Insurance and Your Responsibilities as a Buy-To-Let Landlord

Insurance and Your Responsibilities as a Buy-To-Let Landlord


bjbj Hey guys, Brette Alegre-Wood here, author
of The 3+1 Plan, and chairman of YPC group, where we help you to build a thriving property
portfolio so you can live the lifestyle you ve always dreamed of, but in such a way that
you re not creating a 2nd job, or actually working yourself into an early grave. So what
I wanted to today, was just, we ve been running the webinars for a while and we ve compiled
hundreds of questions that you guys been asking, so I want to take those, and what I ve done
is I ve broken them down into a number of really key questions that most of you guys
are repeatedly asking and what I ve done is I want to present them to you so you get that
level of education. I ve always been a massive, massive supporter of free education, so that
s what I want to do for you guys today, is really give you what most people out there
are concerned about in the market now about property investment, about strategies, about
structures, about all sorts of things, the questions that you guys have been asking.
It s not now me telling you what you should be thinking, it s you guys actually feeding
back and I love that about the social media and I love that about webinars. So sit back,
relax, and let s get started. m going to have to talk about one of my most disliked subjects
which is being a landlord. I can t stress enough that what you really want to be is
an investor. An investor puts an amount of money in and expects a return from their investments.
But the fact is is when you re investing in property, you do have responsibilities as
a landlord. So one of the questions that comes up quite regularly is one on about insurances
and what insurances do you need and what do I recommend and all this sort of stuff. Now
the first thing that I m going to say before I get into this is this: are these comments
up to date? This is now June 2011. So if you re watching this any time after June 2011,
I would make sure you check, either give us a call or check with someone who knows about
insurances and what the requirements of the VicLet are because the laws may change, the
requirements may change, the regulations may change, so if you re watching this and thinking
what I m saying is absolutely correct and you re in 2017, things may have changed dramatically.
So that s the first thing. Be aware of that. And that s with anything and when people are
giving you advice, if you re watching on YouTube or you re watching somewhere else, check out
the dates of the video because if it s not recent, and they re talking about facts and
figures, we once had Kirstie and Phil doing a Location, Location, Location, and it was
quite interesting because they were talking about this hot spot and they were talking
about this being a hot spot . The next day we had a few phone calls saying, Do you have
any property there, and I m like, Hold on a sec. That s overdeveloped. I would never
buy there. What are you talking about? Turns out that the actual show they recorded was
back in 2002 and it s interesting because if you look on it now they actually put the
date on there. Anyway, let s get to the real question at hand. So first of all, building
s insurance. If you re buying a house where you own the freehold, you re going to have
to look after the building s insurance and in some cases even leasehold houses, you re
going to be looking after building s insurance. You re going to have to arrange that and you
re going to have to, it s a requirement of your mortgage if you re getting one, but also
it makes good sense to have one because if that place burns down or something happens,
falls down, then it s covered. This one, building s insurance, you defiantly need that. Now
if you re buying a leasehold where you ve got flats or something, then the managing
agent will look after that and of course you ll have to pay for that, but effectively,
your share of it at least. In a home, you re going to have to look after it. In flats,
generally the managing agent will and you might have to arrange that. Talking about
contents insurance. Now realistically, if the contents, you have what s called an AST:
and Assured Shorthold Tenancy Agreement. Now under the terms of that, what that will say
is that the people are responsible for anything in that inventory. So if they sign out a couch
and some knives and forks and things like that, they re responsible for things like
that excluding fair wear and tear. So if it burns down they should have to pay, and all
these sort of things. So realistically, contents insurance, for the most part, most of our
clients don t need contents insurance. Now, if you re ultra-emotional and you re concerned
about that by all means get some, but make sure with any of these insurance policies,
they cover the vic let. Just getting a normal home, a contents insurance, doesn t work.
When you go to make the claim they ll take it, when you got make the claim, they ll say,
Hold on a sec, you weren t living in the property, you re not covered. So make sure it covers
vic let, that s the important bit. Now for the most part, you re probably going to have,
if it s not furnished, a fridge which is normally integrated fridge/freezer built into, very
unlikely that that s going to be stolen. You ve got washer-dryers. Most of the stuff hob,
stove, these things are actually built-in so it s unlikely they re going to be taken
and when you look at the cost of the insurance, sometimes, it s not even worth bothering about.
