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Why You Absolutely Need Rental Insurance

Via State Farm on Flickr

A friend of mine recently rented and moved into a swanky new apartment in our downtown area. When discussing the details about her new rental, I was interested to know how much she was paying for rental insurance.

Rental Insurance? She asked.

Yes, I replied

It’s a brand new building, I couldn’t be bothered to waste my money on something that will never happen.

That’s how our conversation started about rental insurance, but it quickly developed into a whole debate about the importance of rental insurance and why any renter absolutely requires it.

why you need rental insurance

Via State Farm on Flickr

My Experience With Rental Insurance

Before my husband and I were married, and moved into our current home, we rented an apartment. It was a nice, new, one bedroom 700 square foot beautifully furnished apartment about five minutes from all of our friends and family. Being a new building in a safe neighborhood, I will admit, like my friend, I questioned if we should even bother with rental insurance. I mean surly nothing would happen and I saw the approximate $25 per month rental insurance charge as a waste of money.

To make a long story short, having rental insurance was one of the best financial decisions we ever made. The new piping in our bedroom (carrying our hot-water heating supply) was faulty and we ended up having a massive flood that resulted in thousands of dollars in damage to both the apartment itself and our possessions. We lost televisions, bedding, pictures, books and the apartment bedroom needed to be gutted. The floors and walls were replaced and we were without a place to call home for, what ended up being, ten days.

The flood happened the first week of December so on top of the flood, we were dealing with the whole stress of not having a home during Christmas.

Having rental insurance meant we were entitled to a hotel stay, all damaged items being replaced, legal proceedings were covered and a daily stipend to live for inconveniences was given. We were fortunate to have friends and family close so we didn’t have to live in a hotel but it was nice to know we wouldn’t be homeless. Though we did lose a few personal photos and books, most of the items that were damaged were replaceable. We were lucky.

If we didn’t have rental insurance though, we would have been in a much worse spot. Having rental insurance saved us. Since we are in debt, we have a small emergency fund but we would have needed thousands of dollars already set aside to replace the damages from this flood, something we didn’t have. I shudder to think about the financial situation we would have been forced into if we didn’t have rental insurance.

My Advice on Rental Insurance

I cannot recommend rental insurance enough. To my friend, I think she has changed her mind and decided to get rental insurance. If she can afford this beautiful apartment, she can’t not afford to insure it. Property insurance, whether it is for a property you own or rent is one of the most important decisions you can make.

In our case after the flood was over and cleaned up, the property owners tried to come after us for ”damages” and threatened to sue us since they felt the flood was our fault and not theirs. Once again, having rental insurance allowed us to have peace of mind. We didn’t have to worry about anything and the insurance company dealt with the property owners on our behalf. We moved out six months later into our current home were the first thing we did was sign up for rental insurance.

Insurance is something you may never use but the piece of mind it gives knowing you have it is incredible.

Have you ever had to make a claim on rental insurance? Do you have insurance or see the need for it?

 

 

Negotiating Lower Rent

The cost of living can be astronomically high and depending on where you live, it can take up a major portion of your paycheck. Renting a house or apartment is no different. The good news is that as the renter, you do hold a lot of negotiating power, especially if you come with good references or you are renewing your lease. Especially when it comes to renting a home, you can hold a lot of negotiating power if the owners know that you can be trusted to keep their property nice as well as pay your rent on time each month. Here are a few things to keep in mind when it comes time to negotiate rent.

negotiating rent

via Flickr – sjon

Research comparable rentals in the neighborhood

There is no better way to plead your case for lower rent than to compare your rental to almost identical rentals in the area. There are numerous tools at your disposable this day in age, most of which come via the Internet. Having a few comparable properties in the same vicinity should be all you need to prove to your landlord that you deserve a decrease in rent.

Negotiate Rent by Bartering your Services

All properties require maintenance and upkeep in order to keep them looking nice and functioning as a place of dwelling. Many landlords will be open to accepting your services for a slightly reduced rent. For example, perhaps you can mow the lawn yourself instead of the landlord having a landscaping company come out. If you are particularly handy or are knowledgeable in other trades, it never hurts to ask.

