For most landlords, their rental property is one of their biggest assets and the income they derive from it can make a big difference to their standard of living. So making sure the property is well managed is imperative to protect that income.
As landlord insurance providers we see the fallout from badly managed rentals. Whether it’s a lax self-managing landlord or a less-than-adequate professional property manager, the ramifications of poor management can be wide-reaching – financial, legal, reputational. While it’s true that you can’t control everything and avoid every possible risk, good management can go a long way to reducing many of the common pitfalls, like rent arrears and unrepaired damage.
Many landlords choose to put their investment property in the hands of a professional. The property manager (PM) acts on behalf of the owner to manage the day-to-day operations of their rental asset. To preserve the value of the property while generating income, the PM needs to manage the property effectively. And their professional management skills can have an impact on the landlord’s insurance.
So when choosing a PM, what should a landlord look for? Here are a few attributes to seek out from an insurer’s perspective.
Professionalism and experience
A PM can be engaged to provide all manner of services, from marketing the property, to negotiating and collecting the rent, lodging and collecting rental bonds, carrying out inspections, arranging for repairs and maintenance, providing relevant notices and financial statements to the landlord, paying council rates and taxes (from the rent), or managing the eviction process. As there can be legal and insurance implications if these matters aren’t handled properly, landlords should check that the PM is qualified and/or meets the requirements for registration or licensing in their state/territory.
A PM needs to be able to communicate effectively to ensure landlords and tenants are told what they need to know and are kept up-to-date with changes that may affect the rental or lease. The PM/agency should have procedures in place for record-keeping, as having the right documentation available can prove invaluable if the landlord or PM needs to make an insurance claim. Being responsive and respectful underpins the PM’s relationships with landlords, tenants, service providers (like tradies or contractors) and insurers. As the PM’s communication and interpersonal skills will be tested when they are faced with challenges like resolving problems, responding to emergencies, handling difficult tenants or acting on behalf of the landlord (such as when engaging contractors or making an insurance claim), landlords should look for a PM with the ability to communicate openly, objectively and with authority.
Knowledge and understanding
One of the main things landlords look for in a PM is a deep knowledge of the area in which the investment property is located. The PM should understand the local market so they can provide accurate information to help the owner make informed decisions, such as setting appropriate rent or deploying the right marketing strategy.
Just as important is looking for a PM who can demonstrate that they are up to date on applicable residential tenancy legislation. Knowing the rights and obligations of all parties – landlord, tenant and PM – is crucial as many owners will rely on the advice of their PM when it comes to legislative matters. And in respect to landlord insurance, it is important for the PM to know the ins and outs of rental laws when it comes to tricky matters like evictions. If a PM is not aware of the legalities around terminating leases, any insurance claim the landlord may need to make can be delayed or jeopardised.
Aside from the wrath of Mother Nature, the biggest risks for any rental are tenant-related. This makes tenant selection a key responsibility for PMs. To reduce the risk of renting to bad tenants, landlords should look for a PM with a proven methodology for screening tenants using databases, checklists and application forms, and who runs the necessary checks to ensure the prospective tenant will be able to pay their rent in full and on time and that they are of good character.
When choosing a PM, landlords should look for one who takes a proactive approach to managing the rental. Proven systems for addressing rent arrears and managing maintenance and repair requests can save landlords time, money and stress – not to mention reduce the risk of something going wrong at the rental that triggers an insurance claim.
PMs who conduct regular inspections often keep a step ahead of any problems. The legislation dictates how frequent the inspections can be and the PM should make sure an adequate number are performed and thoroughly. This gives the landlord and tenant an opportunity to address matters such as the need for repairs or concerns about the standard of cleanliness. Top tip: Regular inspections are often a requirement for insurance cover to be maintained too.
Recognises liability issues
Safety and security at the rental are paramount. Once the PM has properly screened tenants and ensured a solid lease arrangement is in place, they need to keep the landlord fully up-to-date on the condition of the property in order to minimise liability risks.
Conducting regular property inspections thoroughly and carefully, fully documenting inspections and providing landlords with inspection reports is necessary to be on top of any existing or emerging issues that could pose a liability. Landlords should check to see how the PM addresses issues raised by tenants or trades to ensure that there are systems in place so that matters are investigated, documented and reported to owners for action.
A PM should understand the value and need for a quality landlord insurance policy and discuss cover with clients. From fire and flooding, to rent default and malicious damage, landlord insurance can offer extra protection when things go wrong. While landlord insurance is not a substitute for good management, is it a financial safety net for unforeseen events.
At EBM RentCover we aim to offer reliable solutions to help investment property owners and real estate professionals feel confident they are well protected by insurance. It’s why we provide support from cover to claim for landlords and their PMs.
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