Should I cancel my HOI now that I've converted my Primary to an Occupied LTR?

[Jarreau Jackson]

Hello BP Fam - 

A low-hanging fruit question regarding insurance on an SFR. I recognized when reviewing the performance on one of my rentals that I may be overly insuring my property. My goal is to maximize the NOI. This property was a previous primary home, but since I have relocated out of state for work, I have purchased a new primary residence in the new state. I decided to keep the previous home and rent it out; I have held rental property/landlord insurance of $80/mo on this previous primary residence, but I see that my Escrow account still pays $80/mo in homeowners insurance.

I am trying to navigate this with some sensitivity, but wonder if I can cancel my HOI within the escrow account since I am paying rental insurance with a 3rd party.  

A) Is this a viable and good idea?  I'm concerned about the lender charging a due on-sale clause (or just being suspicious) if I contact them to cancel the HOI.  I may be inclined to share with them that this is now being rented.

B) The property is stabilized with a long-term tenant, thus why I have rental property insurance.  Does it make sense to keep the HOI if I have no intent on moving back in?

The HOI isn't breaking my net cash flow completely, but I am looking to optimize and understand the true performance of the property.

Am I thinking about this correctly?

[Jon Puente]

Hey Jarreau,

I would just call your insurance provider and let them know that your property is no longer a primary residence, and you are current renting it to a tenant full time.  They should be able to flip it to where it's a landlord policy, and not both.  You do not need two policies in place, only one. 

The mortgage company will not report a due on sale clause, because you are going to keep insurance in place, it's just going to be a landlord policy for investment properties.  Very easy to do. 

Tip: ALWAYS require your tenants to carry renters insurance for their personal belongings. 

Great Question!