Here is a little story that we all do not want to emulate.
I was talking to my PM in NZ yesterday and she relayed to me this information.
It seems that one of her Aussie investor clients had a spot of bother during the last week: the tenants burned down his house.
Now: it would not be so bad if the property was insured but unfortunately it wasnâ€™t. Seemingly the investor had a problem with his insurance company when they came to visit the property 5 or 6 months ago when he had put it a small claim for another unrelated incident. The insurance company did not like the look of the tenants or the property and promptly cancelled his policy.
The owner had a look for another insurance company but could get a reasonable deal as far as he was concerned so practiced a bit of procrastination and let it slip.
The ramification of this has left him with a clean up bill for a few thousand dollars, no house and a block of land worth around 2 to 3 thousand and a mortgage of $30000 plus.
So the moral of this little story is, donâ€™t procrastinate?
If you have to fork out a few hundred dollars more to get insurance then do it. It is better that the alternative: a pile of ashes and a huge bill.
Please do not underestimate the importance of management when investing long distance. We had a few problems early in our NZ experience. This was difficult for us because we had experienced excellent management in Oz for years. We now realise how lucky we are with the Oz property managers.
Since that time things have changed for us in relation to management. We have made some changes in the people we use and have made some changes in the way we supervise the managers.
Now we call the manager at least every 14 days ( more frequently if the property or tenant has issues ).
It can be difficult to keep track of insurance policies when there are multiple properties but it is something that must be done. We currently use the national bank and there policies self renew via direct debit. ie you get a letter saying that your policy has been extended another year when it comes up for renewal.
In this instance the fact that the insurance company cancelled the policy should have been a trigger to boot these tenants. I would take a vacant property over a bad tenant every time.
You need to make sure that you are getting honest and reliable feedback from managers as well as doing your part by making regular and diligent enquiries about your own properties.
If any NZ investors need a fresh set of eyes over their properties drop us a pm and we could organise some photos (good and bad) and a detailed inspection.
Once you know the true situation with your properties you will be able to move forward and find the best way to fix these problems and get quality tenants into the houses.
Best of Luck
Don and LizbuzzwellsParticipant@buzzwellsJoin Date: 2005Post Count: 83
Seems to be a breakdown or perhaps a lack of system in place in the areas of:
1 – Selection/screening of Property Management
2 – Selection/screening of potential tennants
No doubt big lessons for all of us here.
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I have not heard of a person having a policy cancelled before now I come to think of it. This person must have remembered and event like that and been making a conscious decision not to insure.
In that case this person should probably question whether property investment (direct) is a suitable wealth creation tool for the.
No insurance!!! I mean what about the public liability side of things. What if the tenant injured themselves while in the property and not just burnt it down.
No ill feeling to this person as it must have been traumatic but we need to be realistic about the risk and responsibilities of being a landlord.
Best of Luck.
A little more information that has come to light.
Seemingly the house was in a bad part of town and only a couple of doors away from a gang house: you know the deal drugs, crime etc.
Obviously the kind of tenant this property would attract would be of a lower standard and probably the only kind of people you would get. Whether the owner made a conscious decision not to insure because of this reason is unknown, or if the close proximity to the gang house made any difference is also unknown. Although I would think it would have had a bearing on the insurance companyâ€™s decision.
I donâ€™t think you could blame the PM for not choosing good tenants; they would not have a big choice you would assume?
Now: I would not buy a house in such an area but then again I do place a lot of emphasis on checking things out properly: due diligence is what it is called.
Again I wonder if this house was bought sight unseen from the net: most probably I would think. I doubt that any investor in his right mind would buy a house in the worst part of town? Then again stranger things have happened?
If anyone is in a similar situation and you bought from the net sight unseen? Then Don and Liz offer to cast an eye over your property sounds like an excellent deal, I would certainly take them up on the offer. Could save you a lot of heartache down the track.
[biggrin]westanMember@westanJoin Date: 2002Post Count: 1,950
my first thoughts were this sounds like an urban Myth ?? Are you sure it happened to a client of your PM or someone she knows ???
What city did this happen in? i live in NZ (But i’ve been out of the country for 8 weeks), i’ve never heard of anyone having an insurance policy cancelled before. I’d like to find out if this is real, love to look into it more
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Yes it would be good to find out some specifics about a story like this.
I mentioned this in a previous post but we went to a talk recently and were given a stat that 85% of the complaints about landlords that were serious enough to go to mediation were about Australian Landlords (in southland) . I am not sure why aussies are so reluctant to spend the required money to fix properties. Maybe it is partly communication problems.
However, If this guy really did manage to buy himself a house next to a gang house maybe he is one of the 85% that won’t spend for repairs. You would not throw good money away. In saying that gangs are not a problem in Invercargill so I am feeling that it was something that happened in the North? Which town???
The story was relayed to me by the PM as it happened to her (so she says). I know that she was really worried that she would get in trouble some how, but I donâ€™t know exactly why. I think maybe the owner asked her for names of insurance companies and she was a bit vague in her replies.
I don’t think it is appropriate for me to mention names on an open forum, but I will PM you with all the details if you like? ( you to Don and Liz)
You know where I am investing Westan and it was in one of the far South suburbs of that town, near to the road to the port, freezer works etc.
She did say that the owner put in a claim a few months earlier and it was rejected and the insurance cancelled. Now maybe the owner got the s..ts and cancelled himself after being knocked back and then did nothing to find another insurance company: not a 100% sure?
The owner could have told the PM the insurance company had cancelled the policy, so as not to look like a dic.h.ad, who knows? But the PM just told me what she thought was the story. I did say to her that in was strange for an insurance company to cancel the policy, but she said that is what the owner had told her.
I donâ€™t know much more than this, but either way it is a sad tale.
Kerwyn.CoopsTParticipant@coopstJoin Date: 2004Post Count: 26
i had a car insurance policy when i was 17 and after i made 1 claim in the first year, the company sent me a letter at the end of the year saying they won’t be renewing my policy and that I would have to look elsewhere….this scenario kind of sounds a bit like that…especially if he had made a claim a few months prior
Coopss arcusMember@s-arcusJoin Date: 2004Post Count: 1
Hi to me it sounds like an ex forestry town. Assuming it had a value of around 50K and the section is now only worth 2 to 3 Thousand, it obviously not in an employment area, or even in commuting distance. Your tenants in these areas are lower socioeconomic or benefit collectors. If I am right in my assumptions, you need a really good PM or manage it yourself with lots of hands on visits. Secondly capital gain is remote so your returns are linked solely to the rent.oshenMember@oshenJoin Date: 2005Post Count: 112Originally posted by kerwyn:
So the moral of this little story is, donâ€™t procrastinate?
Or is the moral of the story that if the insurers don’t like the tenants to the degree that they won’t give you insurance, you should find new tenants because those ones might burn down the house?