I have been getting private messages daily about the issues with homes in Indianapolis they are well documented on the threads on BP.
however I did want to point out based on my experience of owning literally 300 plus C 's in various markets and foreclosing on another 200 with many in Indy.
I want to caution all of you that have these homes.. to have a second set of eyes on them to verify that they are indeed occupied..
The reason being if you do not have a Vacant home Ryder or builders risk policy and your home is more than 60 days vacant.. there is a very good possibility that you are not covered at this time..
Check your policies and have someone do a drive by that you trust .. Not the above mentioned companies of course but a neutral 3rd party.. have them check with neighbors
And if your home is not occupied and you have owned it more than 60 days.. get right on the phone with your insurance carrier and go over your coverage's.
I have had this happen to me in the past were we had a fire and we were denied coverage.. the insurance adjuster for the company starts investing talking to neighbors looking at UTL usage determines it vacant.. and Claim DENIED.
With all the feedback on BP about these two companies I thought I would throw that out there.. Not only are most of the buyers fairly new at real estate but most simply won't know about this little gotcha in their policies and that goes for any investor really.
Better safe than sorry and have a burnt out shell.. I have one right now in Indy.. I let it go to tax's :(
@Ross Denman wanted to tag you I am sure you guys are up to speed on this.. but after this week of PM after PM I thought I would make a post .. not to talk about the product itself but to make sure those with those assets knew how to protect them.
@Jay Hinrichs thanks for the heads up on the 60 day vacancy issue with insurance. I had a property that took over 60 days and I called my insurance company. All is well and I’m covered, but it wasn’t on my radar there could be an issue. I appreciate your posts and the experience you share.
@Jay Hinrichs I’m not with Morris btw. I’m with you on that group...waiting for the explosion! I’m buying $100k+ renting at $975+!
@Jay Hinrichs love that you posted this thread. Do you think this happens more often in Indy because of Some if the operators there?
I never hear this happening as much in the other markets like Cleveland or Memphis.
The vacancy clause is actually not 60 days of vacancy while owned by you. Its 60 days of vacancy period.
Buy a house vacant 60 days prior, your starting with the vacancy clause in effect.
@Derek Lacy so Derek with these folks buying these homes that are in need of major repairs.
I would surmise like I do you need a builders risk policy while its being rehabbed.. and then once its rehabbed you move it over to a standard policy.. and then in that standard landlord policy you want to check for how long the home can be without a tenant without a vacant home type ryder or what ever you call it... I have had this happen to me personally.
and I know all policies are not created equal.. but I suspect some of these folks need an insurance check up.. I had one denied first thing out of adjusters mouth was when did the tenant leave ? Trying to trip us up the easy way..
@Caleb Heimsoth I don't think it matters in markets I think its all about YOUR individual policy on your particular house..
Insurance is a tricky thing.. I know I buy more than my fair share.
On one policy I bought for a subdivision I was building it was a 10 year liability policy for 1 mil that I paid 30k for.. this to protect against any claims 10 years after I had sold them LOL.. and of course all the subs have insurance and so on and so forth.. basically cost of litigation if I was ever to get sued insurance. and believe me LLC is not going to protect you..
Either way Morris or no Morris all investors should do a check up on their policies on the aforementioned policy I bought .. I paid a very expensive lawyer to go through it and his conclusion was in conclusive.. I hate it..
With all things insurance, the solution depends on scale.
Yes the individual property investor needs a renovators risk policy. (Builders risk hybrid with a special form policy policy that waives coinsurance).
They also need a special form property policy for their occupied. Then at turn price well and market aggressively.
Quite frankly, insurance is poorly understood and poorly represented. And the brokers that do understand... don’t mess with one house at a time.
For bigger guys, 50+ houses (well Indy might be 75 with lower values) you can get a one-size-fits-all solution. So a large turnkey could have all houses just bought at the courthouse, all under rehab before purchase, all under rehab while owned by third party (the customer), and occupied, etc. Cover EQ, Flood, while vacant, etc.
But you need size.
The biggest hurdle is most consumers think (are brainwashed) cheap insurance is the best insurance.
We’ve personally talked since your claim denial, I know you don’t feel that way. I’m speaking to the other readers here.
And yes, adjusters are well trained. Had a pipe just pop on one of my rentals in Indy during the -13 weather. First question he asked too. I then said George, it was the tenant that alerted me at 4 in the morning. I winter in Florida, that’s how I even know about this at 8 am.
@Caleb Heimsoth it happens across the US. Especially high crime areas with NREIG policies and similar (not their fault, they disclose their limitations, maybe in insuranc-ese but it’s clearly on the application) but it’s price that sells these investors.
It happens more on turnkey. Because they lowball the insurance estimate. So if the turnkey says $450 on that and the decent insurance comes back $900. The investor says what can I do to move it closer to $450.
The insurance agent strips coverage and raises deductible and it’s now $550.
...but it cashflows at 12%.
@Derek Lacy we have a zurick type policy for the inventory that is getting what you would call turn key rehab.. and its a add daily take off daily since we are high volume.. it works well.. and its 5k deduct.
but it covers vacant ..
as you state its these folks that own one or two.. plus if they bought from Morris they ARE in the highest crime area of the city.. so you have that as well.
AND FOR SURE you nailed the 450 to 500 a year insurance proforma.. got to squeeze that extra 50 a month out of the cash flow so you can say you have a 10% return LOL..
in certain areas it works in these areas of super high risk for all things.. its a gamble and I guess that's why they call it insurance just like 21 at Vegas.
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