Bob discusses a new concept in protecting rental properties to give landlords additional peace of mind from tenant-related risks. This episode features Dave Holt, co-founder at SureVestor, a company which provides this a unique form of insurance when renters are in your home. Dave explains this new insurance product, how it works, and what aspects are covered under the policy. Dave also shares his insights on costs involved in the three things landlords fear most: malicious damage by a tenant, loss of rent if the lease is abandoned, and unlawful detainer action (eviction). Bob discusses his plans for implementing SureVestor at North County Property Group as part of the company's Premium Program for San Diego Property Management. For more information about SureVestor, click on this link to the SureVestor website. This episode is always available for listening, sharing, or download at Property Management Brainstorm.
Bob Preston: 00:50 Welcome, welcome, welcome to the Property Management Brainstorming podcast. I'm Bob Preston, your host of the show, broadcasting from our studio at North County Property Group in Del Mar, California. I do my best in this podcast to bring our listeners great content from experts in the home rental market, so if you like what you have, where we have to say it would be really great and would make my day if you would pay it forward and leave us a positive review on Google iTunes or our website or wherever you happen to be. Listening to the episode today on the show, we will be discussing a new concept and protecting rental properties and gives landlords additional peace of mind and protection to an investor from tenant related risks. Now this is different than the traditional security deposit concept that most of us are familiar with, so I'm very excited to hear more about this. I have with me today by telephone, Dave Holt, who is a co-founder of a company called SureVestor, which provides a new form of insurance when renters are in you're home. Hey Dave, thank you for joining us today.
Dave Holt: 1:53 Thank you, Bob.
Bob Preston 1:56 Dave, I'm sure our listeners are already curious. Probably their interest has been piqued because they probably know about rental dwelling insurance, probably renter's insurance, but I think it probably occurs to them already that this is quite different. So maybe you can start today by telling us first where you're calling from briefly about yourself and your background and what SureVestor all about.
Dave Holt: 02:17 Sure. You bet Bob. Well, Bob, I've been in property management for over 30 years and I still have a property management company. I'm in Minneapolis, Minnesota and I see from the video that, um, you don't have any snow on the ground. We have about four feet of snow on the ground right now. So, so a little, a little chilly, but, um, I've been doing property management for some time. Uh, I am a licensed realtor as well. I am an investor. I've been investing for almost the entire 30 years. So, I've done about a hundred different properties, everything from flips to buy and holds subject to lease options, you name it. I've been doing that for a while as well. So I'm very familiar with the investing side of things, walking the talk or talking a walk because they said, you bet you bet. And so being in as an investor and cash flow being extremely important and you know, property manager for this, this time, I'm very intimately attuned to those things that can help us in, in both of our businesses as investors, as property managers. And that's what really got me interested in and this whole concept and it's something that I came across while teaching because I'm a national instructor for our association. Bob, NARPM, the National Association of Residential Property Manager.
Bob Preston: 03:42 What do you teach? Out of curiosity?
Dave Holt: 03:45 Well I teach a lot of different courses. I've written in and teach risk management, I teach marketing, I teach an operations and a host of other topics. I've had the opportunity to go over to Australia and teach for their property management forms over there as well and one concept that I thought was really intriguing was that of landlord protection insurance. It's something that has been over in Australia for about 20 years. Bob and it, it's not over here, which was really quite surprising to me and it's, it's a product that covers those pain points that as property managers and an investor that we have, which is covering the loss of rent. When a tenant, something bad happens, the tenant skips for some reason it has to be evicted. Even murder, suicide or victims of violence. Along with the malicious damage and all the costs associated with evictions and whatnot. And I thought, God, why don't we have that here in the US and I actually approached the founder of the company, Terry Shear and Terry still has that, uh, the, she showed the ins and sold the company about seven, eight years ago, but it still sells under her name over in Australia. It's the most widely used the landlord protection insurance overall in Australia, Terry Shear Insurance. And we ended up partnering with her to bring the product over here to the US so that's, that's where we're at right now. And we just launched at our national convention this past fall.
