Insurance Strategy for these deals, am I on the right track

[Bienes Raices]

I went with the realtor to view the two houses I posted about in another thread.

Both houses have a half finished garage conversion which should probably be converted back to a garage, also one of the houses has a medium case of mold. Otherwise these are nice houses in a well kept neighborhood.

The realtor mentioned maybe not telling the insurance company too much about these problems, because they may never come out to check the house in the first place. However, since the house will have to be vacant for at least a month while these repairs are done, I''m concerned that there could be fire or something, and my insurance company could deny me, especially if they found out serious work was being done they didn''t know about.

Anyway, my idea was to insure through TAPCO while the repairs are done (similar to Foremost, but Foremost won''t insure in Florida). TAPCO will cost about 2.5 times more than normal insurance, but I'll just factor that into my offers.Then I'll go back to a regular insurance company once the tenant is in.

I guess what I'm asking is has anyone ever lost a deal because the insurance company wouldn''t insure? I'm trying to figure all this out before I go to my insurance co. and tell them all this.

Thanks.

[J Scott]

There are essentially two types of insurance you look at for an investment property (in addition to your own personal liability insurance):

- Landlord Policy

- Builder's Risk Policy

The landlord policy will protect against damage from tenants, vandals, some acts of nature, etc. The big thing to remember about landlord policies is that they normally won't pay out anything on a property that has been vacant for more than 90 days.

A builder's risk policy will protect you during the rehab/construction aspects of the project. It will protect vacant properties, and will protect against things like you mention above.

Most lenders who finance rehabs will require a builder's risk policy, and as you mentioned, they are generally a good bit more expensive than a landlord policy.

There are lots more details that you should cover with an insurance agent, but that's the gist...