Property Taxes, Insurance, etc...for Investment.

[Account Closed]

Hi BP friends.

Super excited, just today I received my pre-qualification information from a lender. Although I wasn't particular worried about being approved, I am a bit shocked at the numbers. I'm wondering if anyone can help, it seems like I'm missing something.

I generally estimate pretty conservatively, but I've missed by a mile.

Property tax? Is the rate or tax different if its not your primary residence? Sorry if this is a complete rookie question. Are there exemptions to which you don't qualify for as an investor that make the property tax nearly double?

Same thing with Home Owners insurance, am I looking for that to be way off as well?

I'd be very excited to learn if there were any other catches I hadn't found involving fees or pricing. Also, if you could share any math, that'd be really helpful for my nerd side.

Thanks again, happy Tuesday.

[Dave Toelkes]

@Account Closed,

You don't say what you are using to estiamte your hazard insurance premium.  If you are using your own homeowner's insurance premium as a baseline, then you first need to recognize that a homeowner's insurance policy and a non-owner occupied investment property policy are not the same .  You cannot buy "homeowners insurance" for a rental property.  If you do and have a claim for your rental propertty, you won't be covered.

For your rental dwelling policies, you will want loss of rent and business liability coverage included.  The business liability coverage limit may also be much higher than you might consider for your primary residence insurance.  The policy limits may also be factors in setting your premium.  Lender's will want policy coverage high enough to cover the loan balance.  You may want coverage high enough to rebuild the property in the event of catastrophic loss.   The lender may also be using rates for a primate placement (high-risk) carrier as well.  A conversation with your insurance carrier will help you nail down the insurance cost for a rental property.

If you are comparing your owner-occupied property tax to the lender's estimate, then you also need to know that there are discounts available to owner occupants that you won't get as an investor.  Owner occupants typically have a "homestead" excemption that discounts the property tax from what would be charged for non-owner occupied property.  Senior citizen homeowners may also get an additional discount not available to non-owner occupied properties.  

You need to recognize that the lender's quotes for tax and insurance premiums are just estimates and may be overly conservative (high).  You need to do your own due diligence to get realistic numbers.