Bob Preston: 05:27 Wow, that's fantastic. And, and so the concept I guess is address the things that landlords fear the most. Is that a fair way to describe it?
Dave Holt: 05:38 Oh, it is. Because when you think as an investor that the things that we worry about obviously affect our cash flow. You can't really protect against that, uh, from normal means unless you have insurance. And up until now, there hasn't been an inference. So as we know, Bob, as professionals, we do our due diligence for the screening tenants and making sure we try to get the best quality tenants for our investor landlords as possible. But we also know that bad things can happen to good tenants that you just can't plan for. Life happens, right? They, they lose a job, they get a divorce, they have a death of one of the spouses. The way you do it for an ex-spouses, I mean all sorts of situations that can happen in, in life that are unplanned for and you can't screen for that type of stuff and low and behold, they skip or they have to be evicted because now they can't pay the rent and up until now the landlord has had to come out of pocket for those types of things.
Bob Preston: 06:40 It's interesting. Sorry to, sorry to interrupt. But we are, we are, we also have a portfolio. We have a portfolio of long-term rentals and we also have a portfolio of vacation rentals, which is a completely different business model. And one product they have in the vacation rental model is known as a damage waiver or damage protection insurance. So it's a little bit along these lines, but it's not as detailed and thorough in terms of coverage and pretty much only covers accidental damage. So it was kind of an interesting thing and we require all of our renters to have it. This is, this is ensuring the rent yourself though, not the landlord tenant liability type of insurance. Exactly. And it's only an accidental coverage. Well, okay, I heard you rattle off three things. Malicious damage, loss of rent. Maybe this isn't the right order and eviction, a loss of, uh, you know, see if you have to go through the cost of evicting somebody. So maybe we can explore each of those coverage areas one at a time and dive a bit deeper or are you good with that? Okay. Take it away.
Dave Holt: 07:41 Well, the three main things that we worry about as an investor, as a landlord is the loss of rent. When the tenant vacates the property and it doesn't fulfill the terms of the lease, of course being evicted, is usually what, what ends up happening. And so now you have the loss of rent. Due to that you have the eviction costs and many times the tenants, uh, get some free legal advice and that those free attorneys, many times we'll bring it to trial, trying to make it even more painful for the landlord clients as well. And so, the insurance covers that loss of rent covers the, the eviction costs and the legal defense as well, depending on the policy that they, they obtain. Sometimes unfortunately tenants get unhappy with that situation and maliciously damage to the property on the way out. They punched holes. Yeah, you bet. And so those are one of the frustrations that we have as property manager and certainly as an investor that it makes that whole investing very frustrating. And most of the investors out there are not seasoned investors. They're not doing this as a full-time job. They have one or two properties that they're, that they have, you know, when these bad things happen, they go, you know what, this isn't for me. And so, they either sell or move on to blame us as the property manager and move on to something else. Somebody else, so.
Bob Preston: 09:20 It's interesting, we get a lot of investors coming to us who have had bad experiences with this kind of stuff, either on their own or with another property management company. And typically, as I dig deeper and I get to know the person and what exactly happened, it's often that the landlord, on the landlord's and they've dropped the ball somehow, right? They've let the loss of rent or the tenant go too many months without paying rent and one month becomes two months and then all of a sudden, it's six months and then it just kind of downward spirals from there. So, you know, this is, I think you know also might be really good concept for someone who's maybe not as experienced. Now, I know you only offer this product, this insurance product to property managers. Is that correct?
