All Forum Posts by: Lindsey Leavitt

The houses aren't right in DP, although apparently when you put a zip code in innocently enough into the BiggerPockets profile, you can't change it again for a month! Ha, so I'm pinned down for now. The area had some damage from the storms, but it definitely wasn't the hardest hit by any means. And I was just throwing out that 6 months idea, I don't even think the policy does that. 

I do think it's funny, and nothing is meant by this in any way, that most of the replies from actual current rental owners said that it wasn't necessary. While those replies from people in other sectors said that it was absolutely something they would need. (and I can't tell everything from a BP profile, so I may be missing things). Just interesting to see and hear!

I'll leave the discussion at that. If anyone else wants to expand, feel free. But I'll stop hogging the space...for now! :)

@Tim Shin Well I'm glad you could see it with humor as well! And you're right, I had never really given it so much thought until all this anyways. It never hurts to carefully examine what you're being covered. 
Basically, I want what any investor wants: good coverage for cheap. Which is not exactly do-able. I was trying to cut costs where I thought it would be reasonable to cut. In fact, I'm not even sure how much the fair market value coverage is costing me on this new policy because I can't get a transparent answer. I like to see the sheet that explains each costs and where that cost comes from, instead of a big number with no explanation. I know these figures come out of somewhere, just let me see where. I think/know I am being a little bit neurotic over it, but I hate to feel like I'm being charged for stuff that I won't use (that applies to any kind of coverage, not just the fair rental value, which I'm sure if I keep the houses long enough, and plan to get more,I might use down the road). All in all, I must say, it's a little frustrating. This new company must looooove me, ha. That being said, I'm ok with the coverage left in there. It's not something that I'm going to cancel my policy over. I know that it can really help me in the long run. 

To answer your last question, I would definitely use the insurance to cover the house if there was a catastrophic event. That's why they are there. I just see so many people use their insurance to cover the littlest things, and it ends up costing them more in rising premiums in the long run. The way I see it, though, is that the fair rental value coverage is just a bonus that I was/am 'having' to pay for. Yes, I can see how it would help in a big event. But, if I really don't want it, why do I need to pay for it? Clear as mud now? Pretty much how I feel too. :)

What I'm now thinking would be ideal? A cheaper fair market value coverage for up to 6 months, not 12 months. 6 months I might use. 12 months probably (again, knock on wood) would be a very, very unlikely event. 

@Eric H. and @Tim Shin My replacement costs are right at the same price point as the worth of the home. This coverage does not factor in depreciation, which is good I guess. So my deductibles at 2% would roughly be $2100, $2300, $2300, and $3100. I definitely think checking in with the company to see if I can go higher on the deductible might be something to consider in my situation. As I said in an earlier message, we tend to take care of most repairs ourselves. (although I have gotten a practically free roof out of an older policy, so that was very nice! See, I'm not hating on insurance altogether! ha). 

Want to hear something funny/groan-worthy...I just found out that I am unable to remove the fair rental policy on 3 of the 4 the newer policies that I am considering (It was removable under another policy I was considering, but the one I'd prefer to go with, where fair rental coverage is fixed, has better basic coverage and liability). Which basically makes all of this back and forth pretty much meaningless (at the moment!). Grrrr. So it might be back to the drawing board. If anything, I learned a lot!! And hopefully someone else can benefit from this too. 

Thanks again to everyone chiming in. If there is anything I can ever do for any of y'all, let me know! 

@Tim Shin I didn't take any offense and that was one of the reasons I got a photo up! :)

@Derek Lacy Hmmm, you definitely bring up a good idea! That might work for my situation. Unless it was a really big expense, I try not to use our insurance and prefer to pay for the necessary repairs out of pocket. This helps me A. keep the rates down. And B, to simply not mess with it all, especially if there is any kind of inspection or waiting time that will increase the amount of time that the tenants have to deal with a problem. (I like to fancy myself a good landlord that actually cares about how the tenants feel in the house. Happy tenants, happy, cared-for house). So, in that case, that might be the way to go. Our deductible is at 2% now (agent only gave me 1 and 2% options, but I know I can ask for me). Again, thank you for taking the time to chime in! I'm going to put some real thought into this option (if it's possible with my insurance.)!

Maybe I can clarify a few things. @Eric H. no matter if I decide to go with it or not, you do bring up some good points. Again, I really appreciate your input and you taking the time. As you say, $66 or so/month is such a small fraction of my profit on the rentals. BUT, what I'll also say, that while both of us can come up with numbers and percentages of my profit, what we can't come up with is the actual probability that a house will be uninhabitable for a good amount of time (I'm talking 4-5+ months). If that does happen, then of course I would consider that insurance to be a really good thing. That being said, I highly doubt that any of my houses will be uninhabitable for more than 4 months or so at a given time. (This I realize is the gamble that all insurance companies/insured parties make and take). I must decide if saving $800 a year will help me should the unthinkable happen. Let's say I go another 4 years with no major incidents (knock on wood). In this time I will have saved $3200. This will cover me for 2.5 months rent in the case that one house becomes uninhabitable. Since we have good relations with our contractor and easy access to quick and quality workers, I think that this would be enough time to get the house in livable condition again. Obviously, the longer I go without major incident, the more I can save to cover myself in case something happens. As I've read on here, many investment property owners have gone their whole career without a unit/house being inhabitable. While others have had a hard time even getting this out of their insurance. With that being said, I should also note that I already have money set aside for each rent house for any large expense that needs taken care of. And, what I would most likely do is reinvest this saved money and make it work for me in what I currently see to be a better way. Hopefully that will clarify my original questioning of the policy and makes sense to you and anyone else interested in this topic. I'm still not sold 100% on leaving it out, but I guess I should be by Monday when I chat with my agent. 

And @Roy N., thank you again for your side and input as well. It's really helpful to hear from someone who has been successful and has been doing this for so many year. And shout out to the Canadians. I married one and my son is half one, good people :) 

@Tim Shin Same to you! 
@Eric H. It definitely helps to see it spelled out in different ways. You putting the cost per month like that makes it look like a smarter decision. Something to consider for sure! Thank you for that! (Even if you are in insurance, and maybe a little 'biased', haha. No, I was looking for advice from all walks!)

@Roy N. Again, thank you! 

@Roy N. What a great way to think about it! If we ever need to finance a house or two in the future, then I would definitely include this coverage. At least, like you said, until you recover a good portion back from it. Thanks! 

@Tim Shin Don't get me wrong, I know it's a gamble. And I feel that me just saying this is pressing my luck on the matter. The fact is, that over the last 4 years we have owned the houses, they have never been inhabitable. My family owns several more rental houses, and even with several flooding issues, they have never been uninhabitable. I know we've been lucky, but I think this time I will take my chances. (and if it comes back to bite me in the butt, then I will confess up here as a warning to others!). 

I do actually really appreciate your concern. If anything, it may be able to help steer someone else in that direction. 

And @Jim Adrian, your last response is my train of thought as well. My model is able to cover losses in case something happened to one of my houses. We set aside enough for each house for a worst case scenario. Like others have said and you pointed to, it has to be a gamble that I feel comfortable with. Appreciate it!