This is the first time I have posted here so I’m not sure if I’m doing it correctly but I have a question. I am currently saving and studying and hope to purchase my first property in the spring. I am relatively certain I would like to do a house hack with a duplex or triplex. One of the books that I read said as part of my education I should practice underwriting properties to determine cash flow to learn if the property is a good deal. I understand that one part of the cash flow equation is the cost of homeowners insurance. How do I estimate this cost when looking at a property online? If I were actually purchasing these properties I would get this information from my insurance company but since I’m just practicing I wonder if there is an equation to get a ballpark idea. I currently live in a condo so I have never actually had a homeowners policy for a regular home.

Hi @Teresa Phillips and welcome to BiggerPockets!

Good on you for practicing the financials: That's going to serve you well in your investing career!

Property insurance premiums are definitely one of the operating expenses that will impact cash flow. You can get a rough idea of the cost by reaching out to an insurance broker and asking for a ballpark figure. Don't make them provide a formal proposal; just get a quick-and-dirty estimate. Also, don't do this more than once before you throw them some business. Lastly, be sure to give them all your business once you get rolling. Loyalty matters!

One last thing: If you're going to be holding these properties as a landlord, you're going to want a landlord policy, which insures the structure but not the contents within, rather than a more expensive homeowners policy, which covers both. As a landlord, you'll want to demand your tenants get a renters policy to protect their personal possessions.

Thanks so much. I am unfamiliar with landlord insurance but that makes sense. I will research it.

Teresa, Mitch is correct, best way to estimate it is to get an agent to run numbers for a similar property. Some things that will impact the rate: 1. Value of house being insured 2. Fire protection of the town (different towns provide diff protection - Paid fire depts. vs volunteer, hydrants vs tanker trucks) 3. age/condition of the property 4. proximity to coastal or wild fire areas There are also some things that can impact whether or not a company will write a property: 1. Knob & tube or aluminum wiring 2. Flat roofs 3, Asbestos siding 4. no Lead Safe certification 5. Aggressive Dogs/pets 6. Prior loss history ... Hope this helps.

Thank you this does help. I appreciate your taking the time to share your knowledge.

@Mitch Messer Hi Mitch, what if you're doing many insurance estimates for practice or looking at multiple properties daily? Do you have to use a different agent every time? since you're not really throwing business their way ….

I just use 1.5% of purchase price for my estimates.

Talk to an insurance agent and see what's "normal" or "average" for your area for the type homes you're looking at.  Ask if there's anything that can make it MUCH higher so you know what to avoid.  For us it's flood zones.

@John Mocker   How can us normal folks check for the prior loss history?  For properties or neighborhoods?  We have some AOB issues and I think certain neighborhoods have all had roofs replaced after a storm.  I think insurers track this. . . 

Dan,

Insurers voluntarily contribute claim info to an independent central database.  Not every company participates but most do.  The name of it is Comprehensive Loss Underwriting Exchange (CLUE).  The companies then buy claims reports from CLUE.  I am not aware of any way individuals can purchase that information for a property they do not own.  The owner of a property can request a copy from LexisNexs on the personal reports section of their website or by calling 866-312-8076.

Hey @Som Jafari , welcome to BiggerPockets!

If you're just practicing, you can either use the quote from other nearby (comprarable) properties you've previously analyzed, or take the great advice of @Dan Maciejewski  and apply a fixed multiplier to get a rough number that's close enough.

It's mainly when you're running financials for actual deals, and therefore must get it right, that you'll need to engage an insurance broker's help. (At least, until you've already built a solid relationship based on many, many referrals sent their way!)

@John Mocker   That's the report I was looking for.  Thank you!  

It's enough that the owner can get it.  I don't need more info to overload me!