New Zealanders who dive into property investment as a perceived fast-track to wealth may be unwittingly putting their properties and financial security at risk, by being a ‘little too lax’ when it comes to their responsibilities as landlords.
In research commissioned by AMI, 15% of tenants report that they do not have regular property inspections. In the same survey, more than half of renters contact their landlord directly (not via a property manager), and over a quarter (27%) characterise their landlord as someone with whom they have an ‘existing, personal’ relationship.
In New Zealand, rental property owners can choose to manage the property and the tenant relationship themselves or via a property management service. Just under half of all rental properties are owned and managed by non-professional landlords, and of that group, the majority own only one investment property. Additionally, many Kiwi tenants have a personal relationship with their landlord who may also be a family member or friend.
Stephannie Ferris, AMI Executive General Manager Claims, highlights that while it is common for property owners to rent to friends and family, it’s important that they are aware of their responsibilities and are prepared to be accountable for property management decisions.
“With interest rates dropping, and the market becoming more affordable, we know more aspiring property investors are considering purchasing a rental home. We want to make sure they are taking the right steps to protect their property and interests.
“While it’s popular to rent to people you know well, it’s essential that property owners are still taking proper precautions to protect those assets. This includes making sure they do appropriate checks before the tenant moves in and that they get into the habit of making regular, recorded inspections. This is particularly important to ensure any insurance claims you need to make on your insurance go as smoothly as possible.”
Specialist landlord cover is key
It is increasingly clear that specialist landlord insurance targeted to support the increased financial risk property investors take on is a must-have for many property owners.
Steph Ferris says, “Specialist landlord insurance policies like AMI’s Landlord Home and Contents Cover are specifically designed to help property investors manage common risks associated with tenanted properties. These policies typically include cover for the repair or replacement of damaged or stolen chattels and furnishings, lost or defaulted rent, and the clean-up of abandoned possessions. They can also significantly reduce the financial impact of unplanned downtime between tenancies while repairs are carried out.”
AMI data shows that claims that include cover for loss of rent have increased by one third (33%) over the past five years.
“The average claim paid for loss of rent is the equivalent of more than eight times the average weekly rent in New Zealand. This is because repair work often takes time, and a property can only be advertised and re-let once those works are completed. Most do-it-yourself landlords are unlikely to have the surplus cash needed to cover mortgage and other expenses if major repairs, such as those required after a fire, for example, are necessary.
“Getting smart about protecting assets ahead of time means landlords can do right by their tenants and be better prepared to protect property and their own wealth in the long-term,” said Steph Ferris.
