What insurance to close on a BRRRR with conventional lender?

Question

Getting ready to close on my first BRRRR and I am working on getting insurance quotes. My mortgage broker had a requirement for rental reimbursement rider. I had planned to have vacant property insurance since I will be doing renovations before a tenant moves in. Of course there is no rental reimbursement on a vacant home policy. The mortgage broker can waive the rental reimbursement requirement based on my income, but says the underwriter is looking for a regular homeowners policy. They don't want to feel like its a renovation loan I suppose. I don't want to be in a situation where I have a potential claim denied due to the house being vacant in the short term.

Since this is a popular strategy, what insurance are you all using to close on a BRRRR? The home is in NY state and is habitable in its current state, just outdated. Renovations are paint, hardwood floors, bathroom remodels and a bunch of odds and end repairs my inspector found.

Thank You,
Brian

Since this is a popular strategy, what insurance are you all using to close on a BRRRR?  The home is in NY state and is habitable in its current state, just outdated.  Renovations are paint, hardwood floors, bathroom remodels and a bunch of odds and end repairs my inspector found.

Thank You,Brian

Kevin Hoag · Answer

@Brian R. You are correct a vacant policy will not have rental reimbursement. It will basically only have dwelling coverage, liability and medical expense. This policy you will also only use while you are renovating the home. Once that is done then you will want to switch over to a landlord policy.

The issue you may run into is that because you are getting a loan they lender may require your policy to be replacement cost and not actual cash. This can be hard to find. My main carrier Foremost offers vacancy policies with ACV. A company called AU Gold offers a vacancy policy for both residential and commercial that is a replacement cost policy. Check them out it is a place to start.

John Mocker · Answer

Brian,

Very often we insure those projects with a Builders Risk policy.  I have also done them with a Vacant Dwelling with renovation coverage.   Most standard Homeowners will not cover a vacant house but if the renovation is short term (under 60 days) it may be possible.   See if you can get a sample of what coverage the underwriter wants to see on the binder.  It may be that the Vacant Dwelling policy with renovation will give what you need.  Feel free to PM me those requirements and I will let you know if I know a company that may be able to get you what you need.