Nashville, TN · Member since 2015 · 4 posts · 0 votes
Hi everyone! Newly married couple moving to Tennessee who is buying a single-family home that the previous owner converted into a Triplex. It is zoned single family, has one meter for the whole house but is divided as a 3/1, 1/1, and 1/1. We are going to be owning this place living in the 1/1 while renting out the 3/1 and the other 1/1.
The question is: How should this property be insured? We want to make sure it is properly covered.
Any feedback on how it should be treated or insured or any good insurance contacts in TN would be appreciated.
Thank you!
Kelly
Involved In Real Estate · Nashville, TN · Member since 2014 · 70 posts · 26 votes
10y
@Christopher B. made some excellent points in his comment. The insurance company will certainly write a policy and accept your monies, but will they pay out if there is an issue. Most of the time, the situation described will be outlined as not covered in the fine print and you are out of luck, but it is a risk that you can choose to take or not.
If the city did catch you and you were violating a code, then they could either make you update the building or would have to kick out several tenants. I am not sure whether it would be an either/or situation or if they would dictate what you would have to do, but I am sure if they tried to dictate, then you could hire an attorney and probably succeed with simply kicking out tenants instead of updating to code for multi-family; although, they may identify work that was done that did not have a permit pulled while they were in the home and then they could certainly make you fix that or not provide a certificate of occupancy until you have.
Either situation, your investment has not only been hurt, it has been decimated. NOW, this could still be a good investment if you get it for cheap enough that this risk is accounted for in the purchase price, but most likely the investor will not sell it to you for that. It is worth a try, but there is a lot of risk that you would be undertaking with this investment from what you have said.
Insurance Agent · Beaver Falls, PA · Member since 2016 · 126 posts · 84 votes
10y
Hi Kelly,
With a lot of companies in this situation, as long as you are living in one part of the three family property, you can insure on a standard homeowner's policy. Your Agent would just indicate that it is a multi-family dwelling with owner occupency. I am licensed in TN if you would like to message me directly for more information.
Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes
10y
I live in a duplex and my insurance is set-up how Casey described. It's currently with Farm Bureau Ins.. One concern off-hand I have for you is the sub-dividing of the property. Is there just one 200amp service panel for the 3 units on this property? Enough water pressure if you only have 1 water main? Allocating then collecting the utilities bills is going to be a pain with 1 meter on 3 properties as well. Just a few things to consider.
Involved In Real Estate · Nashville, TN · Member since 2014 · 70 posts · 26 votes
10y
I am not an insurance agent by any means, but I would think that an insurance company would not want to insure the property if it is zoned for single-family.
Also, depending on the county that you are looking to move to, you could possibly run into a code violation. For example, in Davidson County, you can not have any more than 3 unrelated people living in the same home. If a neighbor got mad and reported you to the zoning committee, your investment could turn into a nightmare pretty quick. Just a couple thoughts to ponder.
Nashville, TN · Member since 2015 · 4 posts · 0 votes
10y
@Christopher B. Thanks for the insight, definitely new to this. Does your insurance policy have a specific name? Right now it is all one meter. I think for right now we will assume the bills overall for that.
@Matt Leavell thats a good point about the code violations. Do you think there is anyway the insurance company would write this? What is the worst situation possible that would happen if it was to be reported?
@Christopher B. Thanks for the insight, definitely new to this. Does your insurance policy have a specific name? Right now it is all one meter. I think for right now we will assume the bills overall for that.
@Matt Leavell thats a good point about the code violations. Do you think there is anyway the insurance company would write this? What is the worst situation possible that would happen if it was to be reported?
Jelani, I would inspect this property further. Everything being on one meter likely means the subdividing of the house was not done to code. If isn't done to code and someone reported you like Matt mentioned, they, as in the local gov't, can come-out and have you update the property to code. It's their game at that point and your hands will be tied.
An insurance company will write virtually any policy, the main question is will they pay it if a claim is made? If someone burns your house down because you do not have 1hr fire separation walls between each unit will the insurance company pay to build you a new one when their investigator learns that your property wasn't to code or recognized as a legal multi-family property by your local gov't? They may but are you comfortable with taking the risk they may not?
I'd look into implementing RUBS if you don't subdivide utilities. I don't have a special insurance policy outside of the fact they recognize and cover the additional dwelling unit.
Involved In Real Estate · Nashville, TN · Member since 2014 · 70 posts · 26 votes
10y
@Christopher B. made some excellent points in his comment. The insurance company will certainly write a policy and accept your monies, but will they pay out if there is an issue. Most of the time, the situation described will be outlined as not covered in the fine print and you are out of luck, but it is a risk that you can choose to take or not.
If the city did catch you and you were violating a code, then they could either make you update the building or would have to kick out several tenants. I am not sure whether it would be an either/or situation or if they would dictate what you would have to do, but I am sure if they tried to dictate, then you could hire an attorney and probably succeed with simply kicking out tenants instead of updating to code for multi-family; although, they may identify work that was done that did not have a permit pulled while they were in the home and then they could certainly make you fix that or not provide a certificate of occupancy until you have.
Either situation, your investment has not only been hurt, it has been decimated. NOW, this could still be a good investment if you get it for cheap enough that this risk is accounted for in the purchase price, but most likely the investor will not sell it to you for that. It is worth a try, but there is a lot of risk that you would be undertaking with this investment from what you have said.