Property Taxes and Property Insurance

[Brady Boyer]

I am currently working on trying to become better at analyzing deals (essentially get more accurate inputs so my output coming out of the calculator is more accurate). I had a couple quick question for you investors.  

1.) Are property tax rates different (higher) on an investment property than on your primary residence?

2.) Should I budget for property taxes to be higher than what the previous owner is showing on their pro forma assuming I am buying the property at a higher price than the current assed value listed by the county?

3.) Is it generally more expensive to insure an investment property than a primary residence?

4.) Would the homeowners insurance cover any damage caused by tenants? (For example if I have to evict them and they knock down walls etc.)

Thanks for any help you can provide!

[Jason Bott]

@Brady Boyer Vandalism/damage by tenants is excluded on most rental property policies, but it can be added on.  The next natural question is, would you file that claim?  If so, then carry the coverage.  But if you will be carrying a $5,000-$10,000 deductible, save the $ and don't buy the coverage.

Insurance policies are based on a set rate per $100 of building value.  Many investors make the mistake of thinking the insurance for a $50k 2 family will be the same as a $150k 2 family.  You are insuring 3x the value on the $150k duplex, there fore the premium will probably be 2-3x's the cost.

To estimate properly, have 1 property quoted out in the zip code you are looking by your agent.  Use that estimate as the baseline cost. 

If we use the above example, you have a duplex you quote @ $100k, and the annual cost is $500.  A $50k duplex premium will be around $250-$300, while the $150k will be $700-$750.