This new economic climate has put all of us in very uncertain times. It has puzzled even the most astute investors because nobody really knows what’s going to happen. Which is why 89% of the property owners I talk to say something along the lines of, “I’m just going to wait until the dust settles before I do anything”. There’s a new risk that has entered the marketplace. Tenants are allowed to default on rents and property owners can not evict! Which sort of makes you wonder who’s really in charge 🤔. Because it sounds like the tenants have more power than the owners now. But anyways I digress.

As a property owner you’re probably wondering how to mitigate risk and protect your downside during these times. The best piece of advice I have for you right now is leasing insurance. Most owners I speak with are not familiar with leasing insurance, or at least they pretend to be. Leasing insurance works very similar to a regular insurance policy. It’s a policy that we purchase to protect us when something bad happens. In this case, when/if the tenant defaults on the rent for any reason, the company will cover those rents for the term of the policy. Luckily, the expense of the policy isn’t something the owner has to incur. What I would suggest is - instead of collecting a deposit on the rental unit of let’s say $1,000, ask the tenant to purchase a 6-8 month policy for let’s say $300. (Obviously costs will vary depending on the term of the policy and the amount it’s covering but for the sake of the example let’s say it’s $300.) Now most tenants would prefer to keep more money in their pocket. So it’s a win-win. Property owners are protected and tenants keep more money.

Now personally I don’t think leasing insurance makes sense for every tenant or every property owner. I think implementing leasing insurance makes the most sense in situations where tenants are highly likely to default. For example:

1. Lower-income areas
2. Properties filled with tenants that work in retail or entertainment
3. High-risk tenants (Low credit score, bad credit report, criminal record etc.)

The policy doesn’t have restrictions or preclude you from certain locations or tenants. So use it where you deem necessary. I would also consider this program if you are considering selling the property in the near future. It will help you fetch a higher price and make your property more attractive. Considering the fact that you are eliminating a risk that’s on everyone’s minds.