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Friday, June 28, 2013

Insurance for Real Estate Investors

Distressed Property Insurance

As our group started out as specialists in distressed properties, one of the problems we came across was insurance coverage for asset and worker protection. We thought if the Bank won't insure it, no one else will. But let’s look at it from the Lenders point of view.

167 Street Living Room Unit 2 Rehab Duplex
Why would you Insure this Property?

Investors always preach, leverage someone else's money not yours. That's true but Lenders are taking a risk. What happens if an injury occurred on the property or the asset burns down? The Lender is either stuck with court costs, fines, hospital bills or his money is gone due to the lack of insurance. So FYI...Lenders are going to make you insure the property. We rather get our own policy than make forced payments to the Lender's insurance policy.

Depending on your exit strategy, you will eventually need some type of insurance.

Front View 1184 Rehab Duplex
Would You Insure This Property?

Below is an outline of some of the coverage’s we implemented while bringing properties back online:

Types of Insurance Coverage or Services

  • Builders Risk Renovation Policy - Provides coverage that protects a person's or company's interest in materials, supplies and equipment used in the rehab or construction of an asset should these items become lost or damaged.
  • Liability Insurance - It protects the property owner in the event he or she is sued for claims that come within property boundaries. The policy is designed to offer protection against third-party insurance claims, like contracted workers or tenants.
  • Windstorm - Most policies issued today DO NOT cover damage from high winds. It is very difficult to get a windstorm rider due to the size of the deducible, ranges from 10K to 15K.
  • Flood - Damaged caused by rising water. Broken pipe or hoses causes damage to interior of unit or building. Flooding caused by storm surge.
  • Fire, Theft and Vandalism - During rehab you can expect one of these three items to occur. Are you protected from these likely events?
  • Insurance Loss Consultants - Provides Claims Representation to Policyholders. If you experience an event that financial hardship will occur, the insurance company is going to use every resource available to limit the payout amount and the policyholder is expecting the repairs to be done with no out-of-pocket expense, including the deductible. Insurance Loss Consultants make sure that the investor receives the largest benefit to which they are entitled under the insurance policy.
  • 4 Point Inspection is required if an investment property that your company or contractor is restoring is older than 30 years or being refinanced. Insurance companies will want to check the following four systems before issuing a Homeowners policy:
    • Roof
    • HVAC - Heat, Ventilation and Air Conditioning
    • Electrical
    • Plumbing
  • Our Contacts - These are companies that specialize in issuing policies that are going to protect you against the hazards of being a real estate investor.

In the beginning of the rehab depending on your exit strategy, insurance might not be needed but you will eventually. Remember, any property has value even if you can't see it. Are you prepared to lose that value if you don't insure it?

Related Links, Blog Postings, Presentations or Articles:

Written by Bob Burns.
 
####
 
Bob Burns at MREIAs speaker podium.So Raise Your Glass!
Bob Burns Print Signature Photo
+Real Estate Investor
about.me/RobertKBurns
Telephone #: 305-586-5280
sec8@planocho.com

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Monday, June 10, 2013

Cleaning & Securing an Investment Property Adds Value


As soon as we close on an Investment Property, we want to implement our Exit Strategy. The faster you get this distressed investment property back on-line the less money you are losing due to holding costs and the quicker the asset will cash flow. Every step we implement adds value to the property.

The first part of bringing the property back on-line is to Clean and Secure the property. This adds the most value to the property with minimum overhead. Below is an outline that describes the basic process of cleaning and securing a real estate investment property. By the way, most of these steps you can do it yourself.

Clean and Secure Process

  • Removal of debris from Interior & Exterior of House - If the investment property has been abandoned or on the market for a while, chances are there has been a buildup of debris and the property was broken into and trashed. The property becomes an eyesore and the city is just waiting to pounce on the new owner.
    • Dumpster container picture from Ocala property.
      Dumpster for Debris
    • Order a Dumpster - Depending on the amount of debris, you may have to order a dumpster. Delivery and removal are handled by the Dumpster Company. You just pile in the debris.
      • Can be very expensive.
      • Neighbors will help themselves by using your dumpster to pile in their debris.
      • Permit Fee is built into the price. The City keeps track.
        • Suddenly, city inspectors will begin to show up to see what you are up to and do you have the proper permits.
      • Neighbors can see the dumpster on the premises. They will report you to the City.
    • Finish cleaning and get rid of the dumpster as soon as possible. Less attention.
  • Recycle Materials - Every house contains items that you can recycle and receive money for these items. We are serious! You can start pulling cash out of the property right away.
    • eBay - You can place in eBay's Classifieds an ad selling items you found inside the property. It Works!
    • Metals - based on cost per pound.
      • Non-Ferrous - You know the metal that doesn't let a magnet stick to it.
        • Copper, Brass, Aluminum, Lead, Tin, Nickel, Gold, Silver
        • A/C Coils, Radiators, Batteries, Pots, Stainless Steel, Motors, Transmissions, Bathroom Fixtures, Electrical Wire.
      • Scrap - Less money. Pull wiring and motors off of appliances and recycle them separately.
        • Iron, Steel, Sheet Metal, Rebar
        • Old Appliances, Water Heaters, Non-Copper Pipes
        • Dryer & Stove Electrical Wiring
          • Three prong cords - Found on ranges and dryers.
  • Make sure all access points are secure
    • Doors with locks
      • Locksmith - You made need one if you are not handy with installation
    • Windows are covered with wood, rejas (metal bars) or original window.
      • If glass is cracked or missing must board whole window.
      • Board on window must be painted & uniform with other boarded windows.
      • If there are iron bars on the bedroom windows, they must have breakaways. Minimum size 20 x 41 inches.
      • If all windows are boarded, air holes must be drilled into plywood to provide ventilation.
      • Independent Securing Service - If you don't want to board up your property by yourself.
    • Secure your Outside Water Access - People will steal your water, especially if your neighbors have well water and you are connected to the City Water System.
  • Landscaping

By cleaning and securing the property you are adding value to your property right away, preventing break-ins, getting the city off your back and who knows, sell it as is to another investor for a nice profit!

Written by

Related Links, Blog Postings, Presentations or Articles:

Written by +Bob Burns.
 
####
 
Bob Burns at MREIAs speaker podium.Clean and Secure!
Bob Burns Print Signature Photo
+Real Estate Investor
about.me/RobertKBurns
Telephone #: 305-586-5280
email: sec8@planocho.com

Follow US Baby!

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