ASK488: Should I get rental insurance? PLUS: Is this a leasehold nightmare?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Yes, it is Ask Rob and Rob, that weekly fixture where we answer two of your property questions. We love it because there is so much variety, always topics coming up that never have before. And the reason that happens is you send in such good questions. And maybe Rob, that's because the way to do it is so easy. It really is. All you have to do is go to propertyhub.net forward slash ask and there you'll be presented a buffet of options you can write in and potentially see your question in the Sunday Times being answered by our good selves or you can call in and leave a voicemail that way nobody will pick up don't worry just leave your voicemail you can take as many goes as you want and leave a message that way or you can leave a message directly via that link whatever you prefer it does not matter for this episode it helps if it's audio Luckily, that's what Francesco has done.

0:56And we have a great question in. Hi, Rob and Rob. I'm Francesco from London. I've been listening to your podcast since I moved here from Italy in 2017. I really enjoyed it. So thanks for all the great content. In a recent episode, you mentioned being more open to getting rent insurance to protect against possible future losses. That got me thinking. Given that I assume you're in a strong enough financial position to handle the occasional loss and assuming the insurance premium is fairly priced to reflect the current government reforms, do you still see it as a rational move? Or could it be more about loss aversion, like kind of an idea that we tend to fear losses more than we value equivalent gains?

1:37So I'm curious what you think, Churis, Francesco. I said this was a great question, and I think it is really good because sometimes people will go back through the archives of the podcast and pick up things that we said and go, okay that's what Rob and Rob believe but like most humans we're open to changing our mind and this is a subject where I've changed my mind. So Mr D has pretty much always taken out insurance and has said that's something he'll do. I on the other hand have not taken out insurance and up until 12 months ago I got completely away with it and I mean away with it because in the last 12 months I haven't got away with it and what it has cost me with one nightmare tenant and I will share that story one day soon on the podcast when it all comes to a close and it hasn't yet which is part of the point of this answer that one nightmare experience has already wiped out all the gains I've made by not paying insurance through the years I mean it it really has and that along with the changes that are coming through from the government around rental reform mean that from now on, I will be taking out insurance on all my properties.

2:52And I have a reasonable tolerance to risk, but I've seen what I believe the absolute worst case of what can go wrong. And I don't think it's a normal situation what I've had to go through. But even so, I just want this to run on autopilot. And I think that's where my thinking's changed. I've had to get more involved, give more headspace to this property and this situation I would have liked. But if I had insurance, I kind of wouldn't have cared as much because I know I'm going to get the money back. So for me, it's not only just a financial thing, but it's also a peace of mind thing. It's an extra way for me being able to switch off to my portfolio, which is really what I want to do.

3:32I don't want this portfolio as a job. I want it as a financial asset to help me and my family now and in the future. And by getting insurance, that helps me on that path and on that journey. So a complete transformation for me, Rob. Maybe you've gone the other way and you're like, no, screw it. I don't do insurance anymore. I like a bit of risk. No, I mean, I've been inconsistent about it. I haven't done it on every occasion, but I think once these reforms have come in, I think I'm highly likely to be doing it like you say you're going to, just as a master, of course. The thing to bear in mind is that not all insurance policies are equal.

4:04This is not one where you can just go on a price comparison site and choose the cheapest because there are big differences in how much they pay out, when they pay out, what the excess is all that kind of thing and i imagine the market is going to change a lot once rental reforms have come in as well so this is something that we are going to be doing more digging into for our portfolios to find what we believe is the best policy out there so we'll talk about that on the podcast once we've done it might not be the most exciting episode you've ever listened to but it does have the potential to be really important okay let's have a listen now to our second question from james hi rob and rob my name is james from hampshire i just want to So thank you so much for all the good content that you guys have provided, myself and others over the years.

4:43It's been absolutely fantastic in my property journey. I'm currently moving on to my third rental property, which is a leasehold property, a two-bedroom masonette, which I've just purchased going through at the moment. It ticks all the investment criteria, as you guys discuss on the show quite regularly with buying below market value and the return on investment numbers are good on this property. However, going through the process, it's been flagged that there is some clause in the leasehold in regards to some nasty ground rent increases, which is a concern for me. Obviously, I know you guys have spoke about this in the past on your show.

5:19My solicitor has requested a deed of variation to be put in place with the property. So they've reluctantly, after weeks and weeks of negotiation, they have reluctantly agreed to put this in place because the costs are quite high. But my question to you is, even with a deed of variation being put in place, is there anything that I need to think about or be aware of that I may not be thinking about right now? Or do I walk away from the property and look for something new? You know, there's maybe freehold and not leasehold. With a deed of variation being put in place, you know, am I protected from this increases of round rents in the future?

5:56so it was a question around that and also around whether you guys have been through a similar experience recently or know of anyone who's had a similar experience recently and what to look out for in these instances so any advice you can give me i'll be truly grateful thank you very much james thank you for your question sounds like you've got yourself a very good deal there but a good deal with a bit of a wrinkle to it or well potentially more than that potentially a showstopper depending on what the nature of the ground rent increase was. But the good news is the deed of variation should sort it.

6:30So obviously I don't know exactly what it says but if it's as black and white as saying the lease said that it's going to double every 10 years, we are varying it so it now won't increase at all or it goes up in some other way that lenders are more comfortable with then that's it. That is sorted. If you've got a good solicitor and they are content with it then you shouldn't have anything to worry about. That will be in place, it will remain in place and so the issue basically doesn't exist anymore. So I completely understand why you've been spooked by this whole process. There might be other issues with the lease or with the property that we don't know about because you haven't asked it in your question.

7:02But based purely on that one factor, you're not going to have an issue. As long as your solicitor is happy that it does what it's supposed to, then the deed of variation will sort you out. So that's just done for the other week. Thank you for joining us. Remember, you can get your questions in by going to propertyhub.net forward slash ask. And because many of you do that, we'll be back on Tuesday answering more of your questions in the papers on Sunday, Sunday time specifically. And of course, we'll be back with the main event, the Property Podcast on Thursday. Until those wondrous events take place, take care, have fun.

7:32Bye-bye. Bye-bye.