Insurance for vacation rental/primary residence hybrid

5 Replies

Hello All,

I'm in the process of buying a primary residence. I am also considering renting out part of the residence through airbnb. My question is about how to correctly navigate homeowner's insurance. I am currently paying 5% down and everything will be paid through escrow.  I am afraid that if I start out with a business type homeowner's insurance it would raise flags with the lender and that a higher down payment would be required or issues would arise with the loan (I don't know for sure). Should I just start with a regular homeowner's policy and later switch to a business type policy? This is my first home and I just want to make sure I do this right so that I can rent out a room through airbnb, have proper coverage, and still be ok with my lender. Any advice/pointing in the right direction would be appreciated.

Thanks

It’s funny you say proper coverage. The vacation rental insurance company is called Proper. Give them a call and don’t over think it. Won’t be a problem. :)

Originally posted by @Lucas Carl :

It’s funny you say proper coverage. The vacation rental insurance company is called Proper. Give them a call and don’t over think it. Won’t be a problem. :)

Thanks Lucas. I have also heard about CBIZ and Slice. My concern has to do with closing on the house without hiccups. Has anybody ran into a problem where you started to airbnb a portion of your residence, you changed your homeowner's insurance to an appropriate policy, and the lender came down on you for some reason? Also, if I start out with a business/vacation rental homeowner's insurance, does that have implications on my current loan product (conventional loan 95 LTV through credit union). Something tells me I need to reach out to a lawyer but I wanted to check here first.

Originally posted by @Amir Bekhit :

Hello All,

I'm in the process of buying a primary residence. I am also considering renting out part of the residence through airbnb. My question is about how to correctly navigate homeowner's insurance. I am currently paying 5% down and everything will be paid through escrow.  I am afraid that if I start out with a business type homeowner's insurance it would raise flags with the lender and that a higher down payment would be required or issues would arise with the loan (I don't know for sure). Should I just start with a regular homeowner's policy and later switch to a business type policy? This is my first home and I just want to make sure I do this right so that I can rent out a room through airbnb, have proper coverage, and still be ok with my lender. Any advice/pointing in the right direction would be appreciated.

Thanks

 You're right to be concerned that it would raise a flag with the lender. Close with a normal vanilla policy, move in, get settled, and put "redo insurance" on your checklist to get it ready for part of it to be on airbnb down the road. No need to pay for a more expensive insurance policy from day 1 when you are probably at least a month away from actually having airbnb guests anyways, even if it wouldn't screw up the purchase transaction...

CBiz and Proper are the same policy. Proper was started by a dude that worked at CBiz. @Chris Mason is right as always but..... I've spoken to proper about this and they have a work around. Just ask them, they do this every day.  All this being said I use a local company. Nice score on the 5% btw Chris I thought second home was 10? Not that it matters for me I can't do any more second homes. 

Originally posted by @Lucas Carl :

CBiz and Proper are the same policy. Proper was started by a dude that worked at CBiz. @Chris Mason is right as always but..... I've spoken to proper about this and they have a work around. Just ask them, they do this every day.  All this being said I use a local company. Nice score on the 5% btw Chris I thought second home was 10? Not that it matters for me I can't do any more second homes. 

 5% is for a primary residence. The second time you buy a home, it can still be a primary residence.

I say that because when the mortgage industry says "second home," we do not mean the second time you buy a home... we mean a vacation spot that you intend to personally use at least once a year. We really should "find and replace" the term "second home" with "vacation home" throughout the guidelines, since the definition lines up with what normal people mean when they say "vacation home" anyways, but hey what do I know.

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