Dave Holt: 10:07 That's correct, Bob. And the reason we reason we do that is really based on what you just said, a lot of investors are not full time and investing. They have their own full time jobs, they're doing investing on the side because they, they watch HGTV and see how great it is to own rental property and whatnot. And that's all great. I'm an advocate for owning rental property, but it has to be done properly. And most, most investors aren't doing it the way they should be doing it because they, it's not a full time a profession for them. And so they make the mistakes that us as property managers aren't making because of time. And usually it, it, it's a time issue. And so, as you're talking about, they, they look at a tenant not paying the rent and they think, all right, well, you know, I'll let it go. I'll, I'll work with the tenant over a period of time. And it's because the investor doesn't have time. They're thinking of, okay, what happens if that that tenant leaves and now I have to go through the hassle of fixing it up again and releasing it and all this last time that I have. And so, they mistakenly think that if they worked with the tenants and believe these stories of oh, I’ll pay you next week I'll pay you next week and pretty soon one month becomes two months becomes three months and so forth. And then they ended up having to evict them in the in the end.
Bob Preston: 11:33 Yeah for sure. We see it on the front end too. Like when they move in and not document in the condition of the property properly, you know? So there's some issues on that front too. Okay. So, beyond this notion of peace of mind and reducing kind of your worst nightmares, are there other ripple affects that an investor minded experience from having this insurance in the background? It, you know with their, although it's with their property management company and does it free them up to do other things, they might otherwise be worrying about their, their investment?
Dave Holt: 12:08 So kind of explain a saying where what you're trying to, I guess I'm not understanding quite the question there.
Bob Preston: 12:15 Well I guess if they have that degree of confidence that it's being successful, I guess with those way I'm putting it, might there be other things that they can go focus on rather than being worried about their properties. Maybe looking for other investment properties if you know. Are there other things that that, I mean maybe it's even in the psyche of the investor that this may pertain to you.
Dave Holt: 12:40 Absolutely. So let me ask you a question back, Bob. What is really the number one or primary reason why investors are investing in real estate? What are they looking for in that, that investment?
Bob Preston: 12:57 Well, great question. I think number one is maximizing their net operating income. Typically now we also have what we call, I don't want to call them accidental, but it's probably the term that we use in this industry, the most accidental investor and that's someone who's a little different. It might be someone who is moving out of town and doesn't know if they might be moving back in a year. If it's for a new job and they just can't emotionally break with this home they've lived in, have had so many life experiences and so they want to hold onto it. And in that case net operating income isn't so important, but it's more keeping the option of coming back. But that's a whole different scenario. But typically cashflow positive, maximizing net operating income and having the property managed by someone who can keep top tenant relations. I mean those are kind of the things we'll be talking about.
Dave Holt: 13:50 Well, you're exactly right. Exactly right. And so, and the reason I'm asking that is because when you're looking at cashflow and, and what's, what's really affecting that net operating income, I'm assuming most of your owners own a single family homes. So is that a safe assumption?
Bob Preston: 14:06 Yes. We focus on that market. We tend not to do multitenant dwell, or apartment buildings or HOA’s. Yeah.
Dave Holt: 14:13 Right, right. So when you think of a single family home as an investment, one month rent is one 12th of that income for the entire year. Right. When you look at even one month, two months, three months’ rent, I mean that that could be devastating to the overall performance of that investment. And so as I just mentioned at the beginning, there are things that can happen to our tenants that are just unplanned for. And so when you have insurance such as this, that covers that loss of rent covers the eviction costs, the legal defense, the malicious damage, those types of things that can really eat at that, that net operating income that gives our, our investor that peace of mind that they can get into this without having to worry about those things that they can't control when the bad things happen to our tenants. And, and so it, it, it takes a, a landlord that me of thought about selling to say, you know what?
Dave Holt: 15:17 Now with us insurance, I can have that peace of mind to rent with confidence that I can actually put this and have this as an investment property without, without those types of worries and for our current donors and gives them that peace of mind that, hey, if something does happen that is unexpected bad thing too, who are good tenants, then you know, instead of saying, you know what, this isn't for me. I'm going to sell 'em now they have that protection to cover those types of things that would normally eat into that cash flow.
