Protecting your buy-to-let

As a landlord, there are a raft of appropriate insurances you can take to protect your buy-to-let investment. But are there other types of insurance, not necessarily of a financial nature, that you also should consider? One might be for protection against the wrath of thwarted first-time buyers.

A market of contempt

The buy-to-let house purchaser has made a significant impact on the property market in recent years. And in some quarters, contempt and loathing have been the reward, along with the rental income, for snapping up homes that should rightfully go to first time buyers.

Last year, at the height of the house-buying boom, a survey by Mintel estimated that some 850,000 buy-to-let mortgages were held, compared to 73,000 in 1999. Accusations of fuelling rampant house-price inflation and of destroying communities were being levelled, while buy-to-let demand itself was being fuelled by social changes such as rising divorce rates and increased numbers of students and immigrants.

And with current falling, or at least stagnating housing market, buy-to-let resentment is likely to continue, as owner-occupiers faced with tight credit and leaping energy bills cast envious glances at mortgage bills covered by rental income. Yet buy-to-let properties only account for around 6% of all UK households and its been reported that 45% of buy-to-let investors own just one property and 75% own four or fewer.

No matter the number, they need to be insured so Moneyextra takes a look at the top factors landlords should consider before they go about it.

Are you running one or more buy to let properties? You'll need special Landlord's insurance.

1. Don't cut corners

The first thing to bear in mind is that the cheapest landlord insurance deals are not always the best. Resist the temptation to cut corners as you might find yourself temporarily without tenants with no rent coming in; instead be zealous in getting the right cover at the right price.

2. Remember that buildings insurance does not have to be bought from your mortgage provider

According to Sainsbury's Home Insurance research, one in five house purchasers erroneously believe they have to buy buildings insurance from their lender in order to secure the mortgage But this is not the case. Shop around for the best deal (relying on an apathetic captive audience, your mortgage lender will often provide the worst deal). Given that the value of the property or the cost of rebuilding it may increase faster than the rate of inflation, it is wise to ensure insurance is calculated via annual property valuations rather than by an inflationary index.

Use our home insurance calculator to work out how much insurance you need.

3. Be aware of weather conditions and the possible impact of flooding and other natural disasters

Taking the appropriate house maintenance (eg replacing loose tiles) or preventive measures (a supply of sandbags) could favourably affect your insurance premium. An annual MOT of the property is a must if you want to keep ahead of any structural problems. A policy with unlimited buildings cover rather than on a sum-insured basis could give greater peace of mind.

01 February 2008 © Moneyextra.com

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