How to prepare for holiday rental arrears
A study by a leading insurer has found that the holiday period can cause landlords all manners of headaches. Here are some ways you can combat the strain.
According to the study conducted by Terri Scheer Insurance, rental arrears claims increased by 26 per cent in the December to March period of the 2015/16 financial year.
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The insurer also found that 34 per cent of the claims they handled during that year were for loss of rental income.
“From our experience, the higher than average frequency of loss of rent claims is due to two key reasons. Tenants often put gift giving and Christmas spending ahead of paying their rent and utility bills; money is tight and their rental payments fall to the wayside,” said Terri Scheer Insurance executive manager Carolyn Parrella.
“It takes two to three months for this to show as the eviction process needs to take place prior to a claim being lodged. Unfortunately, this can put significant financial pressure on the landlord and leave them out of pocket once the mortgage and other costs are paid,” said Ms Parrella.
The new school year can also wreck havoc on landlords, with families eager to get close to good schools.
“From anecdotal evidence we know that many families break their rental agreement, abscond the property and move to different suburbs for the new school year,” said Ms Parrella.
The best way to avoid these issues is to have clear communication between yourself and the tenants and striving to maintain a positive relationship.
While this may not stop a tenant leaving, it can mean they’ll provide more notice or be more understanding to your situation.
“This can give the landlord an opportunity to proactively seek a replacement tenant and reduce the amount of time their property is untenanted,” said Ms Parrella.
The study also shows the importance of having appropriate insurance, not all insurance is created equal so it’s important to make sure you’re getting the right product for your purposes.
“A specifically designed landlord insurance policy is the first step towards minimising any potential loss in the case of theft from your investment property,” said Ms Parrella.
“If a tenant misses a few weeks of rental payments, a landlord can suddenly be out of pocket by $1,000 or more. Good policies should cover landlords for risks like malicious damage and accidental damage by a tenant and potential legal liability should a tenant or their guests injure themselves at the property,” she said.
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