Buying Vacant House = Can't Quality for Property Insurance?

Question

I was having a discussion with a colleague the other day who is a land lord. There is a vacant property that I was thinking about purchasing to rent out myself. The property has been vacant for over a year.

A friend mentioned on vacant properties you cannot get insurance on them. Is this correct? I would like more information thanks

Account Closed · Answer

@Tiffany H.   Santa Barbara is a varied county.  The property was in an very remote rural area.  It didn't need rehab, I just didn't want to be a landlord in that area.  I had an agent who works the area tell me I wouldn't find any buyers for it other than investors buyers wanting to pay $30K.  So, I didn't list it with him.  And boy was he wrong.  I had tons of interest from cash buyers.  I sold for less than some of the higher offers because the family that bought it had a good story.  Not the best business move, but it was an easy and happy deal for all.

Tim Norris · Answer

There are many carriers and Programs available for vacant and renovation policies.  Consider "higher" deductibles and ensure any contractors (that aren't your employees) carry their own liability and WC coverage...

Tiffany H. · Answer

I don't do many flips but the company I use (they have banner ads on BP) does vacant policy insurance as well as tenant negligence and loss of rents policy.  No minimum number of deals like some flip insurers have, I believe.

@K. Marie Poe why didn't you hold the cheap Santa Barbara house?  Didn't make sense due to cash outlay required to fix?

Jeff S. · Answer

Just bought a policy called Builders Liability about $1200 per year 1800sf doing a full remodel, extended vacancy because of redemption period. Agent is Geico which mostly uses Travelers for rentals.

Account Closed · Answer

You're definitely at least or more savvy than me.  Plus you know how to work a financial calculator.  :)  I'm pretty sure I don't work too many nice neighborhoods, with most properties being under $200K....the last one I sold in August was for $44K.  In CA we both know that's not usually nice. (But it was cute.  And it was in Santa Barbara County!)

I haven't had the timer run out on me that's forced me to take on builder's risk plus vacant.  I don't want a vacant property for that long and work pretty hard to prevent it.

Ellis San Jose · Answer

@K. Marie Poe I am not as savvy as you & your neighborhoods are probably nicer.  I usually get the stuff that takes longer to rehab & rent out and my egg timer runs out and I have to pay American Modern a premium to cover until I can get a renter in.

Account Closed · Answer

I haven't found this to be true, but I buy only fire and major hazard.  In CA most of my policies for vacant properties are underwritten by CA Fair Plan. They insure while vacant with no problem except major repair issues, for which they give ample time to address before cancelling.  For easy rehabs, I've been getting the properties resold before the insurance inspector even does his fist inspection.

Just make sure you tell your agent or insurance company what you are trying to do and your time frames.

Ryan R. · Answer

@Bill Mitchell  call a local insurance agent, preferably an independent agent, and ask him about a fire policy for this type of situation. I just got one for a rehab project on a vacant house that has been sitting for around 4 years. 1 year policy was about $600.

A field auditor came by and took photos while I was working there one day. Haven't heard anything since so I'm assuming they have no qualms about the policy they issued.

Bill Mitchell · Answer

So I guess if you were to have a property that was not insured, begin working on it, and it burned to the ground or something you lose your shirt?

Aly W. · Answer

Ellis is right...but in some areas of high risk to vacant property, you may not be able to insure it. We own 2 properties in that kind of area. If there are other vacant properties in the area and the insurance company is aware of that, don't count on getting insured.