It’s a property investor’s worst nightmare – the rogue tenant who falls into rent arrears, or worse, causes malicious damage to the property.
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Lee Marks, 32, owns a handful of investment properties in Melbourne. For once, he did not do a detailed check on a tenant.
Mr Marks and the co-owner of one apartment have been left more than $8000 out-of-pocket.
The apartment was to be let out to the family of five for only six months, after which time it was to be renovated.
However, the tenant told Lee the rent was being paid to the co-owner and told the co-owner the rent was being paid to Mr Marks.
‘‘It has been about 12 months now and we have received $500 – about two weeks’ rent – and the tenant comes up with stories every week about why he cannot pay,’’ he said.
‘‘I would definitely recommend landlords taking every step they can to ensure that the tenants are reputable and don’t have a history of problems.’’
Carolyn Parrella, executive manager of Terri Scheer Insurance, the largest provider of landlord insurance, estimates about one in five landlords has landlord insurance.
She says the biggest claims, about half, are for rent arrears followed by malicious damage and accidental damage.
‘‘You can sometimes find that when your tenants are in arrears and have been given notice to vacate, they decide to do a bit of damage before they go,’’ Ms Parrella said.
Justine Davies, editor-in-chief of comparison site Canstar, says landlord insurance typically covers theft or burglary by tenants and their guests, rent arrears and malicious and accidental damage.
Ms Davies says to be careful with the excesses: the amount the owner first pays of any claim.
That’s because each category of claim will have its own excess.
However, often the excesses are negotiable with the lower excesses attracting higher premiums.
Also, check if the policy covers damage caused by pets.
Ms Davies says landlord insurance will generally not cover short-term rentals, such as through Airbnb, because there is no tenancy agreement in place.
Insurers sometimes also provide policies for those letting out properties to holiday makers or have specific short-stay policies, she said.
As the insurance is a cost incurred in earning income from the investment it is tax deductible for the landlord, Ms Davies said.
Of course, the flipside is that every tenant’s worst nightmare is the rogue landlord who won’t fix anything, insists on short-term leases and keeps the bond on spurious grounds.
Twitter: @jcollett_money