Buy Rehab Rent - Insurance Questions

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Buy Rehab Rent - Insurance Questions

Adam Gagne
Houston, TX · Member since 2016 · 10 posts · 3 votes

Hello,  I am about to close on a property soon and it requires about $20-25k of rehab before I rent it out.  The rehab required is flooring (carpet/vinyl), sheetrock, finishing bathrooms/kitchen (it was half-rehabbed before I picked it up), light mold remediation, HVAC and maybe some electrical and plumbing.  

I received a 3-month vacant property quote (IR3) for around $1200, which seems really high (when compared to regular insurance).  The policy HO-3, for renting, is around $1600 for a year.  

The dwelling coverage will be for the house will be around $148k.

A few questions:

  1. Am I better off buying a builders risk insurance for the rehab and obtain the HO3 policy? Or should I continue with the Vacant property quote (IR3), then move to the HO3?
  2. Whats included in a Builders Risk Policy and what type of insurance company provides it?
  3. Could you please private message me any recommendations you have for insurance brokers or providers in Houston that deal with investors?

Thank you!

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  • Chad McClain
    Investor · Livonia, MI · Member since 2016 · 23 posts · 14 votes
    10y

    You may want to look into a vacancy rider on a traditional dwelling policy. When I rehabbed my current rental, I was able to pay only an additional $150/year (on a $700 policy) for it that covered me during the rehab. I was able to take the rider off once I got tenants in the door.

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  • Michael Wentzel
    Investor · Colorado Springs, CO · Member since 2013 · 643 posts · 280 votes
    10y

    @Adam Gagne

    I have an insurance company that I used to cover my properties that are vacant and under renovations. Last year I ended up with a backlog of properties and some have sat for six months. I'm paying reasonable insurance premiums. Send me a private message if you would like their contact.

    Mike

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  • Adam Gagne
    OP
    Houston, TX · Member since 2016 · 10 posts · 3 votes
    10y

    Thanks @Chad McClain.  I will look into adding a rider on the regular policy.

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  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    I have written both builders risk and vacant properties. I have went away from the builders risk policies due to the fact that you don't get any liability coverage, no theft coverage and they are fully earned premium, meaning no refund if you cancel before the end of the policy.

    I switched a long time ago to writing Foremost vacant policies because you get liability and theft coverage, and they have a minimum earned premium of $250.00. The fact that the minimum earned premium at $250 works well for my rehabbers, as they set them up on monthly payments and then switch them to standard landlord policies after the rehab and once rented.

    On rehabs, Foremost is primarily concerned with the shell of the home being secured. So if there is exterior work that needs to be done, discuss this with the agent, have them get that approved along with the time line through underwriting and then make sure the exterior work is done in a timely manner. Foremost generally isn't as concerned with the interior of the home.

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