The Times | Implications of not having Rent Guarantee Insurance
A Tenant Referencing UK landlord member has helpfully sent in this latest article from The Times:
The reason the landlord sent this in is because of the advice that The Times ‘Experts’ have provided isn’t exactly the most proactive guidance.
Lets start from the beginning!
The featured landlord’s own home has a mortgage on it, with 10 years still to pay; not very tax efficient for starters!
Of her two rental properties: the London property, at approximately £900k value, makes her 2.5% gross and her Bristol property returns 4.5% gross. So with a mortgage on it she probably clears around £800 pcm gross.
Question: Nice enough, but is this rent guaranteed?…
Anyway, if she re-mortgages the London property for £500,000 to enable her property purchase in Majorca (rather than sell) her best asset could be the one she loses first if she doesn’t obtain Rent Guarantee Insurance (RGI) on it.
The Experts, which includes advice from The Association of British Insurers, concludes: Get appropriate insurance.
Well yes, of course get appropriate insurance – but why stop at one category of risk???
RGI needs to be at the forefront of any decision she makes.
This landlord knows that she doesn’t qualify for income protection in her current salaried position, meaning that she’s already exposed to some risk on her main residence with 10 years more to pay down on it.
“Great that there are other savings and investments about, etc,” says our landlord member.
“But I guess if she was intending to pay the mortgage off with them she could have done that before now. Hope is that she stays well. Hope?! She’s already taken her prized pension and is relying on both rental properties for her future life, as currently being mapped out. See the article in full for all the romantic things she has in mind; nice pad in Majorica with pool, views, logfire, biking about, playing golf, etc…
How very fluffy and lovely! Seems like she should be weighing up a lot more than learning Spanish!!
Therefore The Times haven’t given her the best advice, and I guess they don’t know about RGI either. So on the strength of this article, you should become one of their experts, Paul!”
The Times landlords response:
‘Even as someone who works in the financial sector I hadn’t considered the implications of not having proper health cover’.
So does that mean she might now appreciate the implications of NOT having RGI? ? ?
For her future to stack up, and any other landlord that might be contemplating this route, she needs it ASAP! Wise landlords employ RGI as a strategy to reduce this risk, where the cost is also an allowable business expense.
If you manage to house a non paying ‘professional’ tenant, before long your bills can be astronomical. Gain an understanding of the possible cost of this by adding up eight months rent minimum (it takes most Landlords at least 2 months to decide to evict), add court fees, bailiffs fees, your time, stress and energy. Don’t forget to add in the out of pocket expenses such as damage to the property, removed boilers, copper piping amongst a whole host of other damage that can be done. Environmental health visits and other activities can also delay the process by at least 12 months.
Having protection against this, in association with LandlordReferencing.co.uk’s unique Tenant History reports , is one of the best methods of insuring against misfortune.