Property investors can take out landlord insurance to mitigate the practical risks involved in renting out a property, such as damage caused by tenants, or even natural disasters. It can also
ensure they’re covered in case they lose rental income. But this is getting
more complicated in the COVID-19 climate.
To ensure housing security for
renters across the country, the Federal Government has placed a six-month
moratorium on rental evictions. The states and territories are also offering
different concessions to landlords who are negotiating payment pauses or
reduced rent with tenants who are financially impacted by the pandemic.
But as Mozo’s property expert
Steve Jovcevski explains this puts landlords between a rock and a hard place
when it comes to insurance claims for tenants defaulting on their rent.
"Rental default isn’t an
agreed-upon rent reduction or pause where tenants stay in a property. It’s for
when tenants unlawfully leave and abandon payments within a lease period,”
"So the insurers' argument is,
‘technically the rent isn’t in default because you negotiated reduced or paused
payments with the tenants.’ Basically, they don’t have to cover you for lost
rent if you haven’t tried to evict your tenant who can’t pay rent because of
the pandemic. And right now eviction isn’t an option, so landlords are pretty
What other financial support can landlords
If you have the capacity to continue with your current home loan
terms, Jovcevski’s advice is to do just that. For landlords that are unable to
meet mortgage repayments, there are other options that might reduce some of
the financial burden.
The government relief specifically targeted to address this
situation differs from state to state. In NSW, Victoria, and Queensland,
landlords who agree to negotiate with their tenants are being offered
reductions and deferrals on land tax. However, this has been criticised as it
doesn’t necessarily offset rental income loss. It also only assists the portion
of landlords with properties that actually require them to pay land tax.
Other states such as Western Australia and Queensland are
offering eligible renters grants to cover four weeks rent (capped at $2,000) so
they can maintain payments for that period. This is in addition to new government support payments. Both are designed to keep renters in
housing, which should ideally allow landlords to continue making payments on
their home loans.
Bank and lender relief
Many banks and lenders are now offering six-month deferrals on home loans. Bear in mind, interest will accrue during
that time, and borrowers will face larger repayments post-deferral, or longer
loan terms. Opting to switch to temporary interest-only repayments and
deferring the principal amount could be a way to minimise additional costs
across the life of the loan.
There are also other hardship concessions that could help you
save cash while your property isn’t generating income. These include fee
waivers, additional redraws on loans, and negotiated repayment plans.
If you’re an eligible borrower, refinancing with a lender who offers more attractive
rates and flexibility could potentially offset some loss in rent. However, if
you’ve lost other sources of income and face financial hardship, it may be more difficult to get approved for refinancing.
Find out why RealRenta is
disrupting the Real Estate industry with our Self Management platform.
RealRenta is for Smart Investors, who realise that they are no longer
bound to traditional property management and the associated high fees.
Use RealRentanow and you will NEVER hand over your investment income to a Property
Manager EVER AGAIN!
get 50% off the normal subscription Fee https://mailchi.mp/realrenta/50-deal-2020
Friday, 19 June 2020