Negotiate Rent by Keeping in Touch with Prior Landlords

The last thing a landlord wants to do is take on risk in a tenant. If you can prove a clean history of being a tidy and responsible tenant that pays their bills on time, that can go a long way. For this reason, you may want to start gathering references from prior landlords or just keep in touch with them for future references. A good track record goes a long way when it comes to asking for a lower rent.

Negotiate Rent by Offering More of a Deposit

Nothing speaks like money does when it comes to a rental agreement. Many landlords will require a deposit which is usually one month’s rent. Offering more months rent is a good way to ensure the landlord that you are indeed good for your word and limits the financial risk that they take on. A lump sum is always more valuable when it comes to the time value of money so it would be ignorant of your landlord not to take you up on the offer.

Walk Away if it Doesn’t Feel Right

It’s not necessarily bluffing so much as knowing that there are many other options available, and unless you are completely sold on the place there is no harm in looking elsewhere if the landlord is not flexible at all. If you are being fair in your requests, chances are the landlord will end up realizing that and decide to work with you after all.

Timing is Everything when Negotiating

Nobody wants to go hunting for a new house in the winter or much less move all of their belongings. It is for this reason that it is the perfect time to look for a new place to live. As are most things in life, it is all about supply and demand. When there is less demand you consequently have far more bargaining power. Use this to your advantage when it comes to looking for a new place to live. Most landlords know that people looking for housing during the colder months are far and few between and are therefore much more likely to negotiate.

Have you negotiated rent before?

Grow Rich with Real Estate

Many people think that real estate is the old man’s way to invest, and some say real estate is not an asset. And they may be right. But, investing in real estate is a tried and true method, and if you make wise purchases and find quality renters you can really get rich and make some serious coin. Let me show you two very different methods for investing.

Ten Houses, Ten Years

There are many real estate gurus out there, that got rich through real estate, that believe in this model of buying one rental property each year for ten consecutive years. That’s a lot of real estate investing! For some of you, this might seems like a slow way to earn an income, but for others, this might seem extremely fast. Let’s dig into some numbers and decide whether or not this real estate investment style is right for you.

The Cash Flow

If you purchase these pieces of real estate right and put them on a 30-year mortgage, you can most likely earn $250 a month in cash flow (after factoring the standard expenses for maintenance and repair). After you purchase your tenth house, you’ll be pulling in $2,500 a month and you’ll have 10 houses that are appreciating in value. The very first home you bought for $100k might be worth $125k today (after the tenth year), so not only are you earning a consistent cash flow each month, but you’re also increasing your equity in real estate!

The Equity and the Debt

After 10 years, assuming that the homes increase in value at the historical average, you could have about $1.1 million dollars’ worth of real estate. You are well on your way to getting rich with real estate. The only real problem is that you have nearly a million dollars’ worth in mortgage payments that you still owe the bank. If something goes wrong with two or more of your properties, you could be sunk financially.

get rich with real estate

Debt Free Investing

Many of us aren’t comfortable carrying around a million dollars in debts, so here is a different plan for you. Buy one piece of real estate at a time, pay it off as quickly as you can, and then move onto the next one to get rich with real estate.

The Cash Flow

If you have an excess amount of money from your day-job, you could aggressively pay off a $100k property in just over three years. With this pace, you could easily purchase three homes and have them free and clear within 10 years. With no mortgage payments, instead of earning just $250 a month on each property, you could earn $750, which gives you a monthly cash flow of $2,250.

The Equity and the Debt

Since you poured a lot of your own money into this plan (whereas before, you simply paid the minimum payment on a 30 year mortgage), you were able to raise an equity of approximately $325,000 and you have absolutely no debt to pay anyone.

The beauty of this plan is that you can really start to pay your next investment properties off quickly. Since you now have a consistent cash flow of $2,250 and your day-job income, you can pay off a piece of real estate in less than two years. So after just two years, you could increase your equity by $100k and your cash flow by $750. Then your earnings will most likely skyrocket from there. Choose to get rich with real estate and you’ll be glad that you did.

This post was written by Derek from Life and My Finances. Stay in the know with updates from all of our contributors by subscribing to our RSS Feed