OLA in "L'EXPRESS" (Semaine du 15 mars au 21 mars 2011)

[Greg]

It's a insurance policy. If I have 10 units and pay $35 per month each that's $4200 per year for rent insurance. Assuming I pay that every year until I have to make a claim and all other LL with the company do the same premiums should cover there total pay out. The key is there total number of clients paying premiums should cover there claims. If only 10% of tenants default, as we assume, it should, in principal, work.
Seems like fairly basic math to me.

[Greg]

Tough day today, I wanted to add to my above post.

1000 units X $35 X 12 months = $420,000 premium income.

Assuming 10% of renters default at a average loss of $3000 per unit that's $300,000 in claims.

$420,000 - $300,000 = $120,000 in profit before other business expenses.

And like many insurance policies some (possibly many) may never make a claim.

[HLL]

But if you do get the insurance....and you go after the tenant in small claims....does that null the insurance????

Ganou, my understanding is that you relinquish your debt to the company, collectable or not. Apparently, the company doesn't intend on collecting on that debt as they "don't want to disturb tenants" (had a good laugh at that one -- expect to be disturbed if you don't pay me my rent!!)

At least, that's what I understood from reading it while boning up for the interview. Many thanks to Stuart for providing good talking points.

HLL

[Greg]

There intent to not pursue tenants for the debt will ultimately drive up tenant defaults and therefor the premium on the insurance. Good for them bad for us. Very bad for us. These guys need to be either driven out of the province or encouraged to change there policy on collecting on tenants bad debts.

Tenants will learn that this insurance exists and will quickly discover they will not be chased for their bad debt. This will ultimately kick the door wide open resulting in a huge increase in the number of tenants that will default knowing there will be no accounting in the end.

Welcome to Ontario the free rent provence.