move-in inspection. More than once I have referred to the pictures of a move-in inspection to counter a tenant's claim about a pre-existing condition. I remember one time during a preliminary move-out inspection I noted a cracked ceramic floor tile. The tenant claimed that it was like that when they moved in.

I turned on my laptop, pulled up the appropriate picture from the move-in inspection, and proved to the tenant that the crack was not there when they moved in. The next insurance that I possess is the kind purchased from my friendly neighborhood insurance professional. However, take note that there is more to consider than just regular old homeowner's insurance. There are several kinds of insurance that you want to consider as a landlord.

Property Insurance

When it comes to insuring my personal rental properties, I have a landlord policy on each rental unit that I own, whether that unit is paid off or not. Landlord policies have the added benefit of additional liability protection for the landlord. You also need to ensure that each policy carries sufficient coverage to satisfy your mortgage lender.

Depending upon your rental's geographic location, there are some additional property insurance policies you may want to consider. In California, many people have earthquake insurance. In other areas, you may want to investigate flood insurance. Your insurance professional can educate you on the particular hazards you might wish to insure against for your area.

Umbrella Insurance

The third insurance that I have is an umbrella policy, which acts like an umbrella over all of my other existing insurance policies. Examples of when this coverage may come into play include when a guest of your tenant slips and falls in one of your rental properties and is severely injured, or when a storm occurs and a neighbor's property is damaged by a tree falling from your property.

Your landlord insurance policy has a liability limit. The umbrella policy picks up after those limits are exhausted and therefore usually carries a very high deductible, $300,000 or higher. Those deductibles seem high until you are sued for $750,000 and lose. In this example, the first $300,000 would be picked up by your primary insurance; the balance of $450,000 would be yours to pay. An umbrella policy helps pay that off. Otherwise, virtually everything you own would be a fair game against that judgment.

Renter's Insurance

The fourth insurance is renter's insurance. Remind your tenants that their personal property and vehicles, or those of their guests, are not covered by any of your insurance policies against loss or damage due to fire, theft, vandalism, rain, water, criminal or negligent acts of others, or any other cause. Coverage for those items comes only through a renter's insurance policy.

Renters' insurance traditionally covers the tenant's and any guest's possessions, like furniture, clothes, computers, and bikes. Additionally, if a plumbing backup floods your property and renders it uninhabitable, the renter's insurance may cover the cost of a temporary place to live until the tenant can move back into your property. Some renter's insurance policies may also have protection for the tenant against lawsuits.

You should always require renter's insurance when the tenant has a pet in the residence. You do not want the tenant's dog biting a neighboring kid and then have the neighbor sue you. At my office, we will not allow tenants to receive keys without proof of a paid-in-full renter's insurance policy. If the tenant does not have a policy at the time of lease signing, we make the tenant call an insurer and obtain one on the spot.

Insurance is all about risk management; you buy or require insurance to manage some of those risks. Knowing your real estate laws is the best defense. After that, obtaining the insurance discussed in this article is an intelligent way to begin managing your risk. By following these tips, landlords can find the best rental property insurance policy to protect their investment and provide peace of mind.

Filed Under: Asset Protection, Property Management, Real Estate Investing Tagged With: Asset Protection, property insurance, Property Management, Real Estate Investing, Renter's Insurance, Umbrella Insurance

11 Ways to Determine Rent for an Upcoming Vacancy

February 21, 2023 by Marco Santarelli

How to Determine Rent for an Upcoming Vacancy

The challenge of setting the appropriate rent price for a home that is currently unoccupied can be a hard one for landlords and property managers. Setting the rent too high can lead to longer vacancy periods and missed rental income while setting the rent too low can lead to less profit and underestimating the value of the property. On the one hand, setting the rent too high can lead to longer vacancy periods and missed rental income.

It is essential to have a strong awareness of the local rental market as well as the elements that influence rental prices in order to avoid these errors and make the most out of your income. In this piece, we will discuss several efficient methods for determining the rent for an upcoming vacancy, such as completing market research, studying the attributes of the property, and evaluating the level of competition in the market.

11 Ways to Determine Rent for an Upcoming Vacancy

1.) If the vacating tenant has been a long-term tenant, and you had a good relationship, simply ask him. I bet over the years he's followed the neighborhood and knows from friends and fellow renters. He can tell you if he thinks you should charge more or less. Feedback from your vacating residents should be ONE piece of the info you assemble to determine.

2.) The quickest way to figure out the market rent is to put your tenant's “shopping” hat on and start looking. I observe area rentals (signs, newspapers, etc.), see how they are priced, and watch to see how long they stay vacant. Many times, I'll even stop by to get up close to see the condition of the investment property. In every case, one that is priced right and sits for very long has “issues”.

3.) Another resource is a property manager with local rentals (and a website) who knows what they're doing. They make the most money by pricing at the top of the market and usually have little interest in discounting unless a property sits vacant for too long.  I usually price mine 2% to 5% below their prices.