Bob Preston: 15:53 It's kind of the confidence to stay in it and maybe acquire more properties because they know that they're covered, and they do have some peace of mind. Do you find, have you, have you heard from any landlords or property managers of the banks like this concept for lending?
Dave Holt: 16:09 That's a great question. Absolutely, yes. Uh, when you think about it, what, what is a bank concerned about with, with an investment, right?
Bob Preston: 16:19 They're, they've got a stake in the game too.
Dave Holt: 16:21 You Bet. I mean they're looking at it from, well, how is this going to be performing? What is the cash flow of the property? And they, so they're looking at it from a business perspective, which they should. And when they see that there is landlord protection insurance that's covering that, protecting that cash flow in in a sense from this sample in a loss of rent, malicious damage, eviction costs, those things, it makes that bank or more confident to lend to the investor.
Bob Preston: 16:47 We've probably all seen the commercials with the kind of annoying AFLAC duck. Right. And of course that product is oriented towards healthcare or injury cases for an individual who can't pay his bills or something. But is there a little bit of a parallel there to Aflac with what you're doing is more for more other than the annoying part? Yes. Yeah. Right.
Dave Holt: 17:13 No, I understand completely. But it really is that protection. So I kind of look at it more like an eagle, you know? Soaring over there to get a watching over that investment and making sure that it's protected and giving, giving everybody below that peace of mind. And so much better analogy. I like that better than the, uh, the annoying duck.
Bob Preston: 17:39 Okay. I've studied a bit on you guys. I know enough to be dangerous here. So, I think that there are three different plans to, there are three tiers of coverage. If you will, can give us a brief description? I know there's a lot of detail on there, so we probably don't have time for that. But basically, kind of generally what, what are the three tiers?
Dave Holt: 17:59 We have three tiers, Bob, that the, the central, which is our base coverage, our premier and our ultimate is the top level. Now the beauty of this policy is that it's consistent pricing regardless of the property, regardless of the tenant. It's not tenant qualifying. It's based on the rent. Now we do not have coverage for rent under $1,000. Now in California there you probably don't have too many houses that are renting under a thousand dollars, so it probably doesn't matter in your market. But our sweet spot is, is basically doing rents between $1,000 and $2,000 and then they can have additional coverage up to $3,000 or an additional $100 annual premium. Now as I mentioned, the pricing is flat, so it again, it's consistent regardless of the property. So, prices range rents between $1,000 and $2,000 are essential, which is our, our base level is $315 annual premium a year plus your state taxes. And then you have the premiere, the middle coverage, which is $355 plus tax. And then the ultimate is $395 plus tax. Now if you had properties that let's say a property over $2000 it was renting for $2,200 you wouldn't have to pay the extra hundred dollars annual premium to get that coverage up to that $2,200 and you can just go with the base level and you'd be getting up to that $2,000 of that $2,200 and so same thing with properties over say $3,000 it doesn't mean you can't get coverage. It means that you can only get up to a maximum of $3,000 or they could take the base level at the base amount and get covered up to $2,000. That $315, $355 and $395.
Bob Preston: 20:00 Is it based on the amount of risk they're willing to take on or prevent, I guess?
Dave Holt: 20:03 That's exactly right. I mean it's, it's a risk tolerance. And so, when you look at what's covered under a central, which is our base low lowest level, it's mainly designed for landlords that are concerned about malicious damage. Cause there's a $25,000 malicious damage cover under that section. Under that level, uh, there is some loss of rent, but the loss of rent is, is fairly minimal compared to the premiere and the ultimate. So, for example, a tenant skips under the essential, it's two weeks of cover, but under the ultimate, it's two months of coverage. So they're huge difference and it's only an $80 annual difference in the premium. So, it's kind of a no brainer as far as the levels, but the landlords would really need to look at the levels, see what they're comfortable with, see what their risk tolerance is to determine which ones they want to go with.
