Hot water system packed it in or garage doors that suddenly refuse to open … minor maintenance dramas and the accompanying expenses are par for the course and factored into the budget for most Aussie landlords.
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But what happens when major disaster strikes? Brace yourself for a lot of headaches and a big bill, says financial services professional John Tomlinson, who was down around $66,000 after his rental property in the inner-city suburb of Auchenflower was partly inundated in the 2011 Brisbane floods.
One of six three-storey townhouses built on a site which went under in 1974, Tomlinson thought the chances of it flooding again were "one in a million" and a risk he was willing to take when he bought the property in 1995.
"It was a good investment, ticking along pretty well," Tomlinson says. He put it on the market in late 2010 to help finance the purchase of a family home in Sydney and had a conditional buyer on the hook when the big wet struck.
Visiting relatives in Canada at the time, Tomlinson watched the natural disaster unfold from afar on television. "I thought, 'Oh my God, this is hairy canary'," he says. Friends subsequently delivered the unwelcome news that the waters had flooded his garage and risen 50cm into the first storey, damaging walls, carpets, curtains and kitchen cupboards.
When the deluge receded, Tomlinson found himself without a buyer and facing a $25,000 repair bill for a property the bank now valued at $300,000, not the $430,000 it had been on the market for when the heavens opened.
In common with many Brisbane property owners, he did not have flood insurance and his landlord protection policy provided no payout, given the house had been vacant for sale at the time.
"Then I had to bite the bullet and borrow money to repair it," Tomlinson says. After four months of toil – much of which he did himself with the help of friends, in order to contain the costs – he faced the task of finding a buyer whose price expectations matched his own. Stressful times – given holding on until the market improved was not an option.
"I could afford to take a bit of a hit but I desperately needed to sell it to help fund the house [in Sydney]," Tomlinson says.
He rejected several "opportunistic bids" before finally accepting $400,000.
"There was a large degree of good fortune that one person came along who was prepared to pay a sensible price." Factoring in lost rent of around $11,000 for the refit and sale periods brought his losses to around $66,000.
"Awful but not the end of the world" – but it could have been for an investor with less of a buffer, Tomlinson says.
Concern about major damage and subsequent lost rent have resulted in more investors taking out landlord protection insurance as well as house and contents policies during the past decade, Melbourne financial adviser Steve Enticott says.
Policies typically cover tenant-related risks, including malicious or intentional damage, and loss of rental income in a range of scenarios.
"It's a good investment especially if you're sailing close to the wind," Enticott says.
Cheap at the price, agrees Lucas Real Estate property director Dylan Emmett who says insurance can be had for as little as $300 a year for properties that rent for less than $1000 a week.
Around 85 per cent of his clients hold landlord policies and the agency is loathe to deal with corner cutting landlords who are unwilling to cover themselves, Emmett says.
"A lot of people still don't have it as they are too fixated on the balance sheet – they see it as an unnecessary cost."
Fat Pizza actor and entertainment promoter Alex Haddad says it saved his bacon after a fire, believed to be deliberately lit, destroyed 80 to 90 per cent of his two-bedroom weatherboard rental house in Sydney's Ryde in September.
The trouble-prone landlord previously lost thousands after a disastrous experience in 2010 when he rented privately to acquaintances who stopped paying, refused to leave and trashed the premises when they eventually moved.
The landlord policy he subsequently took out with CommInsure provided him with a goodwill payment of three months' rent, a week after the fire occurred. Enough to fund the mortgage payments while assessors determined whether to pay out his $212,000 house policy or cover the costs of rebuilding, according to Haddad.
Good value and it's tax deductible, he says: "You're silly not to have the right insurance."
