Insurance on an investment home that we're going to re-sell

kudzu9April 22, 2011

We have been looking at investing with another couple and a realtor friend in a repo being offered by a local bank. The price seems right (well under market), and houses in this area and price range are moving, so I don't need investment advice. However, I do have a question about insuring it after purchase while it is on the market. We will be doing some minor cosmetic stuff, but then the house will be vacant while on the market, probably just 1-3 months. How do we proceed with insuring this property while we are in the process of re-selling it...a regular homeowners policy, or is there special insurance for an investment situation like this? I am aware that homeowners insurance can lapse on an unoccupied property, but the house is just 15 minutes away so it is easy to check it several times a week.

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The best thing to do is to speak with your insurance agent. Unfortunately, the insurance company will not care if you live close by. From their perspective, an unoccupied home is always a higher risk. The insurance will be substantially higher than what you pay on your own home.

    Bookmark   April 22, 2011 at 8:28AM
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"The insurance will be substantially higher than what you pay on your own home."

Maybe not since there are no contents to insure.

Landlord policies only insure the structure, generally against fire and other 'exterior' hazards and some liability coverage for the landlord, but not the renters.

    Bookmark   April 22, 2011 at 9:27AM
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I know you're asking for information on insurance, but I wanted to make you aware that if the property is in an area where buyers would normally use FHA mortgages to purchase homes, there are restrictions on properties owned by sellers for a short period of time. Some lenders are not even as liberal as FHA and require the time frame to be owned by sellers for at least 180 days.

You can read more below, if this could pertain to your situation.

Here is a link that might be useful: FHA Guidelines

    Bookmark   April 22, 2011 at 12:28PM
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Vacant home insurance can be very expensive. We initially had to insure with Lloyds of London due to some missing siding on the side of the house. We were turned down by State Farm & Allstate. Later we switched to Liberty Mutual for Vacant Home insurance and it was about 1/2 the price of Lloyds.

    Bookmark   April 23, 2011 at 12:31PM
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You may also need a construction rider.

    Bookmark   April 23, 2011 at 1:02PM
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Sue, what's a construction rider?

    Bookmark   April 23, 2011 at 10:27PM
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If the house is fit for occupancy but vacant, you should have little trouble getting insurance. You will likely have some sticker shock at the policy price, but hopefully you'll just have to pay it a couple of months. You existing agent should be able to give you a quote.

If the house requires more than just some cosmetic work or is really old, insurance can get substantially more complicated. We bought a 100 year old house to renovate and lived elsewhere for several months. It took a bit of legwork to find a company that would issue a policy and they charged us an arm and a leg.

    Bookmark   April 25, 2011 at 3:35PM
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Thanks everyone for your input. I did finally talk with my regular insurance agent, and got a quote. Coverage is available and it costs about 4-5 times what it would for my regular policy on the house I occupy. And that's on a ten-year-old house, move-in ready condition, in a good fire district. The quote process was pretty interesting, including answering questions like: Have you been convicted of arson in the last 20 years?

    Bookmark   April 26, 2011 at 2:17AM
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