Property Insurance Question for Investment Home in TN

[Jelani Bonner]

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

[Matt Leavell]

@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.