So for most of our clients, well and truly over 95%, they don t look at getting this
contents insurance. They rely on the AST and the deposit that the clients put down. Now,
tenant insurance and what I m talking about is, Rentsure or these insurances which basically
say, if the tenant doesn t pay the rent, if the tenant damages, if the tenant needs to
be taken to court, all these sort of things, it will cover you for. These have become very
popular but you ve got to read the fine-print because I ll give you an example. One of the,
in fact, a lot of things, they don t kick in until after 30 days, so if your tenant
s late, you don t get paid. If your tenant runs off and it s only a month they owe you,
then actually they won t cover you, so what it means is that they ve got quite a decent
balance there. And you ll find that if you do want that first month covered, well you
ve got to pay for it and it can become quite cost prohibitive. I was looking at a few different
properties because we were thinking about selling this and what I found was that it
was somewhere between 10 and 20 pounds per property per month which, when you add that
up over a portfolio, that s a huge amount of money and the decision that I made was
not to take that insurance, to take the risk, and that s all it is, I m taking the risk
upon myself that the 20 pound that I would have put per property, I started putting into
a bank account, built up a big amount of money, and in the end I didn t use and I haven t
had to use it because when you look at the statistics, and the statistics are something
around 3% of properties are problem properties. Around less than 1%, that 1 in every 100,
it s more like 3 in every 1000 are what we call, tenants from hell. Around 3% are problems,
they don pay on time, they run off without paying the last month s rent, or doing things
like this, but normally they get looked after in due course. So, tenant insurance. Now one
of the questions that comes up quite regularly is, they going in to this, should I get public
liability insurance because if they fall over and hurt themselves while they re in the house,
should I be covering that? And the answer is you don t need to because as long as it
s an AST, they are taking responsibility upon themselves. So they are taking responsibility
for that. Now, this is a really important bit. Because if they as tenants under the
Assured Shorthold Tenancy Agreement, they call you up or they call your agent up, even
more importantly, and say, The door is hanging off its hinges, and then you don t do anything
about it, and it falls on them, then you can be liable. If you look after and you manage
it well and the door is hanging off its hinges, you get a person out there to fix it and they
fix it, fantastic. If you re a ??? then you don t have any problems. All these sort of
things. If you ve got good management in there and unfortunately in this marketplace, there
s good agents and there s bad agents. Unfortunately there s a lot more down in the bad end than
in the good end. So you got to take responsibility for that because when it comes to it, the
actually letting agent isn t accepting any responsibility for those properties. They
re doing the work, they re not accepting responsibility. You, as an investor, are still 100% responsible
for what goes on in your flat. So it s really important that you understand that because
that could mean anything. If they say there s, the boiler seems to be leaking and you
don t send someone out straightaway, you wait and then there s a fire and someone gets burnt
or they get damaged or they, whatever, then you can be held culpable. That s not something
you want to address. So just be aware of that. Now if you ve got good management, fantastic.
So there really, the main things you have to consider when you re talking about insurance.
m sure you found that information really valuable. The first step really now is you need to get
a plan. You need to actually work out exactly how you re going to put this in place. So
what I encourage you to do is come in and sit down with us, talk to us, grab a coffee
with us, and what we can do is we can start mapping out what your plan is. But more importantly,
not just give you a written bit of paper that says, Go a buy a property, or Do this. We
can talk about structure, strategy, processes, procedures. We can talk about all the things
you need to put into that plan. We can talk about why you want to achieve this, what you
re actually looking to do about this. We can talk about where you re starting from. What
sort of limitations, what sort of emotional barriers you re going to face. But more importantly,
we can talk about how you re going to get there. And with those 3 elements, you ve got
yourself a really powerful plan. Then the next thing is the motivation and the action.
Nothing happens without actions, and this is where the team can help you do this. In
fact we can do it for you if that s what you want. So I encourage you to come in and meet
with us, grab a coffee or tea if you drink it, and really just sit down and get that
out. One of the things you re going to find about the way we approach this is that most
companies in this industry, what they ll do is they will try and just sell you into a
property. The first phone call you make to them, guaranteed, you re going to get sold
a property. You re going to find we don t do that. What we want to make sure is you
get that plan in place, you get all the emotional things sorted out and you re aware of those.
And you really get a feel for who you re going to be working with. Relationship is what it
s all about. It s not just flog lots of property because I m going to tell you it takes about
3 months to buy a property, but you re going to own that property for 5, 10 years, maybe,
so it s really important that you put a structure, a strategy in place, a plan, and follow that
plan. Because otherwise what s going to happen is you can grow your portfolio very quickly
but then if you re not aware of market cycles and all these sort of things, interest rates
rising, inflation and all those, what s going to happen is you re going to be put at risk
down the track. It may look good now, but the market changes and then all the sudden,
all of your weaknesses in the portfolio you ve built are going to be displayed. So getting
a plan is going to enable you to get rid of that totally. Guys, I m looking forward to
meeting you real soon at either one of our webinars or perhaps a seminar, or if you come
to one of our office around the world. Have a great day and remember, live with passion.
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