Guaranteed Rental income

9 Replies

Hello everyone. Has any investors ever looked into getting credit insurance on the event of tenant default by insuring your accounts receivable? It seems like this would be a good way to get guaranteed income.

It is probably more expensive than it is worth, if a person's finances can't weather a short term vacancy, rentals might not be a great investment for that person.

It’s actually pretty cheap for a rental that brining in 3000-5000 a month it’s only about 100 dollars. The insurance also covers evictions costs

It costs on average 1 to 2 cents per dollar of rent per month. Has anyone used this. I could see this being good when you have 100% financing in place and don’t have strong reserves

Originally posted by @Storm S. :

It costs on average 1 to 2 cents per dollar of rent per month. Has anyone used this. I could see this being good when you have 100% financing in place and don’t have strong reserves

having equity and strong reserves IS my insurance.

this seems like throwing good money after bad. 1-2% cost of additional insurance on top of 8% vacancy and 10% property management, both of which when done properly should mitigate all the risks you're referring to.

I do property management so I don’t have that 10% fee also the vacancy rate should be lowered since there is no default caused vacancies that I would have to pay for as the insurance company would cover it while it’s vacant.

If it were cheap enough to make sense for an investor the insurance company wouldn't offer it because they would lose money.  The risk is a couple months of rent vs regular insurance which covers loss of the house or lawsuits both of which could be hundreds of thousands of dollars or more depending on the situation.

@Storm S. do you actually know of any insurance company offering this? I looked into it some and my insurance agent had never heard of such a thing and I’ve never seen it offered by a legitimate insurance company.

The best way to mitigate risk is buy in good areas, screen tenants well and diversify your risk pool by buying lots of properties in several areas

Yeah I’m a risk management consultant/ insurance broker. there are a few ways to get this insurance there are a handful of companies that offer this in the U. S. You can also get it through surplus lines as this kind of insurance is the norm in the Europe. You can also get this by setting up a captive and getting this through the reinsurance market. Or you can find people willing to do a credit default swap.