Call 7: Insurance

Call Notes

Which insurance policy to get?

Get the Replacement Cost Value policy for insurance – it’s more expensive but you really want full coverage, it’s what insurance is for. 

How much deductible to choose?

You don’t want to be too over insured, because then it might affect your cashflow. It’s an investment you need to take some risk. 

Choose what amount will start to hurt and then double that amount. For example I thought once I pay $1,000 for a repair it would start to hurt, so I got a $2,000 deductible

Most repairs are less than $1,000, under this amount it’s usually not worth the time it takes to work with the insurance provider to get it covered. Plus if you’re worrying about getting a couple hundred dollar repair insured, real estate investing is probably not for you. 

Which natural disasters should you be concerned about?

Hurricanes are the worst natural disaster; they will leave your property offline the longest compared to tornados which is an isolated disaster. Of course being in a flood zone is not ideal, but this can be avoided if you check the FEMA map. 

Should You Get Umbrella Insurance?

Getting an umbrella insurance is “over insuring” yourself, but it’s so cheap like a couple hundred bucks that if it helps you sleep at night, you should get it. 

Property Management Advice from Rav

Rav is a property manager with over 100+ active properties under his belt. He shared his knowledge of what actually happens in the field.

Most Common Issues

Water issues are the most common (leaks, sewer, septic).

Sewer line – Older properties (built in early 1900’s) have cast iron pipes that can break. To change a cast iron pipe to pvc piping is around $800. Re-doing a septic tank costs around $4,000.

Sewer vs Septic

Sewer is better because there’s less maintenance.

Are septic tanks a red flag?

If you do the underwriting and get a good deal (and you can cover the replacement cost of $4,000) and it passed the septic tank inspection then the septic tank would not be a red flag.

Wind damage, roof damage 

Small roof repair costs $300-$400 

Major Things to Look For

Removal of trees, find out condition of tree – Has to be removed by someone who has insurance (in case it falls. To remove a big tree can cost between $2,000-$3,000

#1 Trees (should know going in)

#2 Water problems 

#3 Electrical (should know before going in)

        Tenants in Birmingham prefer all electric and shy away from natural gas.

What makes a good property manager

Talk to someone they work with. Ask them are they easy to get in touch with? What are the costs are they overcharging you for repairs?