One of things I love about real estate investment is you can protect the property against loss and you can even protect yourself from loss of income – I can’t think of any other investment that can offer these advantages – I recently met these guys at a PREI conference and I thought you property owners would find this interesting and helpful – Kimberly.
Insure The Asset, Now Protect the Income
You’re a real estate investor; your properties are your assets and every investor from the experienced head of a REIT, to a first time landlord, knows that in order to achieve long term profitability you need to have those assets properly covered.
The property insurance you carry will protect you from losses from damage, from potential liability, and in some instances even vandalism and tenant negligence. All of which is necessary to keep this venture profitable.
But what about in the short term?
Growing your portfolio means taking on more expenses day to day in the hopes of turning those expenses into more income down the road. Until very recently these costs were the reason potential landlords wouldn’t take the plunge, and existing investors were hesitant to grow their portfolios. New properties bring with them new taxes, new mortgages, new tenants, and unfortunately often times new headaches.
Every landlord can share a story about a tenant who was never on time with the rent and has experienced a sleepless night spent worrying about how to cover the mortgage if the rent check didn’t come in. When you’re operating a growing business these rental payments are your lifeline and for years the only protection available was doing your best to prescreen the tenant and to collect a security deposit. But even the most diligent landlords were still leaving themselves at risk. In fact in October 2012 CoreLogic (NYSE: CLGX) reported that on average 2.2 million landlord/tenant court actions are filed each year.* When you take your tenants to court, you aren’t collecting rent, and when you aren’t collecting the rent, you are forced to cover your business expenses without the necessary income.
So what are the options?
In January 2012 Aon Affinity, a division of global risk management leader Aon plc (NYSE:AON), launched Aon Rent Protect. Aon Rent Protect was created to solve that last biggest question that investors face: What happens to my asset when my income stops coming in?
Based on a similar line of insurance that Aon has provided overseas for decades, Aon Rent Protect insures against tenant rent default with up to six months of rent recovery available plus reimbursement for legal expenses to help with the eviction process. Rent losses are reimbursed monthly as they occur to keep the cash flow interruption to a minimum. Premiums start at $250 a year** (about $21/month), a small price to pay for the security of knowing you won’t have to tap into your savings while you’re looking for a replacement tenant.
Maximum protection for a minimal cost is a business operating strategy that just makes sense. Whether you are a small landlord looking to protect your finances or have a large portfolio and want to expand further, adding rent default insurance to your risk mitigation strategy gives you the ability to protect your income in the short term, and grow a more profitable business in the long term.
LEARN MORE: *The My REI Advisor webcast, titled “Risks Facing Residential Landlords: How a rent default action can impact a landlords time, resources, and finances” can be accessed here: myreiadvisor.com/teleclass-76- bryan-kinsey-risks-facing-residential-landlords.html.
** Aon Rent Protect premiums vary based on monthly rent.