Single-Family Owners: Protect Your Bottom Line with a PDLW™
These institutional investors and holders are expected to rent their properties for the long-term because of the yield this will generate.
This, in turn, has created new opportunities for local property management firms. But with those opportunities, comes some risk.
Much like their counterparts that manage traditional apartment communities and even student housing properties, these management firms must deal with the financial fallout resulting from damages to their assets caused by negligent or careless residents. For example, consider the costs associated with a resident-caused fire sparked by a misplaced cigarette butt or an overflowing toilet that was stuffed with material not meant for this form of disposal. The repairs for these kinds of damages come directly off of YOUR bottom line.
Property managers need a risk-management tool in place to make sure their balance sheets are protected against such losses and should look to transfer this kind of liability to the negligent resident that caused the damage. Unfortunately, the liability provisions of a typical renter’s insurance policy (traditional HO4 policy) may not adequately cover such damages and are difficult to enforce. Further, tenants of single-family homes may not be inclined to purchase renter’s insurance now that they don’t have to worry about other residents living adjacent to their units that could potentially ruin them financially after just one fire or flood.
This is precisely why a Property Damage Loss Waiver® (“PDLW™) that is required as a condition of the lease for single-family rentals can play a role in mitigating those losses to the property management firm.
Most people know about damage loss waivers as it relates to renting a car – whereby it releases the renter from liability for physical damage to the vehicle in exchange for a fee, subject to the terms of the rental agreement. It is not insurance, but rather, a contractual obligation. Similarly, in the case of a single-family rental, a PDLW allows property operators (or owners) of single-family rental homes to manage their risk and mitigate losses caused by the resident’s negligent acts based on the indemnification in their lease agreement.
How does a PDLW work? This risk management tool protects the management firm first against damages up to $100,000 as a result of fire, smoke, explosions, accidental water discharge or overflow, accidental sewer backup and peril related mold caused by the renter, allowing the property manager to dramatically control their property loss ratios. In fact, many have even realized decreases by as much as 15% on their annual premiums for their P&C insurance.
Unlike the liability insurance provisions that are sometimes part of a renter’s insurance policy, a PDLW option protects the owner first. And the low monthly premium is simply incorporated into the resident’s monthly rent, ensuring that the policy is maintained by the resident.
The resident benefits as well – the ability for the resident to protect his own financial standing for just dollars a month is a meaningful resident amenity and marketing tool. In addition, residents can receive up to $10,000 of personal property protection in the event of these kinds of damages. And this all costs the property management firm nothing.
In fact, the PDLW option offers owners and property management firms an opportunity to even generate ancillary revenue, further increasing their NOI and bolster the value of their property.
Property management firms typically offer a PDLW across their portfolio of single-family rentals and,in the case of Renters Legal Liability®, require a minimum portfolio size of 50 homes in order to be able to offer the PDLW program to their single-family renters.
Renters of single-family homes are prone to causing the same kind of damages that residents in traditional apartment communities can cause as a result of their own negligence. Now, property management firms responsible for a portfolio of single-family rental homes have access to the same kind of protection for their bottom line.
Paul J. Kaliades is president of Renters Legal Liability LLC, the sole provider of Renters Legal Liability® Property Damage Loss Waiver. For more information visit www.rllinsure.com or contact Kaliades directly at [email protected] or at 800/ 770-9660. Renters Legal Liability® is a registered mark of Renters Legal Liability LLC.
American Apartment Owners Association offers discounts on products and services for all your property management needs. Find out more at www.joinaaoa.org.
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