First multi family property

[Grant H.]

I am looking into a duplex in a major city in Texas that is listed for ~$300k and has total gross income of $3,100/month (so it meets the 1% rule). Tenants pay their own utilities, except owner covers water. Plan is to put 20% down and not to house hack it. At a 50% occupancy, the property still generates enough income to break-even on mortgage, taxes and insurance.

My biggest concern about this property is that it isn’t in the “best” part of town and I’m not very familiar with the insurance needed. How can I properly cover myself in the case that something drastic happens on my property? Is there a case that I could “never” actually be fully protected?

Also - I see multi family units being something I continue to purchase throughout my life. I have a goal of purchasing 3 within the next 12 months. I know that after a certain period of time, lenders will factor rental income into your back end debt-to-income ratio, but what happens if I max that out before hand? Is there a possibility of refinancing all the properties under a commercial loan to give myself more room to purchase rentals? 

[Jim Cummings]

@Grant H.. Find a local Insurance Agent you feel comfortable with. They can set you up with sufficient Insurance Coverage. You'll need to cover the building for at least 80% of the Insurance Company's estimate of the amount required to rebuild the dwelling if it was a total loss. Policy will also contain other provisions for injuries, etc. Don't necessarily accept the minimum as increased coverage will not drastically increase your costs. 

Also, consider getting an Umbrella Policy, $1-2 Million Coverage will cost probably less then $300  annually. 

Good Luck!