I’ve always taken out rent guarantee insurance in case tenants stop paying, but I recently went to put it in place for a new tenancy and was shocked by all the exclusions in the policy wording. Is taking out rent insurance still worth it?
— Siobhan, Gloucester
In principle, rent guarantee insurance (RGI) is a great deal: it kicks in if tenants fail to pay, and generally also covers any legal action needed to restart payments or remove the tenants. As a very general rule of thumb you can expect it to cost about 1 per cent of the annual rent, which seems like a low price to protect your income stream.
However, particularly since Covid, policies have included ever more conditions and exclusions. Insurers are also being more selective about the tenancies they’ll cover, and set a high bar for affordability and credit history. Insurers naturally need to make a profit and will avoid taking risk where they can, but it does feel as if they’ll now only insure the tenancies that they’re virtually certain won’t need it.
Personally, we’ve stopped taking out RGI for tenancies in our own portfolios — but if a lack of rent would quickly put you under a lot of financial stress, it may still be worth considering. Just make sure you read the policy documents in detail, because there’s nothing worse than believing yourself to be covered then finding out you’re not. You’ll also need to be clear on their requirements for being notified about non-payment, because you’ll need to follow their process to avoid invalidating your policy.
I have two rental properties, and the stress of being a landlord is really getting to me. Both my properties have suffered leaks within the past month; in one case I had to rehouse tenants in a hotel at my expense. The other turned out to be caused by a previous tenant, unbeknown to me, drilling a hole through the roof to install a TV cable. I find it hard to manage all this alongside my full-time job: needing to respond quickly, keep lots of people onside and deal with the financial pressure. Do you have any tips for how to handle this?
— Jessica, London
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As a landlord you won’t get sympathy from many quarters, but it can be stressful when you’re trying to do the right thing and deal with pressures of your own. Unfortunately, it does go with the territory: things go wrong, people are unpredictable, and there’s always urgency to get matters resolved. It doesn’t help that for some reason we’ve never been able to explain, it always seems to be the case that nothing happens for months then everything across multiple properties goes wrong all at once — much like with your leaks.
Practically, there are a couple of things you can do. One is to remove yourself from the day-to-day by using a managing agent. This is easier said than done, because you’ll probably have higher standards than your agent and will feel compelled to jump in. Poor agents will also just act as a middle-person, passing messages back and forth and leaving you with just as much work and mental load.
Our recommendation would be to find a particularly good local agent through word-of-mouth (standards are often better among small independents where the owner is still actively involved), and set clear boundaries with them about what you do and don’t want to be notified about. If you trust them, you can authorise them to deal with most issues without coming to you first — but trust is critical, because you still bear ultimate legal responsibility.
Financially, it’s also helpful if you’re not feeling under pressure — so retaining a large emergency fund, even if it’s not efficient, can make you feel more relaxed.
Over the years we’ve dealt with police raids, properties left in horrendous states, and more leaks than we can count. At first it’s natural to find some of this hard to deal with, but over time we’ve gained perspective and now it takes a lot to bother us. Everyone’s different though, and you might not get to the same place: ultimately investing in property is a choice, and there’s nothing wrong with deciding it’s not right for you.
Submit your questions for the two Robs: propertyhub.net/sundaytimes
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Rob Dix and Rob Bence are the presenters of The Property Podcast. They also co-founded the property investors’ community Property Hub and the investment app Portfolio. Rob Dix has written four books on investing and renting including Property Investment for Beginners