Bob Preston: 20:59 Okay. I just got back from the NARPM conference, the broker owner conference in Las Vegas. And one of the most interesting topics I heard being kicked around out there was this concept of no security deposits with your product and still need to take a security, right?
Dave Holt: 21:16 Well, sure. I mean you could do a no, no security deposit. What that is, Bob is, is uh, a company that's really guaranteeing and backing that deposit. That's a benefit for the tenant, not the landlord. Okay. So the benefit for the tenant is that they had to come up with all of this money to rent the property because typically you have one month's rent and one month as a deposit, as a minimum requirement to get into the, into a property. And so a lot of times, especially in your market, if you're talking a $3,000 rental and that's $6,000 that somebody has to come out of pocket and that that's tough for a lot of people. And so that deposit, no deposit situation is really for the candidate to say, all right, they're doing the charge. The tenant, the monthly amount for basically guaranteeing the deposit for is what, what's happening. And, and so it's really totally different than what we're providing because our product is a benefit to the landlord. And so even if you do the no deposit or have the deposit now, that amount, that deposit doesn't have to be used for when a tenant has to be evicted or violates the terms of the lease and skips or, or even dies in the property. And now the rent is and coming in. And so typically a deposit would go towards that cost, that loss of rent. It would go towards the eviction costs, it would go towards any malicious damage. And now your deposits eaten up. So even if you had a no deposit type of product like this, now it's backed by this company and you still only have the deposit. And so, using that deposit is gone because there was more charges than just, it covers.
Bob Preston: 23:08 No, exactly. I mean if bad things happen, you'd burn through the security deposit really fast and then you end up chasing that person either to get them out of the property and evict them or chasing them for additional damage in small claims court. That's right. Yup. Okay. Now we've talked about the different levels. The name of the product is Scheer Landlord Protection, right? That's correct. And we've talked about how that benefits the homeowner and the investor, but what about the property management company that's standing behind all this or partnering with you? How, how does the insurance product benefit them or people like North County Property Group?
Dave Holt: 23:46 Yeah, great question Bob. Most property managers are not licensed in insurance and so property managers have to really be careful when they're offering any types of insurance. And it's not, and I shouldn't say offering, cause they're not doing that. Basically what they're doing as their duty of care to their investor is informing their, their landlord client of the availability of this product because it's such a value to that landlord client for protecting their cash flow. And so they cannot monetize insurance in any way. So, you can't be up charging insurance. There's, there's no relation that way because that's illegal. But there are some substantial benefits to us as property managers by having this as another product that you're offering. And think about it, Bob, uh, I'm a, I'm assuming you have competition in your market. I mean certainly nobody doing it as well as North Country Property Group but are companies around and you do them.
Bob Preston: 24:50 I'm kind of looking at this, this might be one way to do that, especially kind of a premium program in our.
Dave Holt: 24:59 You bet, and you kind of answered your own question. Is that when, when landlords are coming to you, it's typical in, in our markets, in this business is they asked you typically one question first and, and Bob, I'll just ask you that. What is the typical first question that they asked?
Bob Preston: 25:15 Well, that's a good one. Let me think about that for a minute. They probably ask, well, I'm going to tell you something that blows people away here in a minute, but they typically ask how long, uh, how long we've been in business, how many bad things have happened, right? So here we go. How many evictions have we had, um, can we guarantee that, you know, there's not going to be damage to the home, things like that. Those are the typical questions.
Dave Holt: 25:42 Those are, those are, but usually the first question that property managers asked, and this is when I'm asking my students in my classes, usually in their number, the first one that comes up is, what do you charge? What are your costs?
Bob Preston: 25:53 Certainly Group of people that would ask that too. You know, it just kind of depends upon where people are coming from but.
