Residential Property Insurance

2 Replies

Hello BP!

We are new to REI. We are currently forming a LLC and will start with flipping residential homes in our local area. We are considering using hard money lenders to finance a few flips. With that being said, what has you experience been with attaining property/home owners insurance while the property is in your possession? Traditionally, insurance and taxes are paid via escrow. How does that work with hard money/personal loans?

Please share

@Kristen Ray , There are a few REI Insurance Companies that will issue for a short term flip. The company I use has a system in place that you can update the policy every step of the way i.e, board-up, renovating, vacant or rented. This helps you with the exact coverage you need through out the rehab process. The policy will be issued and the PML/HML will be noted as Beneficiary of payout. Most small private money lenders will have language in the "note" stating that insurance must be kept in place during the duration of the loan. Bigger more established lenders will have the insurance and taxes paid at closing , you will see this on the HUD or closing statement. When going for a HML or PML be sure to do the math. Most new investors miss that fact these items will be paid either upfront or put on the back end of the loan. If your going for a 80% LTV type loan then you assume that you only need 20% to put down plus some fee's but there can be some additional charges like the 6-12 month insurance upfront. Folding the insurance into the loan will increase your payments and you will be paying a % on the cost.

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