Welcome to “Tarl's Weekly Insights," my take on real estate today.
Hey there,
Welcome to Tarl’s Weekly Insights, my take on real estate today.
In these newsletters, we'll dive deep into the real estate world, share valuable investment strategies, and explore the craziness that life has thrown my way. Whether it's my struggle and journey of overcoming flipping, deciphering the insanity of the market, successful strategies being used in REI, or just me making fun of social media real estate investors.
I can't wait to share it all with you...
Join me LIVE tonight, January 18th at 6:00 PM (EST), as I will be hosting a FREE webinar on the Future of Flipping in 2024, including the fundamentals of what you need to succeed in your business today.
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When to file an insurance claim and when not to...
Insurance is an interesting and sometimes challenging topic when it comes to real estate investing. Many newer investors have yet to experience the complications of having to navigate insurance on multiple flips, or deal with types of coverage options on a large portfolio of properties as rentals.
I have always been an advocate of getting insurance on all my rehab projects (typically known as builders risk policies) and then converting into a landlord policy once construction is complete and if I keep it as a rental. I have some friends who have determined that insurance is a waste of money when doing rehabs, and that over time it is better to not get the insurance and save the money. Personally, I cannot stand the thought of finding out a house of mine burnt down and then realizing I don't have insurance...peace of mind is worth the cost to me.
YET! When do you actually file an insurance claim and use the insurance? Especially when you have a builders risk policy during rehab? This is something that has come up time and time again in my career.
Let's say that you just finished up a property and you put it on the market as a flip. While on the market, someone decides to break into the house, steal all the appliances, cause damage to the property; damage cabinets and floors, etc.
The total amount to replace the appliances are repair the damage amounts to $7000! In addition to that cost, you lose time on the market. What do you do? If you have a builders risk policy, chances are your damages/appliances are covered BUT you probably have a $5000 deductible if not more. Do you file the claim and get $2000 back? Personally, time and time again, I DO NOT file the claim. Why? It sucks, but the biggest reason is fear of getting my policy dropped. It happens all the time. (PS This scenario has happened more than once to me, and the picture provided was one of my houses).
In 2019 I received a text message from my team asking "Hey where is the insurance policy on 123 Street?" Now keep in mind, NO ONE on my team has EVER asked me about our insurance on properties up to that point in my entire career. It is something I always handled on my own. So for my team to ask...something was up!
Come to find out, a project we were fully underway on, decided to spontaneously combust when a squatter poured gasoline in the living room and set the place on fire (it was believed this was due to my GC constantly kicking squatters out aggressively). Fun! Everyone on the team was upset. I was personally just hoping I paid my insurance on this property.
Once I realized we DID have insurance, we of course filed the claim. In about 45 days, I received a check for $350,000 as a full loss on the project. Yay!
Yet...two weeks after receiving that $350k check, I received a notice that my insurance company was canceling ALL my policies on ALL my projects (12 at that time).
That sucked! Insurance, believe it or not, tends to punish you when you actually use it. The fact that we had a total loss claim, increased my pricing on new insurance with new companies.
Very recently, two weeks ago, we had another break-in on a property we had on the market. This house we had owned for over two years as a rental, which means we had a landlord policy on it. $3500 worth of appliances were stolen, along with $3,000 of our furniture, and about $1500 in damages. Our deductible was $1000 on this one, and since we have a clean record with this company, we decided to file a claim and get reimbursed. Simple!
Ultimately what I have found is that landlord policies are a lot more forgiving than builders risk policies when it comes to filing claims. I will still get policies on all my rehab projects...but chances are I will only file claims on total losses, and eat the costs of break-ins and vandalism as part of doing this business.
Let's stay connected! Find me on social media at @tarlyarber and stay updated with additional videos and content.
That's it for this edition of Tarl's Weekly Insights! Stay tuned for more each week!
Talk Soon,
Tarl Yarber