Dave Holt: 26:00 Yeah, no, it is. And they usually doing that because they, they don't have any differentiators from one property manager to the other, because they look on the websites and the end, we're all doing the same thing in their mind. That's right. Basically we become a commodity and it's commodities are shopped on price. And so they're, they're looking at, at our fees. And so back to your question and really the benefit, this is a point of difference for property managers to help bring on new owners and help them set themselves as a apart to say, hey, you know, we're, we are looking after our investor's best interests, which is cash flow making, maximizing, trying to make the best ones for our owners. And this is a point of difference that nobody is doing right now because we've just, we've just launched it. So, the property managers that become first in their market to be offering this hell of a competitive advantage so that, that's one benefit. The other benefit Bob is, is that when rent isn't paid, property management fees aren't collected because as property managers, we collect our management based on the rent. That's, that's, uh, that's collected. And so if there's no rent, there's no management fees. And so when you have insurance that is covering the rent, now the management fees get, get paid as well. And so that's a benefit. Also, we do know that bad things happen to good tenants as I mentioned. And typically, and I don't know for you Bob, but when I lose an owner, it's usually to because of a bad tenant experience. And so, the tenant had to be evicted. They damage the property and the way out they go. You know what I mean? They're blaming you property manager because you screen the tenants. Right. And even though that they didn't realize that they lost the job type of type of situation, there's still blame us. And so they go to either go to another property management company or they say, you know what, this investment thing isn't for me and I'm going to sell. And so, when you have this insurance coverage, it helps to keep that landlord longer. And as you mentioned earlier, it helps them to, to want to invest in more properties as well.
Bob Preston: 28:27 I couldn't agree more.
Dave Holt: 28:30 I could go on it. The benefits. Yeah. I mean, so as we mentioned with the deposits, whether you collect a deposit or you go with a no deposit type of program, you know that deposit is typically eaten up when a tenant violates the terms of the lease and has to be evicted, for example. And so it's gone, it's gone to the loss of rent first and foremost typically. And if there's anything left, it goes to the eviction costs. Maybe legal offense may be some malicious damage that usually it's already eaten up by just the loss of rent. And so now when you have the insurance covering those things, the deposit is available for other types of damages. So that's a benefit for the landlord. But it's also a benefit for the property manager because a lot of property managers are guaranteeing their tenant for a period of time, meaning that if the tenant does violate the terms of the lease and vacates without fulfilling the complete term, they'll release it for no for no charge right now with that are.
Bob Preston: 29:30 You know, we tell them we have a 12-month guarantee.
Dave Holt: 29:31 Yeah, you bet. And so now when you have that deposit available because it doesn't have to go to the loss of rent and eviction costs and malicious damage, now that's available for those types of classes as well. And so, you can now have that deposit to pay your, your leasing fee because it's the tenant that's paying it out of their deposit to you. And then obviously as we know, Bob, you know, our staff, our front line people dealing with the tenants, dealing with the owners, um, can be, it's a not a very comfortable conversation when something bad happens to the property and none of us like that. And the conversation becomes a lot easier for us when there's insurance. It's certainly, it's, it's never, never a great conversation, but when you can tell your owner, hey, you have insurance to cover that loss of rent, cover that malicious damage, the eviction costs, that's an easier conversation than saying, hey, sorry, your, your tenant had to be evicted. They trash the property on the way out and oh by the way, you have to pay for it all. It just makes it easier for us as property managers. So happy, happier landlords means happier staff.
Bob Preston: 30:47 Absolutely. And the thing I'm going to tell you that I think might blow you away as in 18-year history, we've never had an eviction. Wow. Yeah. Every time I tell an owner that I always do this right. Knock on wood. Um, look, it could happen someday and it's a probably an eventuality. But owners love that. And I think this insurance product could sort of fit into backing that up. Like, look, you know, we're, we're, we're very comfortable that you're not going to have an eviction and if you have it, we've got your back. But we're thinking about folding this kind of to start to experiment with uh, Dave and the premium group or the premium property management program. I mean, look, this is whether it's evictions or rent not being paid or having to tell bad news to the owner or the investor or the, even the tenant. This can be a conflict laden business. So from my perspective, anything that can give us that same peace of mind we talked about for investors is that it is a positive attribute. Cause you know I want to sleep at night too.
