All Forum Posts by: Kevin Romines

Talk with your insurance agent about the difference between the home owners policy and a landlord policy. If it were me I would also require your renters to have renters insurance and list you as an additional insured /certificate holder on that policy. This will give you the same coverages they would have on that policy from a liability stand point and it would give you notice if the policy ever cancels, lapses or terminates in any way. You really need to have this in place.

You really need to talk with your insurance agent. you wouldnt want to think you have coverage only to find out at claim time that maybe you don't? No insutance companies that I'm aware of will insure a structure with knob and tube. Even if you get that policy in the beginning, they can still deny the claim. This is a very serious issue, all knob and tube must be eliminated to get the coverage your going to want. This can be very costly to open up all the walls and essentially rewire the hole house including the panel. I have the unique experience of being an 11 year vet. of the electrical industry and an insurance agent for years as well.

Let me clear up a misconception that I have seen here.

Yes there is a 1 year time frame before you can take any conventional loan that was used as an owner occupied loan and then rent out the property. There are even extenuating circumstances that would allow that time frame to be less than 1 year. However if you took out any conventional / FHA or otherwise loan as owner occupied and paid it off before one year in the case of a refinance, and at that point you made it non-owner occupied, even though the original loan had a 1 year provision in it, you are well within your rights to do that. So if you planned that at as an exit strategy there is zero wrong with that. Totally legal!!!

18 year vet in the mortgage industry.

Now that said, if you took out an FHA 203K, (great loan by the way, but you need to fully understand it and get with a loan officer that does them regularly) you could plan to use that loan to buy below market properties, plan to live in them, rehab them and then roll that loan over into a Fannie Mae / Freddie Mac conventional loan with hopefully no mortgage insurance on the other side of the rehab. Now that's a set up just some of the house hackers have figured out. Be totally honest with your loan officer, they will actually help you do this over and over again, both of you smiling all the way to the bank!!!

As Jonathan Goedes has mentioned above. Sit down with your insurance agent and explain that you are building a partnership through this business and explain what you would like to see happen in certain situations. This typically leads to a "Key Man" type policy or other arrangements, but you need to take the time to spell that out in advance with experts in the industry.

Keep in mind, your partner dies in the middle of a great partnership, you haven't spelled in advance what the business will do in that event, now your in partnership with your partners wife, or other relatives or friends. You just don't see eye to eye but they have control over 50% of your business. Are you happy? Probably not, instead spell out all possible out comes.

Have a real conversation about what the founding partners want to have happen if that particular situation occurs and put it writing in the operating agreement and spend some time with your attorney, accountant and insurance agent. Get it nailed down. Its like a pre-nuptial, only in some cases much more important!!!

You need to think about the implications of the insurance on that car. If you have an at fault accident and the police officer notates that you were using it in the course of your business or if the insurance adjustor finds that out, in some cases they can deny the claim. Now your business is liable and your going to get sued.

Most standard auto policies can be business rated for not a lot more than the standard policy. However the coverage is limited to just what's on your personal lines auto policy and may not be enough. In a case such as that, you really might want to look into a commercial auto policy which has extensively more coverage available, also with much higher limits. You should also consider getting a general liability policy or an E&O policy for your business. If you are sued and if gets past your business, your personal wages and bank accounts can be garnished and will be. An injury judgment only goes away 1 way, you have to pay it. You cant file bankruptcy or even close your business in some cases and make it go away. You have to get coverage!!!

Everybody here has given great advice. I would get a landlord policy. For our company they tend to be less expensive because they don't have near as much personal contents coverage as a home owners policy. Keep in mind on a landlord policy, the personal contents is typically appliances. So 4-6000 is common whereas a homeowners policy could be several hundred thousands in contents. I would make it a requirement of your tenants to carry renters insurance policies and you need to be listed as an additional insured / certificate holder. If they have their own policy and some form of liability comes up, their policy is 1st line of defense and yours is secondary. You don't want claims (especially large claims) on your record, this will help prevent this. It also gives them coverage that they will need. If your property burns down, your policy will pay you loss of rents and expenses. If they don't have one, not only did they lose everything, they also must pay to move somewhere else. A renters policy has loss of use on there for $2-20,000 which will help them pay to relocate. For the $8-20.00 a month it could cost them, its well worth it.

By being an additional insured, it protects you in the same way it protects them on the policy as far as liability goes. It also pays the legal defense costs. Everyone knows a fight in court only produces the attorneys as the winners and is actually very costly to the parties paying the bills. In this case the insurance company pays that. Being a certificate holder means that you will get a notice if the policy ever lapses or is terminated for any reason.

All apartment buildings in the metro areas require this of their tenants. There is a reason why.

As an 18 year vet in the mortgage industry, I would never under any circumstances close a deal where title is transferring without a title insurance policy. Its just that, an insurance policy that basically will show you the liens and conditions against title and if they miss anything, all the risk has transferred to them, thereby they are obligated to defend it and make it as their title policy shows it. There could be thousands of dollars coming from any direction, you cant take the chance. A few years ago with the mortgage meltdown and all the foreclosures, there were issues with robo-signings. Thereby leading to issues of rightful ownership. To take that kind of chance is penny wise and pound foolish.

It doesn't sound like this would be the case based on the work that you described, but if he or any other contractor you ever work with decides to use sub-contractors, you must also check to be sure the subs are insured at the same level as the general. You must also get lien waivers signed off by all contractors and subs for sections of work they have completed. If you don't, they can come back an place liens on the home / project and sue you even if you had paid the general contractor.

I saw this happen to a friend of mine years ago when he was building a gas station convenience store / fast food drive through. The general ran off with the money, stiffed the subs and the subs placed liens on the property and in the end it took my friend and the store he owned for years, down. He lost it all. Be careful.

You do want to be listed as an additional insured on their policies and get the certs. Call the state and the bond companies as well as the insurance company. Make sure that your own policy will cover these types of potential liabilities? A builders risk policy is purely structure and contents coverage, generally no liability coverage. I would assume you don't have a builders risk policy on this property, but spend some time with your agent and get familiar with the differences and get the policy and endorsements you should have?

Keep in mind that you are technically an employer, so a workers comp policy needs to be in place by the contractors, if not, your now responsible as the employer.

A few of you guys mentioned renters insurance. I would make it a habit of requiring all renters to have this and list you as an additional insured. The 1st reason is that if they have no renters insurance and they have a liability claim, they and you will get sued. Who has the coverage at that point, you the home owner. However if they have renters insurance, then their policy is 1st in line to cover the expense and legal defense. Your policy would then be considered secondary. This could save claims against your policy. The renters insurance policies in our area tend to run $8-20.00 a month depending on how much contents coverage they have? Very inexpensive insurance for the coverages that a person gets on those policies and it also gives them discounts on their other policies, such as their auto policies.  Just no good reason in the world to not have one. All apartments in the metro areas require them, you should too.

I would talk to your agent? If you have a loss of rents due to a covered loss (fire) your policy should have coverage on it to cover this? Keep in mind that a claim tends to stay on your record for 3-5 years depending on the company and can affect your rates on your policies. Weigh out if it is better to take care things yourself or potentially see an increase in your premiums for the next 3-5 years. If you were making a claim for the fire anyway, then you were already headed down that path, just make sure the insurance adjuster agrees that the home is temp. not inhabitable due to the lack of air conditioning so that you do get the loss of rents, and extra expenses.