When a lease is coming to an end - what is the full plan?

Which highlights exactly why it's so important to have good landlord insurance! It's just a business and although not desirable, events like these will happen over the holding period of any investment. Insurance covers it, the event is dealt with and the investment continues. It's all part of the game unfortunately. All we can do as investors is mitigate our risk along the way.

 

Eh ... I had a housing commission tenant (big mistake).
While landlord insurance is useful, it is a band aid solution and does not address the core of the problem.
A friend in the US said that over there, the housing commission will put forward a tenant and the agent/owner can check out that tenant (for criminal history, damage to past properties, etc) and can still decide if that individual is a risk or not and can decline them so that they can still allow lower socio economic individuals who have not done damage to have a place to stay.
Over here, the housing commission contract says that owner leases to them and has no say in who they put in. Until they change this I will never allow housing commission to rent out a property of mine again.

Lesson is - be all over your agent to do all the checks for new tenant applications (criminal history, past landlord, and current employment), and as long as housing commission does not give you final say on the individual for you to do these checks and ability to reject the risky ones, tell housing commission to go jump off a bridge.

Would still get landlord insurance though - but it is secondary to the tenant application approval checks.

 

It's not necessarily a band aid solution, it's a secondary risk mitigation measure as part of an overall risk mitigation strategy.

To explain further, in aviation we term safety measures as primary or secondary. The overall objective is preventing loss of life and/or prevention of injury and damage to property.

A primary safety measure is designed to stop an accident occurring in the first place. It involves training, normal checklists, standard operating procedures, etc. It is clearly the preferable solution and much time and expense goes into it. Primary safety measures are constantly evolving and rely on all persons involved in the chain to follow procedure.

A secondary safety measure is put in place for when something does go wrong. It involves the development and use of things like seatbelts, fire extinguishers, emergency procedures and checklists, oxygen masks....even multiple engines. A secondary safety measure recognises that even though the preference is to never have to use it, the reality is that the accident model inherently has holes in it (see James Reason's Swiss Cheese model) and being human, there is always a chance an accident could occur. There is no point in pretending it won't happen, as if/when it does (and there are varying degrees or incidents and accidents that happen every day) preparation is what will be what prevents loss of life and/or injury/damage to persons or property.

They are both valid and necessary safety measures and essentially work in conjunction with each other.

A risk mitigation strategy in property investment is very similar. A primary measure is the PM doing their checks and everyone following procedure to the best of their ability. Despite best efforts though, a smart investor realises that things can and do go wrong. I didn't suggest that landlord insurance should be relied upon a sole measure, but it forms that same function as a secondary safety measure. It is there and should be used if necessary.

Those investors who do not have it in place are metaphorically getting into an aeroplane with untrained pilots, no seat belts, no supplemental oxygen, no fire extinguishers and only one engine. Sure, you'll probably get there...

 

Agreed - that is a much more correct/accurate explanation.