All Forum Posts by: Kevin Romines

I used to write builders risk on these policies, but I really dont like builders risk policies for a few reasons. They generally don't provide liability coverage as well as theft or vandalism. They are fully earned premium, so no matter how long you have the policy (1-4 months) before you sell or hold as a rental, you will not get any of the premium back?

I switched a long time ago to Foremost vacant / rehab policies, for many reasons. You can get liability, theft, and vandalism coverage on these policies. The minimum earned premium is $250.00 ad so I set my flippers up on a monthly payment plan if I can and once they have used up the $250.00 in premium, they can switch it to a landlord policy if they are going to hold the property. If they are going to sell, then the pay the remainder of the $250.00 and that's it?

As far as a blanket option, they don't really have that option, but they don't have a limitation on the number of properties you can insure. They will write individual policies on a blanket format with a max. of 35 properties on it, thereby saving you monthly service charges.  This also makes the dec. page 1 overall dec. page, so in a lot of ways easier to work with. 

Foremost is primarily concerned with the shell of the home, so tell your agent the scope of the work and plan to get all exterior work done 1st. Oh and Foremost has no issues writing a personal lines policy in the name of your entity, many companies will not do that?

I was an agent with Country Financial for 3 years. They are a very good company, but like any company they have certain rules. They require you to have your primary residence with them to be able to write a landlord policy. They will allow outside lines policies on some things and still be able to get an umbrella, but they will hit you with a surcharge on the umbrella assuming its an outside lines policy they will allow? If not, then you must bring all policies to them.

The company I'm with now doesn't require the primary to be able to write a landlord policy. On the umbrella, so long as your outside lines policy has the minimum underlying coverage's, we will write the umbrella. But just like any carrier, we will hit you with a surcharge due to having outside lines policies backed up by our umbrella.

You are going to generally get the best coverage, and pricing by doing all your business with one company, but shop around, there are difference in what each company likes and will do?

I agree with @Ned Carey the LLC is not a substitute for quality insurance. In your case, you will need what is known as a habitational policy. This is a commercial policy due to the fact that its 5 units. 1-4 units are considered by most lenders and insurance companies to be residential and 5 units and above are considered commercial. I would also follow this up with a commercial umbrella policy. They tend to be in expensive, and liability is your biggest concern, so load it up.

While the LLC can be used to insulate any assets that you have in other entities or that you hold personally, its not a guarantee that a sharp attorney couldn't pierce the corporate veil and get outside your LLC to other assets, so a solid foundation of insurance is critical.

Not to complicate things any further, but something you need to be aware of and that is how you hold the property is of great importance. What I mean by that is that the IRS has the ability to audit your overall business and classify you a dealer if you are known to flip houses, or sell on contract or only hold rental property for a short period of time. If they do this, they then will label all your transactions as dealer status and therefore tax you differently. You will lose out on depreciation, and the ability to do 1031 exchanges and will be required to pay taxes as if your profits were earned income? 

How do you avoid this situation, well the best school of thought is to create entities that only do like kind transactions in that specific entity. Have one entity for rentals, have one for flips and owner contracts / lease options. Basically separate the transactions into long hold, versus flips and owner contracts and lease options or short term holds. You could even keep the long hold properties as a sole proprietor, but the short term buy and sell must be in its own entity to keep from getting tagged this way by the IRS. Do the research on this so that future transactions don't bite you down the road.

@Tony Castronovo I would take out a vacant / rehab policy with Foremost (not to be confused with a builders risk policy) this is a much better, more comprehensive policy and it tends to be less expensive. If your going to have escrows and the lender pays the bill for the year up front, then when you switch to the landlords policy, Foremost will refund the remainder of the unused premium at that time.

When you switch to the landlord policy, the new company or even Foremost (who also has landlord policies) will send a bill to your lender. You lender will pay that bill and get the refund from the previous company. Don't forget to cancel the old policy once the new one is in effect. That's the basic flow of things.

Ah, @Larry Fried you are so correct about that. My sense of humor doesn't always come through on paper as well? Sorry for the confusion. I did sign up for the webinar, it seems interesting.

Its typically $8-24 a month depending on how much contents coverage they have? It also gets them a couple dollar discount off their auto coverage when they bundle?

Farmers will do up to 20 properties on personal lines and Foremost has no limit on personal lines. Debunked!

@Tim Harvey You should be able to have the policy written as an owner occupied 2 unit. This would be the only policy you would need except for a personal lines umbrella. If ever you move out of that duplex and make it a rental, then you would switch the coverage on it to a landlord policy.

I would require the tenant to have renters insurance with a 500K min. liability coverage. You need to be listed as an additional insured and a certificate holder. This will protect you on their policy just as it protects them. It will also let you know if the policy were to terminate for any reason.

Virtually all the larger apartment complex's in the metro areas require their tenants to get renters insurance and list the company as a certificate holder. They do this because in the event of a liability claim, that tenant has coverage and it lessens the risk of that claim hitting the apartment owners policy and driving up their premiums.

As a landlord, I would require my tenants to have a renters policy with a min. of 500K in liability coverage. Liability is cheap, so going to 500K doesn't add that much? I would also require the tenant to list me as an additional insured and a certificate holder. As an additional insured, I would be covered just as they would be on the policy. That includes legal defense costs.

You can as the landlord, build the cost of the policy into the rents and require it in that way. You would be the payer of the policy and they would be the owner. If you do that, they would still have to agree to sign the application, but why wouldn't they, it covers their contents and gives them liability protection?

@Tony Castronovo You might try Foremost on their vacant policy. Tell the agent you will be doing a rehab and the scope of work. They will primarily be concerned with the shell of the home being made secure from weather and someone gaining access. So complete the exterior work 1st. Best of all, you can set this policy up on a monthly billing and they only have a $250.00 minimum earned premium, so just use the policy as long as you need it, or no more than $250.00 and then sell or change the policy to a landlord policy?

This policy will also give you liability, theft and vandalism where most builders risk policies wont offer those coverages. Also builders risk policies are fully earned premium, so no matter how long you have the policy, you wont get a refund of any of the premium.