It is readily apparent that natural disasters are striking with greater frequency and these events can leave devastating consequences in their wake. There are steps homeowners can take to protect themselves and you may collect insurance payments under certain circumstances.
However, while most of the news coverage focuses on the human toll, which is understandable, we would like to turn our attention to what investors can do in the event a natural disaster affects one of your investment properties.
Understand your coverage
Renters’ insurance typically covers your tenants lost, stolen, or damaged personal goods. This does not cover losses incurred to your property, such as any physical damage done to the apartment.
A landlord’s policy is more extensive than a renter’s or a typical homeowner’s policy. But, you need to check the policy and understand what it covers, and, perhaps more importantly, what is your responsibility. You should know your deductible and what events trigger a claim. For instance, most policies do not cover flood damage. It is particularly important to know if your policy covers lost rental income due to inhabitability and potential injury.
If you do not understand anything, you should ask your insurance agent prior to disaster striking.
Keep orderly records
You should have your property and insurance records in a safe place. Then, once disaster hits, make sure your estimates and receipts are in order to keep track of the required costs to fix your property.
This takes on an added level of complexity for real estate investors, who may have multiple properties.
Many leases include a clause allowing landlords to exit the agreement should disaster hit, providing it is not a rent-stabilized building. Assuming tenants can safely habitat the unit, a typical tenant’s clause is one that allows him or her to break the lease if the problem is not fixed within 30 days.
You may also find you can continue to charge rent. However, you should prepare for a backlash. Aside from the bad publicity, under New York State’s Warranty of Habitability, owners generally have to provide a property where the tenant has a living condition and does not present a danger to their life, health, and safety (this warranty does not extend to a tenant that caused the damage).
Have a reliable contractor
As a property owner, hopefully, you have established strong connections with general contractors and repair personnel such as electricians and plumbers. Remember, a lot of people are likely trying to reach them in the aftermath of a disaster. As a property owner, one way to catapult to the top of the list is to do a lot of business and refer others to him or her.
Co-ops and condos
Investors tend to shy away from buying co-op units since there are usually rules designed to limit a shareholder’s ability to sublet.
Therefore, New York City investors typically turn to condos due to the less restrictive rules the board imposes. The building’s policy is likely to cover external damage, such as to the roof, façade, and landscaping. While this means you do not have to concern yourself with these aspects, you still need a policy to cover damage to the unit, though.