The caveat with property managers is that some have owners that force them to overprice. That happens fairly often, but it is usually pretty obvious.

4.) Be careful not to use an apartment as a comparable (“comp”) for a single-family home (or visa versa). Instead, I'd try to find another single-family home in the same neighborhood as your income property.

5.) Maybe, there aren't any single-family homes on the market to serve as comps. But, were there any in the past few months or years? Is there a way you could track those down by reviewing old newspapers or more importantly, your notes on what homes have been rented for?

6.) Check comps on www.craigslist.org.

7.) Do you feel that your current long-term tenant was paying the market rate when he moved in? I believe that a general guide to rental increase should be 3% to 5% per year. Use this amount as a starting point. (This rule of thumb may not apply in cities experiencing a large number of lay-offs.)

8.) Take a property manager to lunch. Maybe, if you said the right things in the right way over lunch, a property manager could give you her opinion — and maybe even back it up with some comps on properties she manages.

9.) A trick I have used is to always set the rent a little too high. If the phone does not ring with decent quality renters, I quickly lower it to $50 or $75, or so. If the phone starts ringing then, you can be pretty sure that you have the right amount.

If you find someone terrific and they tell you they would love your house but can only pay $50 less than what you're asking, you can always say yes. Be flexible and listen to market feedback.

10.) The key for me is not to wait until you get notice to vacate to begin your pricing research. Go through the rental ads from good sources weekly. That way you'll be on top of things when the time comes.

11.) Don't be overly concerned with the best rent amount. More importantly, keep turnover to a minimum. Lost time is more valuable than a slightly higher rental amount. This money can never be recouped. One lost month can cost more than leaving the rent too low.

Advertising, curb appeal, repairs, and even some paint can all be done during the current lease. It should only take a day or two maximum for cleaning and painting once they leave.

Play up the return of their deposit for super cleanliness at move-out. Remind your current tenant their lease ends August 31, not September 1. Your new lease should start September 1.

Bonus Tip: How to Build Value When Showing Rentals

When showing properties to prospective tenants, you must build value in the eyes of the prospect. Three ways you can build value are:

  1. Building interest or excitement in the property,
  2. Building trust in you, the landlord or property manager, and
  3. Building a connection between the prospect and the property.

If you focus on each of these points, you WILL rent your property faster.

– – –

Known to thousands as “Mr. Landlord”, Jeffrey Taylor is the author of a dozen publications, books, and reports on various aspects of rental property management.

Filed Under: Property Management, Real Estate Investing Tagged With: Property Management, Real Estate Investing, rental property

One-Year Rent Guarantee – Too Good to be True?

May 2, 2013 by Marco Santarelli

Earlier this year Norada Real Estate added a One-Year Rent Guarantee as part of every investment property purchased through their network. The response by investors has been very positive and overwhelming.

A few people made the comment that it sounded, “too good to be true”. In response to those comments, I present the following excerpt from an interview conducted with Robert T. – a landlord with several properties. Rob's properties are protected by the same policy we provide all our investors. Shortly after his policy was placed, he experienced a vacancy and filed a claim. The following is an excerpt of an interview conducted with Rob in February, 2013.

[Read more…]

Filed Under: Property Management, Real Estate Investing, Real Estate Investments Tagged With: Property Management, Real Estate Investing, Rent Guarantee

My Tenant Stopped Paying the Rent – What Can I Do?

February 11, 2013 by Marco Santarelli

Non-payment of rent is a serious problem. It is one of those predicaments that places the landlord in a difficult situation. Moral and ethical values are often challenged by the need to collect the rent. If your only two choices are to evict a family that has fallen on hard times, or to go weeks or months without getting paid, the right choice isn't always obvious. Most landlords have a conscience and genuinely care about the safety and well-being of their tenants. So the challenge is finding a solution that works out well for your tenant, as well as for your bottom line.

[Read more…]

Filed Under: Property Management, Real Estate Investing Tagged With: Property Management, Real Estate Investing, Tenants

5 Tips for New Landlords

June 4, 2012 by Marco Santarelli

The constant fluctuations of the housing market can mean many things in terms of property investment, rental rates and the life of a landlord. We know, for instance, that there is a higher percentage of renters in the United States than there has been in quite sometime. But what we haven’t addressed is that there are also more landlords.

Whether you have found yourself in a property investment deal that didn’t go quite as planned or you’ve moved to another house while your old property has sat on the market for far too long, you yourself may have already become a landlord due to a lack of options. The life of a landlord can be financially rewarding, but it can also be complex and draining with many rules, laws and advice to wade through. In this article we want to distill a few of the more important tips that will lead to a better life for both you and your tenants.

[Read more…]

Filed Under: Property Management, Real Estate Investing Tagged With: Property Management, Real Estate Investing

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