Insurance suggestions for flips?

Question

I’m currently under contract for a “fixer upper”.  For my buy and hold business.

I engaged my normal insurer for the basics but they refused to cover the property based on its condition.

Namely the roof is shot, so is the heating, and it needs some pointing repairs. All of which we considered when we placed on offer. It occurred to me that flippers likely find themselves in this situation.

Any suggestions?

Alex T. · Answer

You definitely need Builder's Risk + GL for any legitimate flip. For GL, I match the limits of my GC. For Builder's Risk, I insure the maximum I could lose on the very last day of construction. So if I'm estimating I am in for 500k on the last day of construction, but the land I could package and sell for 300k (conservatively), my Builder's Risk is essentially a 200k policy. Lastly, for a big renovation project, I'd take things a step further and go through the city to close down the sidewalk along your frontage. It can be expensive, but it's another layer of protection that people rarely talk about. The city may not even allow it, but if you're on a smaller street, not closing the entire block, and can provide alternative routes for pedestrians, this is a great option to further limit your exposure and also make it safer for neighbors and workers.

John Mocker · Answer

Neal,

I have clients doing both By & Hold and Flipping.  From the brief description of the project I would suggest widening your search for an agent for this.  In similar situations I use a Builders Risk policy (specifically a Renovation Builders Risk) and a Liability policy to Insure the project until it gets the Cert of Occupancy (CO).  The Builders risk policy is designed for a building under construction so the condition of the property is not as important.   Not all companies that write Builders Risk policies will write a Renovation Builders Risk so look to agents who write Commercial Insurance with multiple markets.  Also, agents writing construction or contractors could be good for this.

Once the building gets a CO and is being rented, you can rewrite it to a Dwelling Fire policy.   If you have trouble finding a agent to do this, PM me and I will let you know what companies we write these with and you can contact them for local agents.

Joseph Platyan · Answer

Neal I’m an insurance broker in philly and specialize in insuring flips. Let me know if I can help!

Andrew Syrios · Answer

Affinity (or REI Guard) is really good for getting quick insurance, especially on flips.

Todd Powell · Answer

@Neal A. The roof is the primary issue insurance companies look at. I used to have State Farm but with doing so many past flips, they were hesitate due to the likeliness of injuries while the place got rehabbed. If they know its a short term insurance policy they feel its not really worth their time. On 4 plex or above I have found Country Financial to be better coverage for cheaper rates than State Farm. But, its a tough one for ugly flips for sure. Maybe shop some other companies? Sometimes they will use pics from the internet and ask you what the roof is like. If you can get a roofer bid and a start date to fix this may help your cause.