Are you covered for your investment risks?

Landlord Protection insurance is an important, yet often overlooked, part of the property checklist for investment owners.

  • 1 March, 2015
  • PROPERTY MANAGEMENT
  • Investors, Landlords, Insurance

This insurance product can cover landlords for unforeseen risks such as loss of rental income due to changes in a tenant’s financial circumstances, damage to the property caused by a tenant, or a member of the tenant’s family injuring themselves on their property. All such incidents can leave landlords exposed to substantial financial losses.

The end of financial year is approaching fast. Very shortly, tax accountants will be requesting receipts of expenses incurred in the last financial year relating to rental properties to complete tax returns.

Landlord protection insurance is not only a tax deductible expense under current legislation, it’s also a small investment that can protect landlords from some of the risks associated with owning a large investment, such as a residential rental property.

Landlords factor in costs for maintenance and repairs, but they can often overlook insurance for their rental properties which, for many of them, are their most valued assets.

What you may not be aware of is that standard building and contents insurance policies generally won’t cover for many circumstances such as damage caused by a tenant or loss of rent.

A landlord insurance product can help protect against such risks.

RBNZ Targets investors

Property investors remain firmly in the sights of the Reserve Bank.

It announced earlier this month it plans to create a new loan category for investors.

The Reserve Bank says that, over the next month, it will be consulting on “a new asset class treatment for mortgage loans to residential property investors within its capital adequacy requirements”.

It plans to amend existing rules by requiring all locally-incorporated banks to include residential property investment mortgage loans in a specific asset sub-class, and to hold appropriate regulatory capital for those loans.

The Reserve Bank, which cites international evidence on the higher risk profiles of investors, says the goal of the consultation is to better define what an investment property loan is.

While it has previously proposed defining property investors as those with five or more properties, that suggestion was met with significant opposition.

This time, the Reserve Bank plans to consult on three possible alternative definitions for property investment loans. They are:

  • If the mortgaged property is not owner-occupied; or
  • If servicing of the mortgage loan is primarily reliant on rental income; or
  • If servicing of the mortgage loan is at all reliant on rental income.

Loan Market’s Bruce Patten says the Reserve Bank’s latest approach is a better one.

He believes the Reserve Bank is seeking to get a better understanding of the level of property investment and its place in the property market.

“Based on the available information, I think this is stage one of a data collection plan. They need to gather information before they enact any macro-prudential tools aimed at investors.”

But the issue is what the Reserve Bank might then do once it has collected such information.

 For the full story: www.landlords.co.nz

LJ Hooker NZ

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