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Discover the secrets of successful property management and investing on "The Property Investors Handbook" podcast. Join Colleen Sutherland as she shares expert insights and strategies for acquiring, managing, and maximising returns on real estate investments. Whether you're a beginner or seasoned investor, this podcast is your essential guide to navigating the world of property investment. Tune in and unlock the keys to financial success in real estate.
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Hello, and welcome back to the Property Investors Handbook Podcast. I'm your host, Adam Bell, joined again by Colleen Sutherland, the seasoned owner of Sutherland's Property Management Group. Today's episode focuses on an essential topic for every property investor and tenant alike, insurance for rental properties.
We'll explore the crucial insurances that safeguard landlords tenants
Colleen it's fantastic to have you here to shed light on this for us.
Thank you so much Adam
Okay, so let's start with the key one for landlords landlords insurance an Absolute must firstly, isn't it?
Yes, it is and a lot of agents including myself now don't Manage properties that don't have that landloss insurance.
Just won't do it.
No. Yep.
No. Look, understandably. We call it a human nature insurance, really, in the industry. Right. Simply because we can do all the due diligence in the world, but unfortunately, things can go wrong throughout a tenancy, or somebody has told us something that, you is not necessarily correct and we've picked up a dud tenant.
Sure.
But when things go wrong is when you need that landlord's insurance. And if you've got a good landlord's insurance, It's worth its weight in gold.
Right. What, well, firstly, what does a, what's the difference between a good landlord's insurance and a not so good one?
So what I've found in our experience is there's landlord's insurance that's standalone.
Yep. Like an agency, an independent agency.
Sure. And
there's landlord's insurance that you get attached to your mortgage, the bank,
right.
Wherever you save your money, things like that. Those are the ones that have hidden. Clauses in them that you may not be able to claim as much as you would on an independent policy.
Sure. So your advice would be always to landlords to get a stand alone policy? Because there are agencies that specialise in them too, isn't there? There is.
Yes. There's a lot of independent ones and there's about three or four, just a handful that I've worked with that are good and then some are better than others.
Sure. Now what type of things does landlord insurance cover? Give me the standards firstly.
Well, in a house, because the house and the unit's going to be different, but in a house what will be covered will be a defaulting tenancy. So let's just say there's a marriage breakdown and he moves out and leaves her holding the bag, and she's got to pay for this huge rent.
Rent on her own. Obviously she can't and then she ends up having to move because she's fallen behind in her rent. Yep. So it will cover the rent, or the defaulting rent up until the time you can re tenanted and that's why, one of the reasons why we always suggest that you have a fixed term tenancy over the property.
Sure. So it's not just, you know, you're guaranteed of rent.
Yep.
You've got to back yourself. It meets the criteria of
the, of the insurance.
And then if it's like a domestic violence. situation and unfortunately we're seeing the rise of that. If it's domestic violence situation, it will cover damage that's caused to the property, that will, help fix it up.
Right. Yeah. What about damage just where, you know, you've got a rogue tenant, you are, you do get them out, you know, through whatever means eventually, but they have done a lot of damage. You know, their bond isn't going to cover it. You know, that it's is that covered by landlord insurance while you chase the tenant?
It can
be. Yes. So if it's just general cleanup costs, like Cleaning the house, getting a bond clean, doing general bond things, no, you can't claim that. However, if the tenants moved out and caused a lot of damage that wasn't there at the last inspection. Kicked
walls in, etc. Yes,
then yes, that is. So it's how we then make the claim as to how much we can claim.
So there is a certain way that we write the claim up, that maximises the return.
Again, another great reason to be with a property manager who knows this stuff. Yes, so, can you give me an example or tell me about a time that you've had a tenant who's had good landlord insurance where you, you've just, you've actually got sat back and go, wow, this was really worth its weight in gold.
Yes, yeah, yeah. So we had, we picked up a property with a tenant in there and she was nice. However, she took on a partner that was not as nice as her and things went downhill from there. Yep. And the landlord had a really good landlord's protection insurance over the property. And so by the time she moved out, and she was very, remorseful.
It was her partner, and we sent her on away, but she eventually had split up with this guy, so it was good to give her a reference that he wasn't going to come back. Yep. But what had happened there was he'd caused a lot of damage to the property, during his stay at the property, and then on his way out, and then, Didn't pay the rent.
So we had I think it was four weeks rent. We did go through the normal process But it was also above the bond. So what happens is how it's written up. The excess on the policy was the bond. So the bond is four times the weekly rent. And we were able to claim that bond and disperse that bond in general cleanup costs.
And then anything over the bond, we were able to make a claim on the insurance. And I think he was really only out of pocket about 500 odd dollars, but the cleanup costs and the rent was close to 10, 000. Wow. Yeah.
