Insurance, Repairs & Other Items
Insurance, Repairs, and other annoying things that WILL Happen!
When we first started in this business, we loved the properties we worked with, bought them new, built them from the ground up or fixed them to rent out. Regardless of how you do it, there comes a sense of pride in owning properties, and it is easy to get attached to them.
Unfortunately, many renters/tenants don’t feel the same as you do about your properties, especially the vacation rentals. Now, we own some pretty expensive properties, some that rent for $6,500 per week in the summer! You would think that the people that could afford this rent would have some respect for the property. Not always the case!
So with that in mind, you have to EXPECT that at some point in time, you are going to have damages, repairs, re-painting, extensive cleaning, etc… It is just part of the business. Therefore, I recommend that you make sure you have a few things ready.
Good Insurance
If you have purchased the policy already, look at it again! If you don’t have it (own the home outright), get it! In your own home we have a tendency to want to get the premium lower and keep the deductable higher. This might not always be the safest thing to do. Major problems don’t happen as often as little problems. If you have a $5,000 deductible, you can get a ton of $150, $250 and $350 bills that you have to pay for all the way up to $5,000. But if you keep the deductible lower, around $1,000, then you don’t have as much out of your pocket. In one of our cases, the premium only went up by $300 so our out of pocket total for the year would have been $1,300 if we used it. The other way, our out of pocket is $4,700. Think about this. Your tenants could break your flat screen tv, the mirrors in the master bath and the refrigerator and it might not even come to your $5,000 deductible. You pay for all of that! Major repairs over $5,000 are if the upstairs bath floods and runs through the floor and destroys the kitchen ceiling and wiring. And you still have to pay the first $5,000 of that cost. And if you are renting your home per year, make sure the tenants get renters insurance and give you a copy. If you are working with a management company, make sure you know their policy on insurance. It is not a bad idea to inquire about an umbrella policy to cover everything your insurance doesn’t. A good umbrella can get you up to $1,000,000 for less than $200 per year. Not bad to have if someone tries to sue you.
Repairs
You’re going to have them, period! So if you don’t know a good repairman or company, find one now. Don’t get the cheapest either. A person or company that knows what they are doing and can get to your issues quickly is worth their weight in gold. Like the example of the cheap property manager, if they aren’t getting paid much, then you won’t get much! If you are using a management company, then make sure you get their maintenance and repairs policy in writing.
These issues are going to happen at some point in time. But if you have done your homework upfront with the tenants, and follow these tips, you will be protected.
