All Forum Posts by: Parker Cox

@Andrew Martin Since you are using Safeco I am assuming you have these properties covered as either an extension of your homeowners or as a stand alone personal lines non-owner occupied policy?

if so, are your policies all SFRs or are there small multis and how many units do you have?

ultimately, everything above is right, every company has a niche, Safeco is usually pretty competitive and its worth it to take the time to get multiple quotes from both direct writers and independent agents.  

But, depending on the size of your portfolio (more than 5 units ish), ask your agents to look at this as a commercial policy and be creative and they should be able to give you a few separate options that can save you especially if they provide a shared liability policy.  

Best of luck, if you have any other questions please feel free to reach out.  

@Russ Grassa Welcome to BP, it is a fantastic community.  Do you have any experience or interest in either taking on Flip rehabs or partnering as the construction head on these sorts of projects?

Who doesn't need a good and reliable contractor who also understands the investor business.

Thanks for putting yourself out there.  

and ps: where do you focus your rentals in SD county?

@William McCauley There is actually a few companies that offer flipper specific policies: Atain is the company I use for most of my clients, but there is also Alliance and a few others.

You will want to talk to any independent insurance agent who comes well recommended in your area, they should have access to a couple carriers that have competitive offers.  

But, most insurance agents are not very familiar with REI needs especially flippers, so make sure your policy has these things:

First, proper property coverage: the "Building Property" is the big one: it should be valued at the property's replacement cost (rebuilding cost) not what you bought or will sell it for.  There is also optional contents coverage: which would cover any appliances or furniture you have in the home.  In most cases my clients refuse the contents but it depends on your plans.  There is also "machinery breakdown" which will cover your heating and cooling systems in the event of a covered loss (again often taken off by many if not most of my clients). Then Ordinance and Law coverage: this will add extra coverage limits to the Building property coverage value: the idea is lets say you have an older house that your flipping that burns down but, to replace it as it was would be in violation of the cities ordinances or zoning or codes, it provides the extra cost of modernization and legalization of your project.  And make sure your deductibles are reasonable: $500-$2500 will have minimal premium differences but can be a big difference if you have a loss that is in the 2000-10,000 range as most are.   

Next: Liability:  This should be very straight forward and a flat rate for 1million/2million (the industry standard.  But if you want more liability coverage, you can easily add higher limits or umbrella coverage that will maximize your liability protection.  

Finally your policy should be "Pro-Rated," meaning you will only pay for the time you have it, as soon as the house is sold you should be able to cancel and be refunded.  But, this is for the property not the liability: Liability has no pro-rating.

Thats a pretty comprehensive explanation, but I am in Ca so you should check with your agent about any specific things in Kansas.  But, this knowledge should give you the right questions to ask to keep them honest.  

Best of luck and feel free to ask any further questions.  

Thanks guys, I appreciate the feedback

@Charlie Fitzgerald

thanks for responding, does that mean that the person with the highest percentage of investment is the most protected even if that is me and not the outside outside investors?

When I started looking into this I thought it would be straight forward, but its not...

Thought experiment: 

I am in Ca and I have an LLC devoted exclusively towards my real estate investing. I have my own money as well as other investors' held under the LLC, who have gone in on my projects and are getting their promised annual percent return. But, with the cash that is in there, in the event that I/the LLC was sued, I need to understand how the cash within the LLC would be dispersed.

Does it get taken from my portion of the funds first as the head of the LLC? does it remove all the funds equally and we continue to all share the equal portions of whatever is left after settlement? or is it dispersed by loan/investor position? and if it is based on position, do I count as lowest position (least protected investment) or highest position (most protected investment)?

Thanks for your help

@Dan P. 

The Yuba city area could be a good one to look into.  I don't invest in the area, but this past summer I was driving through for a vacation and as an investor always keeping an eye out, if it was closer to me, I would be interested.  

The inner city is quite sketchy but the outskirts have some new development and theres 2 walmarts within 10 miles (a strong sign to me of an active renter's market).  My gut was telling me that a duplex- 4plex on the outskirts of town might just be a worthy little gem by California buy and hold standards.  

If you look into it and find anything good let me know.  

Best of luck

@John Arendsen 

Until it is legalized, you are exposing yourself to an immense amount of risk, for all of the discussed reasons above.  And, from a liability perspective, even if you are not "involved," you can certainly be held liable in quite a few ways in the event of a raid or shut down.  

On top of that, your inviting a hugely high risk operation on to your property.  Not only are these people a target for law enforcement, but they are a target for other crime enterprises.  They have an immense amount of cash and valuables, easily stolen and re sold.  

All the people on your property are in a position that if something goes wrong, you are nearly guaranteed to be sued.  

On top of that, if you are planning on doing something beyond a retail storefront, and building out a warehouse space for cultivation, it can require a ton of building out to the space that will make it quite expensive to change in the event of a shutdown.  

But, on the bright side, it is certainly possible to create a niche here and charge an arm and a leg for a property specifically suited to the Grower/Sellers needs.  Its certainly an intriguing idea, but there I am not convinced that as of yet it is worth the risk.  

@Casey Murray

Not sure exactly how in depth you're after, but I get the San Diego Source and San Diego Business Journal sent to my inbox everyday.  They are good overviews of the general economy, with the source more focused on real estate trends.  

Also, the NSDREI maintains a pretty solid economic data sheet that they update monthly for the meetings.  But, they will only send it out via email to members (a very strong reason I am planning on joining).  But, even in there I have yet to see anything rent specific.  

I have been looking for this info recently, and I am with the SDCAA, which has to have that data compiled being that its purpose is for unification and representation for Property Managers and Independent owners.  

Tell you what, I will reach out to them and when I find it, I will pass it on to you. And you send over whatever you find and we'll call it even.    

@Clint Worland Just so I am clear, your in the process of a complete demo and then gonna rebuild?

If that is the case, you will want a "builder's risk policy" that will have your liability and property coverages (vandalism, theft...etc) to protect you both during demo and construction.  

But, there are a couple caveats depending on if its your own construction team or another you're hiring to do the job, and on top of that, is it a continuous project, ie demo then immediately rebuilding or is it gonna be vacant land for awhile? 

if it remains vacant for awhile (more than a month or two) it is likely worth it to cancel the builder's risk, go to vacant land liability only, then get a new builder's risk when the build starts, but that depends on the numbers. 

Finally, if you have your own team or if your hiring out the policies will be a little different and coverages likewise just because there is a significant change in risk.  

If you have any further questions, this is my niche-REI insurance in San Diego, send a private message to me and I am happy to get into further detail.

Congrats on the deal and good luck