So you can see the value there. Yes, but
we were able to claim so much. He'd run into the garage door and, damaged the side fence and all sorts of things.
And while it's a big job for us to clean that up, we were able to do that at a minimal loss to the landlord. Sure.
Okay. So what other What insurances do landlords need? They obviously need to have building insurance?
Yeah, that is an absolute must and it's written in the legislation that they have to have public liability insurance.
So with your building insurance, you automatically get a level of public liability. Most is about five or ten percent. Million dollars and then there's some at 20 million dollars depending on the property.
Sure. Okay. So that's the landlord's
Yeah, it's a requirement of the landlord to have a responsibility.
Sure So are there any others that landlords need to think about or is that pretty much it?
No, that's pretty much it Because you're protecting your income and you're protecting your property and an investment. That's what you need.
Now I'm assuming it's the tenant's responsibility to have contents insurance.
It is. So we do let them know at the time of signing up that it's not covered. So if there is a burst water pipe, the property and its contents are covered by the insurance, but nothing, no resultant damage if there's damage to their furniture.
Right. So, Just to clarify that, burst pipe, burst, you know, hot water system, carpets are covered.
Yes. But
anything on the carpet isn't covered.
No. And that's because the landlord doesn't own what is on the carpet. Right. Unless it's a furnished property. Let's
take this a step further. Massive floods, we see those in South East Queensland. House is covered, walls are covered, carpets, curtains, all that, it gets to the roof, but none of your gear is covered unless you've got your own.
Renter's insurance.
Yeah, that's right. So a renter's insurance will have contents and it will cover the rent in the time that it's needed. So say you've had an accident at work and you're on workers compensation. Or it's not covered. Making a claim on that renter's insurance will cover your rent.
Until the time you're back on your feet and okay. So this
is something I'm not aware of. So there's a renter's insurance, which includes contents.
It can include if you tick the box
or you can say, but there is a, like I understood there was a a contents insurance to cover damage to, your property, everything in the house, garage, et cetera, did not realize there was actually a renter's insurance.
So that can be separate or combined.
Yeah, that's right. And it's really beneficial to you to take out. But at the time you're saying that insurance is The both together is higher than just my contents. Now, I won't take out the insurance. And then if something happens, it's all downhill from there.
So, you, expect, you want to expect that nothing will ever happen. But then, you plan for the best. And expect the worst.
Sure. Yeah. Sure. Alright. Or is that the
other way around? Hang on.
Plan for the worst? Plan for the best? Now I'm confused.
Yeah, I know. So am I. Plan for the worst. Plan for the worst, but expect the best.
Yes. Yes.
Absolutely. Yes. Absolutely. Alright, so let me recap. So, uh, Get a good landlord's insurance.
Ah, that's a must. That's a no brainer. Not as part of
something else. Get a stand alone and have a good look at it and, I'm sure you'll be willing to tell anyone who gets in contact with you, you know, the, your preferred, um, suppliers of that, uh, of those insurances, but get a good one if you're a landlord, obviously you need to have building insurance.
It's a must. Building insurance with public liability. Public liability.
The other thing, when I said at the start that houses and units are different. Units are covered under the body corporate insurance. 'cause that's why you pay, right? The bo part. Sure. It forms part of your body corporate for levies.
So
that's covered there.
Yeah, it is. However, if you change the floor from carpet to timber and something happens that timber floor, if you haven't got approval, won't be covered. Right. So you, there's a lot of variable factors in a unit. because you know where the leak comes from if it's common wall or an exclusive or it's just a minefield.
So yeah, just make sure that your investment property is covered for its contents. And not just the landlords protection insurance.
Yeah. Okay. So building insurance with your public liability and of course for a tenant. And something new to me, so A, contents insurance, make sure you've got your gear covered, but there's also a renter's insurance that can cover you for rent under certain circumstances.
Yeah, and it happens, when you just don't even think it's going to happen, it may happen and you want to know that you've, you're covered.
Here's one last question to throw at you. Can a landlord insist on a tenant having renter's insurance?
No. And that is another reason. I'm sure a lot would like to.
Yes, but that's another reason why the landlord takes out the landlord's protection policy. Which is also claimable on your tax. It's a tax deduction. Then he's covered and then the tenants interfailed, which you don't want to happen and you minimize it, but I can't minimize everything. I
understand.
Well, look, I've certainly learned a bit of stuff here today and I'm sure a lot of our listeners have as well. So look, remember having the right insurance is not just compliance. It's a crucial part of protecting your investment, ensuring peace of mind. For more insights and professional management services, visit sp mg.com au. I'm Adam Bell, and this has been the Property Investors Handbook podcast with Colleen Sutherland. Make sure you tune in next time for more essential Property Management insights. Colleen, thanks once again.
Thanks, Adam.