Property managers need to be wary of landlords who insist on renting to family, friends or loved ones, according to a major insurance company.
Terri Scheer Insurance, the landlord insurance specialists, warned that while it’s great to have people the landlord knows and trusts in a property, there are things property managers should look out for to ensure a client’s investment remains profitable.
According to Terri Scheer Insurance manager Carolyn Majda, investors can be too lenient when rental payments fall behind.
"It can be easy to turn a blind eye if a family member or friend is late on their rent, or promises that they will pay as soon as they can," she said.
“However, if a tenant defaults on rent, certain notices must be issued. If the landlord is later required to make an insurance claim, the claim may be reduced if there was a delay in sending the appropriate information.”
Another common mistake investors make is failing to have a formal tenancy agreement.
No matter how much you trust your tenants, the terms set out in a tenancy agreement can help to resolve some disputes that may arise regarding the tenancy in the future, she said.
Ms Majda also said investors in these situations often fail to see the need to have landlord insurance.
“Even the most trustworthy tenant is able to damage a property, whether accidentally or otherwise,” she said.
“Uninsured landlords really need to think about how they would manage financially if they were faced with thousands of dollars worth of damage to their rental property, or were unable to re-let their property while repairs were being made.”