Is Renters’ Insurance Really Worth It?

Roof on fire

By Jade Rich

If you are one of the 104.5 million people who live in a rental unit in the United States, it is imperative to be aware of your rights and responsibilities. For example, many people erroneously believe that their landlord’s property insurance covers their personal belongings in the event of a fire or flood, but this is not entirely accurate. Instead, you are required to obtain renters’ insurance if you want to make sure that you will never be put into the awful position of losing everything that you own due to a weather-related incident or the negligence of another renter.

A shocking 66 percent of renters are not currently covered by their own insurance policy, and the primary culprit behind this minimal level of protection seems to be a lack of understanding. For example, many people will refer to the myth that renters’ insurance is expensive as their reason for not buying it. However, industry statistics indicate that the average monthly cost is only $12 per month.

This basic level of renters’ insurance protection typically offers approximately $30,000 in property coverage, and it includes $100,000 in liability coverage. You can also add a larger amount of coverage for a nominal fee, and the vast majority of people who opt for a more extensive renters’ policy do not pay more than $25 monthly.

With that in mind, there are several good reasons to consider a renters’ insurance policy. Here are six compelling reasons to consider:

#1: Your Landlord Has No Legal Obligation to Help Out

If your apartment burns down tomorrow, your landlord has no legal obligation to help you or any other renters with the replacement of damaged or destroyed property. Additionally, they do not need to help you find a temporary place to stay, and they also typically have the legal right to void the rest of your lease term. However, if you have renters’ insurance, you can get assistance with replacing your lost belongings, and you will also have your temporary living expenses covered.

#2: Coverage for Your Mistakes

Anyone can make a mistake that could lead to a flooded apartment or a kitchen fire. To make matters worse, you can be held legally responsible for the damage that you cause to the landlord’s property. In other words, you won’t get a chance to debate hardwood vs. carpet in the living room, and instead you may have to pay to replace whatever flooring the landlord chooses. You could even end up being sued by any other renters who are hurt or lose property due to your negligence.

#3: Protection from Theft

No insurance policy can stop you becoming a victim of theft, but your renters’ policy will enable you to replace your items if someone breaks into your apartment. There are almost 2.2 million burglaries every year in the United States, and the average loss is $2,096. Therefore, even if you have a $500 deductible, you can still dramatically reduce your losses after a break-in if you are protected by renters’ insurance. And as an added bonus, your renters’ policy even covers theft of your personal belongings that takes place outside the home.

#4: Assistance with Disasters

Not all natural disasters are covered by every renters’ policy, but it is common for these policies to protect your belongings during a fire, snowstorm, explosion, lightning strike, electrical surge, smoke, and certain types of water damage.

#5: It Will Help You Avoid Financial Issues

Some people falsely assume that their items are not worth insuring, but this is not the case for almost every renter. After all, if your annual policy costs $150 and your deductible is $500, you would only need to lose $650 worth of stuff for your policy to be worthwhile. Unless the value of all of your belongings is actually less than $650, you need to have renters’ insurance. Also, do not forget that a renters’ policy will help you with liability issues.

#6: Protection from Injury Lawsuits

It’s important to note that if a visitor hurts themselves due to a building or property defect on the rental property, your landlord can be held responsible for their medical bills. Unfortunately, you cannot use your landlord’s property insurance if someone is injured due to an issue that you caused in your apartment. A prime example would be an injury that was caused by your television set falling on someone’s leg. The liability coverage portion of your policy will cover the bills associated with this injury up to your limit, which is usually at least $100,000.

As you can see, signing up for renters’ insurance is a smart move. An increasingly large number of apartment communities are making it mandatory to have one of these policies, but you should not wait for anyone to force you to buy it. Instead, take responsibility for your future by acquiring a renter’s policy as soon as possible. Keep in mind that many companies that offer automobile insurance also have options for renters, and this could even save you money due to a multiple policy discount. With the average renter having at least $20,000 worth of belongings, it makes absolutely no sense in most situations to decide against this affordable insurance option.

Jade Rich is a freelance writer and Social Services Director who currently lives in the Northeast Atlanta area. She has been a frequent renter in the past and gained valuable rental’s insurance know-how during her first tenancy in an apartment.  

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Things To Consider Before Investing In A Rental Property

  Investment House Meaning Investing In Real Estate

Investors that have decided to invest in rental property have usually weighed the pros and cons of this type of investment versus other investment types. Although many people can succeed investing in real estate, investing in rental property isn’t for everyone. Real estate has proven to be a way to build significant wealth and can generate income, significant tax advantages and long-term appreciation. However, it is not the right decision for everyone. Questions like do you have enough time to devote to the maintenance of the property, are you comfortable trouble shooting or hiring a property manager are all questions that should be answered before deciding on this type of investment.

