Renters Insurance
 |
You Know You Need Renters Insurance....
But With So Many Options and Companies. How Do You Make Sense Of It All?
Simple: Use this free site to compare all the major renters insurance companies, instantly and painlessly.
All you need to do is enter a few simple details, and right away you'll see exactly what the major insurance companies can really offer, and what will work best for you and your situation. Get your free quotes right now |
Why Selling on Lease Options is Glorified Landlording (note
renters insurance info here)
By: Tim Randle
I might upset some folks with this one, but
that's okay as I think it's important to get some of my experiences
into the light of day. If you fully believe the hype that you won't
have any landlording responsibilities by selling on a lease option,
go ahead and stop here. Or perhaps you should read on as this article
is specifically written for you.
Let's review one of the common misconceptions
that is thrown around by folks touting the wonders of selling properties
on a lease option:
You won't have any repairs or maintenance.
True, you can certainly have your documents
state that the tenant/buyer (TBer) is responsible for repairs. In
fact, I've seen numerous variations of this ranging from the TBer
is responsible for all repairs to only those repairs falling within
a certain price range. Some investors ask the seller to be responsible
for repairs up to a certain amount and ask the TBer to be responsible
for those over that amount. Insurance will theoretically cover major
damages so that's not an issue. And I know from several experiences
that insurance will and does cover many repair expenses less than
$10,000. So far, knock on wood, I haven't had to test going above
that amount.
So, what happens when your TBer moves in,
sends you back your move-in condition form and two days later the
A/C, heater, or whatever goes out? You're either ponying up some
money or you have one upset TBer. Yes, I know it's wise to have
them sign off on an inspection or an inspection waiver prior to
move in, and if you're not doing that, I recommend it. However,
do you think that's going to matter if the TBer just gave you the
majority of their life savings and they're looking at a large repair
bill?
Yes, you can use some of their funds to purchase
a home warranty and I also frequently do that. If the expense happens
to be one that is actually covered under the policy on such a short
time frame and not classified as a pre-existing condition, then
you're fine and the TBer can just pay the deductible. Wait a minute,
didn't you shell out a few hundred for the warranty? True, it came
from the TBer's funds, but that option consideration was supposed
to be yours to keep, right?
Other recommendations on addressing the issue
include asking the seller to be responsible for repairs for a certain
time period and then passing that "guarantee" on to the
TBer. Again, it may be one of those "sounds good in theory"
type arguments. The few times I've gone that route I've not had
to test it, but I wouldn't be surprised if the seller is a bit upset
if I had to call to ask for money after the fact. And what happens
if your repair period from the seller is only 30 or 60 days and
it takes you longer than that to find a decent TBer. Oops.
What I've found is that typicallly the TBer
will agree, sometimes reluctantly, to cover half the expense. I
present that solution in such a way that it does appear as if I'm
breaking "company policy", but since "I want them
to be happy in their new home", I'm willing to bend the rules
some. It is definitely smart to push the TBer to get an inspection
done prior to move-in as this not only comforts them, it protects
you. Make sure you get a copy of it and have the TBer sign off on
it. To be clear, I only make this offer for repairs that occur in
the first 30 days. After that, they're on their own or insurance
will take care of it.
Let's not forget the TBer who doesn't call
to let you know that something needs repair. You may have done such
a convincing job explaining that it was their responsibility that
the TBer chooses not to call. Since they don't have the money to
fix the water leak in the upstairs tub, they just let it continue.
Now, we've got some mold issues and much more serious repair numbers.
It's critical in my opinion that the TBer call you if they have
a significant repair, even if they're able to pick up the tab. I
want to know what's going on in my properties.
So, to summarize, I think there are some
important steps to take when you sell your properties on a lease
option. Take what you feel is important and incorporate it into
your business if you haven't already done so.
1. Push the TBer to get an inspection done.
If they don't have the $200 or so to do this, ensure they sign off
on an inspection waiver. It's more difficult for them to come back
to you demanding their option consideration and rent back due to
needed repairs if they made this choice on paper and signed it.
2. Consider using part of the TBer's funds
to purchase a home warranty. Not only does it comfort their concern
of potential repairs, it increases the likelihood that needed repairs
will get done. It's cheap insurance in my opinion.
3. Set up your standard operating procedure
regarding repairs. Like all issues regarding properties with which
you stay involved, it's important to promote and maintain consistent,
documented procedures. In other words, don't have different repair
policies for different properties or TBers. Choose the repair responsibility
method or methods you think will work best and stick with them.
4. Another item not mentioned that is also
company policy is that the TBer must have and maintain renters
insurance. Policies can be purchased for very little funds and
it protects their personal property. Typically, these policies will
also have a liability component that provides an initial layer of
protection before they get to your policy. This way, if some accident
happens, like the tub leak above, that damages their property, they
won't be coming to you first for replacement.
Selling on lease options can be a profitable
technique if done wisely. Just don't go into it believing it doesn't
take any work and that the landlording headaches are completely
removed. They aren't.
Sincerely, Tim Randle
You can find more Renters
Insurance Information here
|