Dave Holt: 31:50 To your point by the lot of property managers are going to a tiered pricing type of format. So you mentioned your premiere type of level, which is the top level. And within that level, property managers are starting to incorporate all their fees into one price and make it really simple for a property, for that investor. Because as an investor, you know, I want to know what as much as possible what my costs are. And knowing that up front is very helpful for me for planning purposes. And so, when I have a property manager that offers a tiered pricing, and in that top tier it's a, it's a either a flat percentage, a percentage, a percentage or a flat fee. And I know what that is going to be and I'm not going to be hit with all of these other, other charges throughout the term of the course of the management. You know, I know what it is. And so that makes it more palatable for me as an investor. But when I see that the insurance is included in that top tier, that even makes it more valuable for me as the investor. And it's a, and so now that top tier becomes even more of a, of a value for me because everything's included. And that's where we're seeing property managers using the tiered pricing and including the insurance and their top tier to make that top tier more valuable.
Bob Preston: 33:15 Well, it's a great talking point and it's a unique, a unique differentiation, right? Sure. You as a property management company, and I can tell you were signed up and ready to go, we just have to do some kind of productization around our premium program to build this in and we have to work it into our content and our web updates in our collateral. So all those things aren't quite as easy to implement quickly. But we are going to do it and we're pretty much ready to go and we're hoping to have it done in April and start offering it, done in March and start offering it in April. That would be fantastic. And we're really honored to get. So Dave, I know you offer some other insurance products as well. I'm thinking in particular of the tenant liability insurance. Can you tell us briefly about that product?
Dave Holt: 34:01 Yeah, you bet Bob. So, tenant liability insurance is been around for a long time. That's not something that we've invented or created. It's been in the multifamily industry for three years and now it's coming into our space more and more. You'll see it through a lot of different vendors offering tenant liability insurance. But, but one of the things that I really want to point out is that again, as I mentioned at the beginning, most property managers are not licensed in insurance. And so, it's important that you're not, you're not doing things and the up charging and monetizing it in a way that is illegal. And so with tenant liability, that can be done very effectively by having it as a condition of the lease. And so, you're requiring it as a condition of the lease that a tenant has to have a minimum of say $100,000 tenant liability, which is typically what it is. And if they do not get their own insurance and now, they can go get renter's insurance and I'll explain the difference in just a moment. They you can get a renter's insurance; they can get their own tenant liability insurance and then add us as the property manager as an interested party. So we get notified that it's in place and notified if it gets canceled, those types of things. But if they don't get the insurance, we will force this insurance on the tenant and so it's a massive policy that that we have and that if they don't get the their own insurance now they are going to be automatically covered and then charge for that insurance as a condition of the lease. And then with that you can effectively and legally as the property manager charge an administration fee to the tenant. Okay. Now those are things that are covering the accidental damage that a tenant cause for example, they are cooking bacon on the stove and go up and take a shower and all of a sudden there was a grease fire and it burns the kitchen.
Bob Preston: 36:09 Yea we’ve had things like that happen. Left their bathing suit and the utility sink with the water running in the laundry room and went up to the phone and never came back. And lo and behold there was a flood.
