Property Insurance resources?

Question

Hi everyone, I am new here and new to RE investing.

I intend to buy and hold turnkey single & multi-family rental homes.  I am still trying to learn all I can before pulling the trigger on my 1st purchase.

One thing I don't seem to find much good info on is insurance.

I do plan on placing each of my properties in an LLC.

What kind of insurance should I get?  I read about mortgage insurance, landlord insurance, hazard insurance, homeowners insurance with and without umbrella policies, replacement costs, etc.  It's all rather confusing.

What sort of insurance coverage do I need?  How much can I reasonably budget for insurance costs?

If anyone could just point me to a good book or other resource that explains all the different types and pros/cons of insurance for buy&hold rental landlords I would be very appreciative.

Thanks in advance!

Rob K. · Answer

Stan Butler My policy is through SWBC in San Antonio, but they are backed by Lloyds of London. I purchased it through a local insurance broker. You could call SWBC directly or call a local agent and look into the policy

Tim Norris · Answer

Bienes' post is correct regarding the cost increase between insurance for LLCs and personally-owned properties--when dealing with the "traditional" insurance markets.  However, there are programs and policies available that do not factor the ownership into the cost calculation.  By the way, it shouldn't as "the risk is the risk" regardless of who owns it.  That stated, I had written this piece a few years ago to address some of the insurance "basics" for a new investor:  http://www.nreinsurance.com/RE-Insurance-Issues.pdf

Hope it helps.

Tim

Rob K. · Answer

Scott W. I don't think my policy changes much between vacant or occupied. I get one bill each month and all of the houses are on the same policy. It doesn't fluctuate much.

When I had individual policies on each property, the vacant coverage was a lot more expensive.

Mark Yuschak · Answer

Like Rob K, I use the exact same insurance company.  In fact, we likely even share the same agent.

They have also reminded me of the importance of switching between the vacant and occupied statuses.

Steve Babiak · Answer

Stan Butler - see the link in Tim Norris sig area for such a vendor ...

Stan Butler · Answer

Rob K, is it taboo to ask what insurance provider you are using??  I am in a similar position to where you were in that I have a bunch of SFR rental properties with their own policies.  I would love to combine into a single policy and add and remove properties that I flip.

Mark Spivey · Answer

That is an absolutely awesome document.  Thank you very much, I've just saved it.

Bienes Raices · Answer

Tim Norris

Thanks, I'm going to read your article.

Bienes Raices · Answer

(None of this is legal advice, just my experience.)

Before spending time and money forming LLCs, I would speak to at least a couple of insurance agents in Phoenix (or wherever you plan to invest) to find out their carriers' rules for insuring LLCs.

For example, in my area, the premiums for insuring an LLC are about twice as much as for insuring under your own name. And as you probably know you will need to have more than one LLC if you plan on buying more than one or two properties, unless you are able to consistently strip out all or most of the equity in the properties through loans, etc. so that creditors have nothing to come after. But it's hard to get new loans once the properties are already in an LLC.

Also check if the carriers will insure an LLC with more than one member. I've been told by at least two agents in my area that none of the ones here will. Also I had to sign a statement that the LLC being insured was being used for for financial planning purposes only and would be engaged in any other businesses besides owning the rental house. And check if they will allow more than one property per LLC.

After you have done all this, add up the costs of a registered agent, annual filing fees, etc. and see if it is still worth it to you. I know that some people will say that you must have all properties LLC'd but you must also weigh the costs and benefits.

Mark Spivey · Answer

Thanks for all your responses!

I've requested my free book and hopefully it will soon find its way to my front door.

Property Insurance resources?

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