All Forum Posts by: Michael Norris

All the suggestions above are solid. Call a local agent or two and tell them you are bidding on something and want a quote ahead of time. It takes 5-10 minutes I do them all the time for my clients.  Zip codes make a big difference on rates! As does the age of the home and type of construction. A brick home may have a higher cost of construction but some companies also give you a big discount for an all masonry home.

Some of the 1900 to 1930 houses have a construction type that is open inside the walls from ground floor to the attic - a fire that breaches the wall will shoot straight to the attic and efficiently burn the house down.  

If you were looking at two similar houses for the same hypothetical purchase price in Ohio here are some factors that can make a difference if you want to control insurance cost. Pre 1933 is higher cost than Post 1955 construction. The newer the property the better the rate could be. Brick dwellings have a higher rebuild cost which can drive up the policy rate but they also get a bigger discount for masonry construction. Was the wiring redone in the house? As in fully redone not just the Western Pacific Box.

Focus on having enough insurance on the unit (dwelling) aka Coverage A on your policy, then Liability, then personal property if you will be living in the unit. You will need to know if the by laws require you to insure the unit from "studs in" or "paint in". Ask the association that question "studs in" or "paint in"?. Once you know that your agent should have suggestions for you. How much that is can be very subjective -  but it almost always comes down to a $ per Square Foot of coverage. Ex 1000 Sq Ft x $120 per SqFt = $120,000 indicated need for insurance. Marshall and Swift has an online reconstruction cost estimator if you can get access to it - if not your agent should be able to. Hope that helps.

I would suggest lawyering up before contacting your insurance carrier with any "what if" questions unless you have a close relationship with your agent and can speak with them off the record.  I personally disagree with the practice but almost all carriers will note the incident as a $0 pay claim because you asked a "what if" question even if the person never actually files against you. 

A $0 pay claim may not hurt you now but if you have a real claim in the future then it could be considered your second and adversely affect your rates and/or insurability. There may be some shared liability with the snow plow company but a claim will have to be filed before that comes into play. Good luck!

As an insurance agent I think you should go the LLC route. That said, depending on the state your in and companies you deal with you may be forced into a commercial policy. If you are a newer investor or have limited resources you may also have a more difficult time with financing with LLC ownership. One of my companies will let me insure a 1-4 family property with a corp ownership and the buyer as second insured to avoid a commercial policy. Everything is disclosed so no issues with claims.

Snake oil? Maybe I was wrong so I took a quick look some resources. I"ll agree that the majority of homes in Parma are $90k and up. I'm not a realtor so no MLS access but a quick search on Zill**.com, sorted for recently sold with max price of $55k in Parma has more yellow dots than I'm going to count. HowardH**.com shows 27 properties in Parma, OH listed for under $55,000. I'm sure at least half of them are vacant lots or misc junk but not all of them are junk. There will be some overlap on Aucti**.com but it shows 25 listed in Parma several I looked at start bidding at $25k. Final price could be higher obviously. I just landed a new insurance client who bought one on Albertly at the sheriff sale for $44k. You gotta hunt for them but deals are there if you're patient.

Cleveland Ohio you can buy houses by the truck load in that price range. Some neighborhoods will obviously be more sketchy than others. If you focus on the Parma, Brook Park, Old Brooklyn area you can find houses in that price range with safer surroundings. Rule of thumb - look at zip codes between 44100 and 44109

If you haven't found a policy I'm an Ohio agent and may be able to help. 

I mocked up a quote for you (*small print* this is not an offer of insurance)

As an occupied landlord property it's approximately $950 year with.. $100k Dwelling, $1 Million Liability, $12k loss of rent, and $4k deductible.

As a vacant property with $50k Dwelling, $1 million liability, & $4k deductible it would be aprox $750 year.

We don't charge you for a payment plan on the policy and don't hit you with a fully earned premium on the vacant policy either so when it's ready to convert from Vacant to Occupied you won't lose the premium you already paid.  

We can do a full replacement cost policy but not until the rehab is complete and it's at least partially occupied. With a full replacement you should have at least $100 per square foot in Dwelling coverage - probably a little more than that with an all brick building.

If I can help or answer questions for you let me know.

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I am an insurance agent but not in your state so rules may be different there. Some companies including mine (Farmers) will allow for a modified homeowners policy where you are renting out a room(s) in your house. Some companies are more restrictive so make sure you tell your agent what you are doing otherwise you could have a claim denied for misrepresenting your property. You should also figure out if your home needs to be reclassified as a 2 family home which will keep you legal but may also have tax consequences. Being in a different state I can't directly help you but it's a pretty simple policy to set up. If the agent you talk to does not have answers then find another person to talk to who deals with a lot of landlords.

(I'm an insurance agent) The secret sauce of having higher liability limits on your policy (landlord, home, and autos) is that it forces the insurance company to fight harder on your behalf. If you had some sort of large liability claim against you - once your company accepts fault it becomes a business decision for the claims dept . Simple numbers - You get sued for $150,000 in damages but only have $100,000 in coverage. It's no brainer for the company to go ahead and pay out the max on your policy ($100,000) avoiding the extra cost of defense. That leaves you holding the bag for the remaining $50,000 in damages. With high limits the insurance company has a stronger incentive to fight harder on your behalf.

If you have a loan on the property there are 3 parties with a say in the matter and they typically do not line up 100%

Bank - wants coverage to at least the amount you have borrowed but realize it may not be enough to rebuild in a total loss situation. The lienholder is also listed on the claim payout and they will grab those funds to pay off the loan. Some banks will demand full replacement cost coverage while others are ok with being just covered for the amount of your loan.

Insurance Company - diff companies offer different policies. If you want full "Replacement Cost Coverage" than you need to typically insure to at least 80 or 90% of the amount of coverage the insurance company thinks you should have on the property called Replacement Cost Estimate. If you are ok with "Actual Cash Value" coverage than you can typically insure it for whatever you want up to local market value typically or at least for the amount you have borrowed on the property (see bank above).

Owner - You are pickle in the middle. Deciding on what type of policy you want (Replacement Cost or Actual Cash Value) and if you have a loan figuring out what your lender requires will give you a strong guide on the dollar amount to insure the property for.

It typically comes down to an average $ per square foot for your area.