Dave Holt: 36:15 There you go. So those are two examples and those are just things that accidental things that are covered by this insurance. And you and your listeners might say, well my rental dwelling would cover that. And that's probably true. More. Most of them would cover that. But when the tenant, you're making this a requirement for the tenant to have as a condition of the lease. Now the tenants, now the landlord's policy dwelling coverage doesn't have to come and do a back. And so now the landlord doesn't have to pay the deductible. They don't have to worry about their premium being canceled or, or the premium being increased. And so, it is a benefit for that landlord. Now here's where property managers get confused as really the difference between the benefit for the tenant, which is tenant insurance, Renter's insurance, and what the tenant liability is. Because the tenant liability really isn't a benefit for the tenant. It's a benefit for the owner. It's covering those, the accidental things at the tenant does, but it's not covering the tenants belongings. For example, renter's insurance would cover the tenant’s belongings because it would cover place in the tenant in another accommodations at the place was uninhabitable, for example. That's Renter's insurance. That's a benefit for the tenant. That's a policy that's in the tenant's name that you cannot monetize because it's selling insurance. And so when you have a product that has benefits in it for the tenants such as those, and you are now charging the tenant an administration fee for example, even though that you're calling it an administration fee, what you're doing is have a benefit for the tenant. You're charging a fee for that. That is selling insurance. And so that's where the gray area that property managers can find themselves if they have a product that offers some benefit in it too for the tenant. So, it's really important that you keep it as a condition of the lease and it's only for tenant liability.
Bob Preston: 38:20 What's the typical admin fee that a property manager can charge?
Dave Holt: 38:23 Good, good question. And it's not something that usually you'll see around $3. That's what we necessarily the uh, so, uh, I mean you can, you can have it anything you want. We're not suggesting that, but um, you know, one, two, $3. But once you start getting over that, when you're charging, say $9, which is typical for the policy for a month. So that tenant and then charging more than $3 and it's starting to get into the end of the gray area for the.
Bob Preston: 38:53 $9 for the tenant is pretty darn reasonable. Now, Renter's insurance does have liability?
Dave Holt: 39:00 It does, it does. But tenant, renter's insurance is usually shopped based on the credit score of the tenant. All right? Because it's a, it's a policy for that tenant. All right? So, when you offer a policy such as this, our tenant liability and coverage, it's flat pricing regardless of the tenant, it's still the same $9. All right? And so then making it as a condition of the lease. The property manager can effectively charge and administration fees, for example, $3 per tenant per month. And so that's, that's a way where it can become for the property manager, a nice income stream, but it's, it has to be done properly. Otherwise it could be viewed as selling insurance.
Bob Preston: 39:47 Dave I’ve really enjoyed this conversation today? Good stuff. Any last thoughts or parting words?
Dave Holt: 39:53 Well, just, um, you know, when you think about your, your comment of the, you've never had an eviction before. I mean, that's unique in our business, the thing is for an individual investor. We know that things do happen to our tenants, as I mentioned, the divorce, loss of jobs, all of those types of things. I mean, they can happen. And that one time that it happens to you as the investor, that can be catastrophic, obviously to your whole investment potential. And so that's where this really comes into play. You, you know, your business, you screen your tenants properly, you do all the right things as a professional, but you can't protect against those unknowns. And so even though it has, you haven't had an eviction per say, it's still out there. There's still that worry. I mean, you look at, you look at how many of us have dwelling coverage on our properties. Almost all of us do.
Bob Preston: 40:49 Yeah. I've never had my house burned down.
Dave Holt: 40:54 But I still have the insurance or what if, what if that happens? And that's, that's the rub is that that these things do happen. They can happen and when it happens to you, you don't want to be without insurance.
Bob Preston: 41:10 Exactly. Wonderful. Okay. And if someone wanted to get in touch with you or the team at SureVestor. What's the best way for them to do that?
Dave Holt: 41:16 Well, a couple of different ways. You can either go to our website at surevestor.com or just call me directly. I'm happy to field calls and I'm at (612) 465-0421.
Bob Preston: 41:34 Terrific, Dave. Thank you so much for taking the time to join the show. I know you're a busy man and it's very much appreciated. That concludes today's episode. I would like to make another quick plug to leave the show a positive review. It would mean the world to me and our team. And thank you all our listeners for joining the property management brainstorm podcast. Until next time, we will be in the field working hard for our clients to maximize their property value and rental income and maintain top tenant relations. And we'll see you next time.
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