Investor Profits $41K While Tenant Cries – Landlord Insurance and Renter’s Insurance are Must Haves!

Posted on: January 9, 2010

Categories: Investors, Profit, Things To Consider

Author: buyfixandprofit

Renter’s Insurance

I never used to require my tenants to obtain a renter’s insurance policy when leasing one of my properties; I just suggested it.  I figured it was a good idea to have but it was ultimately the tenant’s decision not mine.  The landlord is not liable for the tenant’s personal belongings in almost all cases of loss (unless it can be proven that the landlord’s negligence caused the damage), so why should I care?

Well after years of owning many rental homes in blue-collar neighborhoods, I have changed my views and now require all new tenants to obtain a renter’s insurance policy as part of the lease agreement.  In many cases it’s only about 50 cents a day.  Check out this link for a good overview of the benefits of renter’s insurance to the tenant.

Here is the series of events that lead me to making renter’s insurance mandatory.

House Fire #1

house fire 199x300 Investor Profits $41K While Tenant Cries   Landlord Insurance and Renters Insurance are Must Haves!

This is the wrong time to think about your insurance needs

Tenant overloads electrical outlet in the kitchen (6 electrical cords) and causes fire to begin in the middle of the night.  Everyone is OK, but everything in the house is lost.  The first thing the tenants did was to demand that I pay for their temporary rental housing and for their lost belongings.  Obviously that didn’t happen, but if they had a renter’s insurance policy they would have been covered.  Lots of crying I had to listen to.

House Fire #2

Tenant forgets to turn off stove after making dinner.  Grease catches on fire in the middle of the night and burns down house.  Everyone is OK, but again, all personal items are lost and tenant has no where to live.  The tenant demands that I compensate them for their loss and again there’s a lot of crying on their part when they realize it’s not my problem.

3 Basement Floodings

Three separate rental houses had their basement flood due to city sewer back-ups caused by major rainstorms in the area.  In all three cases, the tenants had argued that some of their personal items were damaged and asked if they could be compensated.  Again I said no and told them they should have obtain a renter’s insurance policy like I suggested.   Nobody ever listens.


In this case the burglars broke through the back door while the tenants were away and stole their laptop, cell phone, some other electronics, and the copper water lines from the basement.  It was a good score for these guys, probably several bags of crack.  Anyway, my insurance covered all of the repairs and damage to the house while the tenants cried about their belongings.  When my property management company informed them I would not pay for any of their items they threatened to call the Alderman on me if I didn’t install security screen doors on the front and back of the house.  They didn’t have a case against me, but I actually started installing security screen doors on all future projects as a best practice in these neighborhoods.

Mandatory Renter’s Insurance Policy

In all these cases the tenants were informed upfront of the benefits of renters insurance and still decided to try and come after me when their personal items were destroyed or damaged.  So now, obtaining and maintaining a renter’s insurance policy is a requirement of the lease.   Any prospective tenant who does not like it is probably not a tenant I want anyway.

Landlords Insurance Policy

I’m not an expert on insurance, but make sure to get your landlord’s policies from someone experienced in dealing with real estate investors in your area and preferably someone who owns rentals in your area.  I used an experienced insurance broker familiar with dealing with investors in my area and fortunately I was well covered in all the above events.  The following article gives a good brief overview of a landlord’s insurance policy.

Fire Damage Profits

Check out this video of my first rental property that made me $41K because the tenant was a dumb ass.

My tenant’s poor decisions burned down this house and in turn made me a $41K profit!  The tenant lost everything because of his failure to follow my recommendation of obtaining renter’s insurance.  I hired a public adjuster (an insurance adjuster that works for the client and not the insurance company) to represent my case to the insurance company and received the maximum amount the policy would payout.  The adjuster received 10% of the $80K payout and it was worth every penny.  After paying off the $62K mortgage, I sold the house to another investor for $32K in as-is condition.

 Investor Profits $41K While Tenant Cries   Landlord Insurance and Renters Insurance are Must Haves!
pixel Investor Profits $41K While Tenant Cries   Landlord Insurance and Renters Insurance are Must Haves!

LEAVE A COMMENT:  2 Comments

2 Responses to “Investor Profits $41K While Tenant Cries – Landlord Insurance and Renter’s Insurance are Must Haves!”

  1. Jay Raman says:

    We have contemplated making this a requirement for our landlord’s properties as well, but it is a situation where sometimes landlord’s are fearful that this will cost them tenants. As many landlords entering today’s market are accidental landlords, it is making it difficult for them to appreciate risk inherent in entering the realm of being a landlord. We are going to retweet this blog and share on our firm’s property management Facebook page. Thank you for sharing your prospective.

  2. buyfixandprofit says:

    Thanks for the comment, I’m glad you can appreciate my perspective on this. You’re absolutely correct in saying that many new landlords which many times are accidental landlords do not understand or appreciate the risks that are involved with having tenants and managing properties themselves. In most cases, renter’s insurance is so cheap that after repeating these “poor tenant” stories a couple times to the prospective tenant, they agree without putting up much of an argument.

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