New landlords should consider insurance

by Sarah Ashcroft

Landlords with small buy-to-let property portfolios, such as those who are just starting out, should definitely consider taking out specialist landlord insurance.

Stuart Law, chief executive at Assetz, said that larger landlords, or those who are commercially run, usually have less of a need for landlord insurance as the breadth of their portfolio behaves as a protective force.

However, those with just one, two or three properties and freshly signed tenancy agreements could easily find that all of their tenants default at once.

In this case landlords would end up with significant costs to repay.

"I would strongly recommend that people with very small portfolios - particularly those new to the buy-to-let business or those who haven't got lots of reserves to cover the risk - should consider the insurance," Mr Law said.

"It is a good component of a portfolio. For a small investor who is new to it, it is a pretty good idea."

He suggested that it is particularly important if you are renting property without relying on letting agents, which can carry a few more risks.

If, like many people, landlords decide to cut out letting agents, he advised that the tenant referencing is even more important to ensure you do not end up with tenants that will damage property or run up rental debts.

In these cases referencing should be "substantial".

This point of view was echoed by Malcolm Harrison, property industry expert speaking on behalf of Let Insurance Services, who warned landlords to never accept tenants on trust.

He said that, particularly in a buoyant market when new tenants are easier to come by, it is vital not to neglect references.

Where demand is strong, landlords are in the favourable position of being able to find new tenants if those who have applied have been unable or unwilling to provided detailed references.

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Published on: June 25, 2012

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