Do you remember the story of Chicken Little, who ran through town yelling “The sky is falling! The sky is falling!” Well, I’m the total opposite of Chicken Little. I choose to think the best, in people and situations. Part of it is genetics, part of it is choice. And I like being this way because it adds to my overall contentedness with my lot in life; when things are rough, I trust the situation will take a turn for the better very soon. This philosophy is very helpful when you’re a landlord.
However, I don’t ignore reality. **** happens when you own and manage rental properties, and you can’t ignore tenant issues or problems with your units and wish them away with positive thinking. You protect yourself from tenant issues with an airtight lease like mine. (Check out my book, The Landlord Chronicles: Investing in Low and Middle Income Rentals.) You protect yourself from problems with your units by checking on them regularly and purchasing a good insurance policy for each of them.
I use an insurance broker, who shops around for the best policy for me. I have all of my policies with him (home, car, rentals) and he saves me a lot of money. In my 15 year career, I’ve only had two claims. (I don’t bother with small stuff; it’s not worth nickel and diming the insurance company.)
The first was a fire at one of my duplexes. One of the units was a total loss. I’d paid $26,000 for the house and the damage for that one unit came to $37,000! No problem . . . they had to start from scratch, but when they finished, the apartment, below, looked like new.
The winters here can be brutal, and this fire was caused by an old space heater that malfunctioned. I was so grateful to have insurance, and there were no questions asked. It was very easy and straightforward.
The other claim I had to file was due to a large branch from a neighbor’s tree that fell onto the porch overhang at one of my duplexes. We can get some pretty stong storms here in the warm summer months, and this happened after heavy winds and rain. My tenant called me in a panic and I went to the house immediately. The man you see in the picture is actually the next door neighbor . . . the owner of the “errant” tree.
This repair was much less expensive but still worth filing a claim. Part of the huge branch actually penetrated the wall of the upstairs bedroom. You can see a small piece of it sticking out, above the porch overhang.
So, the first thing on my “to do” list when I buy a property is make a call to my insurance broker, so that I can get the rental insured immediately. By the way, I don’t insure my properties at replacement value, I use market value as my guide. If the property burns to the ground, I’ll take the money and run . . . and buy another! My deductible is $1000, which helps keep the payments low.
My advice? Be an optimist, be positive, but don’t be a fool. Think the best but be prepared for the worst. A good, solid insurance policy will provide peace of mind regardless of what happens at your rental.
So, was Chicken Little wrong? Yeah, for the most part. In 15 years, I’ve had two claims. If you’re a Chicken Little supporter, you may not be cut out for this work. If I had the Chicken Little attitude, I’d be nervous, afraid and miserable every day, and I’d drive myself and everyone around me crazy. I don’t want to go there.
I’m lucky to be me. 🙂