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How Is Your Rental Property Insured?

Many times when an investor is considering the purchase of a rental property, they look to the typical financial metrics such as cap rate, occupancy rate, square footage, occupancy, etc. All of these are great measurement tools in the evaluation of a purchase. But while the property is being evaluated, don’t forget to ask about the insurance questions as well.

The ability to obtain cost-effective insurance along with the appropriate coverage for the owner as well as the lender can have an equal effect on your bottom line. Listed below are some of the areas of concern as well as the questions to ask:

1. Has the property had any claims, both for property or liability issues? Claims happen, that’s what the insurance is for. Find out when the claim happened and what was paid.

Were all the repairs made from the damage? A good insurance agent can help you obtain this information from the prior carrier.
Were there any liability claims, what happened, what has been done to prevent further claims?

2. Have there been any updates to the property? What is the age of the roof; have there been any electrical or HVAC updates? While it is rare for a property owner to completely gut and rehab, there may have been some moderate updates.

When was the roof replaced?
Has the current owner changed out any electrical boxes? HVAC systems?
If you have not owned the property long, did the previous owner do any updates?

3. Occupancy or future plans

If the investment property has serious occupancy or existing deferred maintenance conditions; let your new insurance agent know what you will be doing to improve these conditions.
Provide a list of repairs that are planned and the timetable. Provide your marketing program to increase the occupancy.

The above questions always seem to be the hardest to obtain, probably because the answers have to come from the seller who a buyer may not have direct access to. This is a great time for the listing realtor to be of considerable help. There are many other basic questions in insuring a property, most of which can be answered by the real estate agent assisting you in this transaction. I would also suggest getting advice from a professional property manager such as TierOne Real Estate.

If you have a question about this topic or need assistance with anything else, contact a TierOne Real Estate Property Manager at 801-486-6200 or use the form to the right – we are here to help you with your rental/investment property whether you are a current client or one in the making.

Licensed with the Utah Division of Real Estate