Rental property has always been recognized as a sound investment when planned for and researched properly. The most important factors to reap the benefits of this investment are the choice of the rental property itself and the projected value, income and associated costs to acquire and maintain the property.

Choosing the right property is critical in making this investment decision. The following factors should be taken into account when deciding which property to buy:

  • Schools: Rental homes featuring two or more bedrooms will attract families—and that means they will likely have children in school. If a school is nearby the home, it’s likely to be that much more popular with family tenants. In addition, school ratings can be a deciding factor in what home people would want to rent.
  • Crime:  Crime-prone neighborhoods can have higher turnover and longer vacancy rates, so a bargain purchase price may be less of a bargain than you had hoped for.
  • Commute:  Is there public transportation? Is the property a long commute from the commercial center of town? Many prospective tenants begin their housing search with their workplace as the center point. Renters will consider this before signing a lease—and as an investor you should take this into consideration as well before buying a rental property.
  • Neighborhood: Consider how the overall desirability of the neighborhood is likely to affect its appeal to tenants. Are there attractive amenities like parks, shopping and entertainment venues? What do the local classified ads reveal — is the area’s vacancy rate high or low? How do rental prices compare with adjacent neighborhoods?
  • Rental market projections for the area:  Do some research on what the projections are for home rental values in the future in the area you want to buy in. Are they building many new rental homes/apartments which could affect the rental price of your home? Is the area growing? What are the projections of the job market in the area?

Magnifying glass searching for unique house. Real estate market.Besides choosing the right property, an in-depth financial analysis of all rental income and costs related to the rental property in question is a must in figuring out whether buying this rental property as an investment will be successful. Analyzing the local rental market to set a competitive rental price is the next step. Too high a price might leave the place unrented for a while and too low a price will cut into your profits.

While rental properties are certainly appealing, offering the promise of monthly cash flow in addition to long-term appreciation and tax advantages, investment properties have a number of costs that are both visible and hidden. The following COSTS should be considered before buying rental property:

Mortgage: Mortgage costs for investment properties are higher than for primary residences as they are considered riskier. Rates might be up to 1.5% higher and a higher percentage in down payment might be required as well. In addition, your credit score has to be excellent to qualify for a mortgage for an investment.

Property taxes: Property taxes can add significantly to the property cost. Make sure to find out exactly how high they are in the area that you are buying.

Homeowners insurance: Insurance rates are dependent on the region, especially if your home is located in an area prone to flooding, fires, earthquakes or other natural disasters. Make sure you find out how much the insurance policy would be prior to purchasing the property.

Maintenance: The amount of money to budget for maintenance and upkeep of the property depends partially on the age of the property and where it is located. In general at least 10 percent of the annual property rent should be set aside for this. To get the maximum price for your property when you sell it, you’re going to have to keep it in great condition.

Utilities and Association Fees: Utilities like gas, electric and cable are often the responsibility of the tenant. Other services like water might be included in the rent. If so, make sure to get an estimate from the utility company of the average monthly usage. Association fees are usually the tenant’s responsibility as well, but if you decide to include them in the rent, please plan for it accordingly.

Other expenses:  Hiring a property manager who will be responsible for managing the maintenance of the rental property, will help searching for new suitable tenants and will take care of all the paperwork, can be expensive but will save you a lot of time. Expenses related to temporary vacancy of the property have to be taken into consideration as well, as do possible legal expenses and anything else that might come up.

If you’ve tallied up these expenses and you’re still in the black, this rental property might be a good investment. Budget carefully and stay on top of rent collections to ensure your property pays off. The rental property’s investment value grows as the loan is paid down month by month, year after year. Added to that is any appreciation in its market value. Needless to say, choosing the right rental property is worth the effort

How To Prepare Your Property For The Rental Market

Painting walls, interior decorationPeople have different reasons for renting out their property. Some people are in the property rental business and own and/or manage a large number of properties. Other people need to move somewhere temporarily but want to keep their home for future use. Then there are people who are determined to sell their property—but only at a price the market is not willing to pay yet. For these people a great option would be to rent out that property for a while. After all, smart investors are buying up and renting properties quite deliberately because they realize that a rental home is not just an asset that can appreciate over time, but one that can also produce income at the same time. Rental prices are on the rise and why not take advantage of that?

