I was looking at putting an offer in on a duplex, but am getting mixed information on the insurance needed - that could make or break the deal.
The current tenants are running an assisted living business out of the duplex. The nurses stay upstairs during their 24 hour shifts, and the 3 bedrooms on the first floor unit are used for assisted living patients.
They have been doing this for 3-4 years and their rent is currently below market rate. Current landlord has owned the property for 40 years and shrugged his shoulders about extra insurance. Said he never told his insurance company about the business they were running
I’m talking with other investors, they mentioned insurance is more, but they pass the premium on through to their renters.
I called my contact at State Farm and they told me no extra insurance is needed, and that the business is responsible for holding insurance.
I called another insurance contact, and they said that assisted living facilities have extremely high risk therefor high insurance premiums that they have to run through as commercial. He quotes $10,000/ year.
Obviously this is a huge discrepancy that could make or break this deal.
Anyone with experience in this area??
@Sarah McCluskey I have several clients who have this set up.
There is nothing wrong with leasing your duplex to a licensed and insured Assisted Living facility. In order for them to be licensed, the state will require them to have a good amount of insurance. This is good for you.
FYI - The annual cost for this type of business is $2500-$5000 per year. It is usually based on the level of care and # of beds.
I would steer away from renting directly to the person being cared for and have them make arrangements through the Assisted living facility.
Your landlord policy might be slightly more as you are leasing to a business instead of individual renters.
Hope that helps.
@Jason Bott thank you. I see you’re located close to me! What company do you work for?
@Jason Bott also. You mentioned the landlord policy may be slightly more due to renting to a business, but that the insurance may be $2500-$5000. Are you saying that is what the yearly landlord policy would be? That seems significantly higher than a normal landlord policy of $600-$800 per year.
@Sarah McCluskey go with Statefarm and run away from the others insurance company. You will be fine with just regular insurance for your rentals and groups home will have their own insurance. You should be able to charge 25% more rent premium for the group home.
@Sarah McCluskey sorry, I was traveling this week.
I'm an independent agent @ Robertson Ryan, a top 100 US broker. We represent close to a 100 insurance carriers.
In regards to pricing, the $2,500-$5,000 is what the Assisted Living company pays for their coverage. You would have a stand landlord policy just as if you were renting a market rate unit.
@Jason Bott so you are saying I wouldn’t need additional insurance to cover the assisted living business? Sorry, I’ve just gotten such conflicting answers from different insurance companies that I don’t know who to believe anymore :-(
You should start your own assisted living business and put these nurses on payroll. And get market rent.
I know a builder that does this in my market. He has a pretty large and efficient construction crew. Preselected materials. Can flip a house quickly.
Sometimes he gets a deal in a lower value neighborhood and turns it into one of these. He owns the AL biz but outsources all the work. Gets high rents in a lower income neighborhood. And lulls in big money from insurance companies for the residents. He kills it.