Many people in the UK have what’s known as a Buy To Let (BTL) which are properties that are purchased in order to rent it out to a tenant. Doing this is a really good investment idea because generally properties go up in value over the years and the rent from the tenant can normally pay for the mortgage. Some landlords are lucky enough to buy properties that allow them to make an income from the property as well as it being a long-term asset.
The problem is when the financial markets are doing badly and people start to lose their jobs. If you are renting to someone who has just lost their job it might be very difficult for them to be able to afford keeping up their rent payments. In the UK the laws make it difficult just to throw someone out on the street if they are unable to pay so this leaves the landlord in a very trick situation. Normally the landlord has a mortgage on the investment property so if the tenant doesn’t pay up then the landlord is unable to pay the mortgage lender.
If this is allowed to continue then the lender may well take the drastic step of repossessing the property which often means selling it off at a bargain basement price. The quickest method of doing this is to sell at auction which means it will often sell at a lot less than what it’s really worth. Nobody wants to be in this situation but is something that happens on a daily basis.
This is why it’s a good idea to have landlords rent guarantee insurance. If the renter has problems paying you then you can claim on your insurance. Some landlords don’t want to pay any insurance if they can help it because they hope that their tenant will be a good one and keep up to day with their rent payments. Unfortunately life isn’t always as simple as that.
Tags: buy to let, insurance, job, landlord, lender, mortgage, rent, tenant