Whatever your reason for renting out your property, it will most likely need some work to get it ready for the rental market and get top dollar. Preparations in the following areas should be considered before your rental hits the market:

1. Make the Necessary Repairs and Check All Safety Features
On the top of the list should be all heating, plumbing, and roofing issues. All other issues that could be considered safety issues should be addressed as well. Repairs made now will save you time and money in the long run, and will safeguard against increased damage and costs later. Be sure fire alarms and carbon monoxide detectors are in place and have been tested, and double-check that all windows, doors, and locks are in good working order.

2. Clean and Add Curb Appeal!
Clean the house thoroughly, including closets, fixtures, and appliances. Replace dirty carpets, polish wood floors, and make sure that the grout in tile floors has been spruced up. Remove all debris and trash from the entire property. If a one-time rubbish bin rental is necessary, go for it. Where needed, give each room a fresh coat of neutral colored paint. On the outside, tidy up the lawn and landscaping and make sure that the property has curb appeal. Sometimes replacing a mailbox, front door, adding some color by displaying flower pots, or a coat of fresh paint, can make a huge difference.

3. Prepare Proper Documentation of Your Home and Its Contents
Plan to inspect and document your rental home before tenants move in; then once again immediately after they move out. This is imperative and will serve as documentation of damage caused by the tenant if that warrants withholding the security deposit for repairs. Photos, a checklist, and even a quick video can do the job.

4. Decide on Clear Leasing Criteria and Screen Your Tenants Thoroughly
Before you prepare a rental application, it’s a good idea to pin down the leasing criteria to help determine who will be qualified to become your tenant. Some common criteria to take into account are:

  • No prior evictions
  • Good credit
  • No foreclosures or bankruptcies
  • No criminal convictions
  • No pets
  • No smoking
  • Good References

A quality tenant background check is a must. An online service like Houserie to do your screening for you makes a tenant background check a breeze.

But whatever your choices, do remember to follow the Fair Housing Act guidelines.

5. Get Rental Property Insurance (Landlord Insurance)
Landlord insurance is not the same as renters insurance, which covers the tenant’s property. A good landlord insurance policy protects you; it should cover everything from major damage inflicted by tenants to legal action they might take against you.

6. Prepare All Lease Documents in Advance
There are many basic lease agreements and other documents available online that can be downloaded. You can also have an experienced lawyer prepare (or just review) these documents. Other rental documents you might need include credit check authorization forms, move-in checklists, and any other notices you wish to post to tenants. These forms are all available online.

Preparing your property for the rental market is an important and critical step in the leasing process. Following some of the advice mentioned in this article will make the whole process a lot easier and will give you more bang for your buck. If this sounds like too much work, a property management company can handle some or all of it for you.

How landlords can reduce property maintenance costs

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Investing in a rental property is a commitment, and requires proper care and devotion to enable it to become profitable. Maintaining and managing a property can be expensive, but these two simple cost-cutting measures can help you reduce your overhead and make a solid return on investment.

Reduce Home Maintenance Service Costs by fixing small maintenance problems yourself

Quality of living is a very important factor to your residents, and therefore it’s essential to ensure that maintenance issues are resolved quickly and efficiently, especially when the issues involve structural problems and water damage. Toilet leaks, major dry wall cracking, and roofing related issues require immediate attention and need to be fixed properly and quickly without a delay.
Normally you would utilize the services of a handyman or professional, but honestly, the vast majority of home maintenance tasks you can accomplish with relative ease yourself. For specialized maintenance consider hiring a professional, but fixing run-of-the-mill issues yourself is a great way to cut down on those costs. Taking up the repair duties will obviously demand more of your time and physical exertion, but it’s a nice way to drastically reduce the costs generally associated with home maintenance.

Opt for a Resident Manager Instead of a Management Company

This is contingent upon the number of properties you’re attempting to manage. If you don’t feel you can effectively run the place yourself, consider hiring a Resident Manager to focus on the daily duties. He/ she will be tasked with acquiring new tenants, monthly billings, and maintenance (a nice solution for the aforementioned reduction of home maintenance costs).
Management companies are far more expensive and not always the ideal solution. From a cost-effective standpoint, if you cannot attend to all the management needs, hiring a singular individual makes more sense as opposed to a company.

In Summary

Rental properties are long-term investments, and reducing home maintenance costs by either fixing small problems yourself or by hiring a Resident Manager instead of a Management Company you can save lots of money, reduce your overhead significantly and experience profitability sooner rather than later.

Author Bio: Trevor enjoys writing about home improvement and the housing industry’s continuous innovations. He’s currently marveling at the efficiency of geothermal heat pumps.