Insurance...

How much on avg should I factor into my cash flow chart for paying annual insurance for homes? is there a simple way to get an avg using a % or is it more complicated then that.

It varies from state to state/area to area. What costs $50.00 per month here in my state will run you $250 in So Florida for the same coverage. Last time I purchased, I used one off the web and had a dozen quotes in a few days. Google property insurance and you’ll have a pretty good selection.
Regards,
Dave

Ok just googled it and found hundreds of websites, i’m looking just for a good avg to factor into my spreadsheet…perhaps u can help me find a good website that you would recommend?

I’d use any that gave me several selections. You’ll have agents calling you chasing the deal and then you can pick their brain as to rates in your area. Let them educate you for free… :wink:
Regards,
Dave

jp,

Someone can correct me if I’m wrong, but that’s not really the way insurance works. I’ve never heard that the insurance in an area is a factor of the price of the house…there are hundreds of variables.

I was paying about $250-260 a year and then Katrina/Rita hit and the rate jumped to over $800 a year and only one carrier was writing policies. That’s about a $50 a month hit on cashflow…

Keith

oh yea I know there are a lot of factors to take into consideration, the reason I ask though is I am trying to build the most accurate cash flow analysis spreadsheet I can so I can screen through as many propertise as possible and if I have to get a quote for each home I am checking the flow out on it will severely slow down my productivity…

If you got an email i will send the spreadsheet over to you to tell me what you think

OK, here’s my standard lecture on Insurance. The first thing to understand is it’s based on the law of large numbers within a “pool”. Then risk is actuarially calculated based on historical data within that pool. Hurricane damage in Florida is quite high, nonexistent in South Dakota. Hail damage in Texas is almost a given every 2-3 years. Thus the risk for hail damage is high on property and casualty books of business in the pool for Texas. On top of those main factors, there are hundreds of other variables mathematically calculated in; such as value of the home, crime rate in the area etc, etc. Then there’s the personal criteria; your personal claim history, your credit rating, job history etc, etc.
So, the short answer to your question is that there’s no hard and fast rule to calculate it without guidance from a well versed agent.
Regards,
Dave

How does insurance work if it’s already inplace. Is there an easy way to tranfer insurance, or must the knew owner get a new policy?

Without knowing your particular business model, there’s no way to answer that. Sometimes the seller just changes to a landlord policy and the tenant is responsible for his renter’s policy. On a new purchase, typically you’ll need a new policy. On some of the more creative financing, it depends…lol
Regards,
Dave

And your telling me there is no way to accurately guage the cost of insurance on my cash flow balance sheet without getting the home individually quoted? That really is gonna slow down my productivity

Again, I would pick a P&C’s agent mind. If you’re only in a small market, within the same pool buying the same type and value of home over and over, you probably can accurately judge with a little help. If you’re looking at properties throughout the country, you’ll need to learn that rates for that particular market. For instance, my mothers home in FT Worth, Texas; primarily due to hail storms and tornadoes over the past several years; costs twice the amount for half the coverage of my home in Albuquerque. The same coverage I have in New Mexico for $600 per year would cost close to that a month in south Florida. A landlord policy in Michigan costs close to my homeowners here. See how it works?
Regards,
Dave

jp,

When you were active before, we tried to tell you that REI is not an exact science that you can boil down to a “plug-and-play” spreadsheet system. We were not being mean…that’s how it is. It is very much about getting out and doing and gaining the hands-on experiences. Find an Insurance Agent and pick his brain about your target investment area. But like I said in my previous post, any insurance quote is only as good as the local environment makes it – one hurricane, one 9-11, one (pick a local catastrophe to insert here) and the rates will change. If your figures are so close that a couple hundred dollars is going to make or break a “deal”, then it’s probably not a deal…

Keith

jp,
You’ve received some very good advice through this post. You now know more about insurance than most insurance agents do. Quit looking for the easy way out and get 'er done. There ain’t no shortcuts in this biz, be thankful you have this board as a resource. Let the agents in your targeted areas educate you. Another option is to put an actuary on your staff for $180K per year. I know what I choose…
Regards,
Dave

JP, I am somewhat new and just getting serious. All markets are different, I suggest you do what I am…start calling insurance agents in your market and start asking questions. You also might think of going to a local REI club meeting and asking some of the investors there, or ask them for some names. There might be insurance agents at the meetings. You won’t get accurate quotes on rates for one area from a person in another. All markets are different. Talk to a few in your market and you will get close enough to be able to use them as a starting point, then verify before you close. Good luck.

Regards, Tony

here in michigan, farm bureau seems to have the best rates (less than half the cost of others). if theres a farm bureau in your area, get a quote from them.

Just a follow up question since we talk about insurance here. Will you insurance company be reliable for any injuries tentants may have on the property? My insurance agent suggested to put something in the rental agreement not responsible any type of injuries on the rental property. How did you guys do it?

Thanks,
JW

If you want a ballpark insurance figure, when your talking to the seller, ask them about there insurance coverage and how much they are paying a year for their policy. chances are you new policy will be at least that or more. Play it safe and increase there policy by 15%.
every area is different, I have a friend that lives 2 blocks from me and their house is classified as a flood zone and where I am it is not. It was even challenged and they said its a flood zone, so there policy is about $300 a yr more…