Rent Guarantee Insurance vs Holding 3-6 months of Expences
Hi All,
Does anyone use Rent Guarantee Insurance? Right now I'm holding around 6 months of expenses, just in case the tenant doesn't pay or if any repairs are needed. Currently my reserves are around $15k for 2 condos. (only responsible for maintenance on the inside)
My thought process is, rather than holding $15k in cash, if I'm able to buy Rent Guarantee Insurance, then I should be able to free up some of that cash (50%) for down payments or renovations, while still holding on to the other (50%) for any surprise repairs within the condos.
Any thoughts or advise on this strategy?
Phillip
Insurance companies have very competent actuaries. They are in the business to win. I don't like to to insure anything that I can pay for out of pocket. Also be aware of possible special assessments the HOA may impose due to capital expense projects.
By buying the rent insurance you are spending money you will never get back. never... On the other hand if you put that money into a high interest savings account or somewhere where it is still liquid but making gains then that money is working for you. Unless you are just desperately in need of that cash I wouldn't do it.
Plus that insurance only covers lost rent, not CapEx items. So if something comes up and you need 10K and your only short 2-3K in rent where are you going to fund that from?
