You Have Too Many Rentals

Yes, that's right! You have too many! That's what some insurance companies say once you've reached that magical limit they deem as too many rentals. It's not something they let you know until you cross the line. Which is why I like to ask my clients once they get beyond 3 units, if they plan on purchasing more so I can prepare them for what's ahead. So, what do you do now?

First, let's go back in time when you were a single family homeowner and all was right with the world and your insurance company loved you. You decided to buy a rental property and they were stoked because they could sell you more insurance. Then you bought a duplex and then a 4-plex and they said, WT... You've got too many rentals. Not sure if you have ever faced this before. But, it can be unnerving when you are trying to close on your next 4-Plex and your insurance agent says...Guess what...? Which sends both of you scrambling to find insurance coverage in the nick of time.

Here's how insurance companies think. This has become a business for you and you are looking more like a commercial exposure than Joe Nice-Guy with a home, two cars, a boat and that first home you bought on the other side of town that is now a rental.

So what is that magic number you ask? Some companies stop you at somewhere between 6-8 rental units (i.e. 2 duplexes and a 4-Plex = 8 units). Some go higher and some lower and there maybe one or two who don't care.

My point is, as you begin to acquire more rentals, ask your insurance agent does the company you have me with have a limit on how many rentals I can place with them? If so, what's the next step when we reach that number?

Oh, always remember to review or increase your umbrella insurance coverage each time you buy a rental.

Until then, here's to your next rental and keep growing Bigger Pockets.