Rental Basics in 55124>Question Details

LDEXTER, Real Estate Pro in 55378

Investment Property Property Insurance question. I am going to be purchasing an investment property to rent out, can anyone give me a approximation on

Asked by LDEXTER, 55378 Thu Jan 13, 2011

how much more or less landlord policies are versus regular home owner policies? I am looking at a single family home, purchase price around $135K. Thanks for any help!

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9
Nate Gerard’s answer
Hi Leah,

I'm a bit late but I thought I would answer. Firstly, try using the same insurance agent who you use for your current home and auto. There are discounts available and also you can use the overall value of what is covered to get a better deal. At the same time, I would shop around to confirm if your agent is giving a good deal. Get an inspection since there may be problems that would cause your insurance company not to cover the home.

My three properties are all in the $200K range and cost less than $100 per month to insure except the town home where the Association dues are $130 per month. This does cover exterior items (plus non insurance benefits like maintenance). On that property I also have an HO6 policy to cover the massive $5,000 deductible plus interior items that are a part of the building. My renters all have renter's insurance as well.

Remember though that insurance is also about protection so you also want to be sure you have a section in your lease that addresses liability. That will at least provide some protection if a tenant wants to sue you. Depending on your net worth, you may want to consider an umbrella policy. It's cheap insurance and can cover you if someone does successfully sue you.

Finally, many investors buy using an LLC, which is very easy to get set up and does provide some protection as well. Others put their properties in a land trust named after the county where it's located. Most ambulance chasers who work on contingency won't spend a lot of time trying to figure out if you're worth enough to sue. If they don't find anything right away, they may tell your tenant they need a retainer before they'll dig any further. This will eliminate most people since they won't have the cash to pay a lawyer for their time.

If you want to see my leases, I'm happy to share them with you. Email me at: nategerard@kw.com or call 612-849-9079.

Good Luck!
0 votes Thank Flag Link Tue Feb 8, 2011
Hi Leah!
When my husband and I were purchasing our first investment property, I asked our agent what the difference would be on our own home. We were planning to purchase nearby so that helped. They generally will not be able to tell you until you have an address, but that is true with a new home as well.
Feel free to call or email with any other questions!
Brenda
0 votes Thank Flag Link Fri Jan 14, 2011
Hi, Leah!
Insurance agents should be able to help you with this better than real estate agents. I have a few people that I know would be willing to talk ball park figures. Contact me if you want their contact info. Good luck!
0 votes Thank Flag Link Thu Jan 13, 2011
Usually less, by about 30% in my experience. As an example: I had an Owner recently list his home as a rental and his insurance went from about $1,400 to just under $1,000. However, this is indicative of the area and the fact that your material possessions will no longer be covered. Make sure you specify in your Lease to your new tenants that insurance on their belongings will not be covered and that they would be required to take out a Renters Policy if they desire coverage.

Hope this gives you your ballpark.

Corey Buck Mann
Buck & Buck Inc., Realtors
coreymann@aol.com
0 votes Thank Flag Link Thu Jan 13, 2011
Update to my original question...I have tried contacting insurance agents but they need an address to give a quote which I don't have yet since I am still looking...I just want a ballpark idea, is it usually more or less than principal residence? Any ideas? Thanks.
0 votes Thank Flag Link Thu Jan 13, 2011
Consider contacting a few local insurance companies and ask for free estimates based on your needs, then choose the insurance product that best suits those needs...
0 votes Thank Flag Link Thu Jan 13, 2011
Leah, you should definitely call an insurance agent, also make sure your renter knows to buy renters insurance. I don't think you can force them to buy it, but you should strongly recommend that they do. If you need help with renting out your place, let me know, as I manage 35 properties, and we are always looking for more. Thanks.
0 votes Thank Flag Link Thu Jan 13, 2011
It's true, your insurance agent is the one to help you with this one. I can tell you that having insurance on your property is a major necessity.
0 votes Thank Flag Link Thu Jan 13, 2011
Hi Leah,

The obvious answer is to call your insurance agent. The pricing will probably depend a lot on what coverages you choose.

I wrote an article about my recent investment rental purchases in Rosemount and Apple Valley. Since those are townhouses they are covered by the homeowner association but I am also purchasint supplemental landlord insurance to cover the gaps in the HOA coverage and any liability claims. I can tell you those are $100 per year and carries $1M in liability protection.

You can read about my investment story here - http://www.dakotacountyproperties.com/want-8-returns-investm…

Let me know if you need any assistance identifying properties here in Dakota County.

Bill Wallace
RE/MAX Results - Apple Valley
bill.wallace@results.net, 651-338-0355
0 votes Thank Flag Link Thu Jan 13, 2011
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