Read anything that covers real estate investing for beginners, and you’ll probably discover the importance of surrounding yourself with experienced professionals. Even if you’re a seasoned investor, you can’t do it all yourself.
That’s especially true when it comes to protecting your investment. Despite every precaution you take, there’s always the possibility that something could go wrong. If it does, you’ll want to be prepared and avoid unnecessary losses.
In short, you’ll need to work with an insurance agent if you plan on flipping houses or operating rental properties to build long-term wealth. Why is this such a necessary addition to your real estate investing team? How can an insurance agent help to protect your investment? Let’s discuss this below.
Do You Need Insurance For Your House Flip or Rental Property?
When you buy a home for yourself, obtaining homeowner’s insurance is essential for protection in the event of a theft, fire, or natural disaster. However, what if you don’t plan to live in the property and be the owner for only a short period? What’s the difference between homeowners insurance for your private residence and landlord insurance for a rental property?
In a real estate investing for beginners course, they might not have covered this aspect of building a real estate investment team. You might even think that risk-taking is part of the process. However, most successful investors will tell you that it’s smart to obtain insurance coverage for your investment property.
Owning Properties (Even For a Short Time) Comes With Risk
Fix-and-flips, in particular, come with a certain amount of inherent risk. While there’s the potential for health and safety concerns on any type of property, renovating and repairing these homes can leave you vulnerable to all sorts of dangers. For example, contractors or others on-site could become hurt during a renovation. The property could also be burglarized or vandalized during the flipping process. Worse yet, a pipe could burst, or a fire could break out.
Having insurance coverage for your fix-and-flip property will provide you with ample protection in any of these events. However, while we hope that everything will go smoothly, you must be prepared for anything. Remembering that rule is arguably the best way to start investing in real estate!
Expand Your Knowledge and Assemble a Team
Determining the best way to start investing in real estate isn’t always easy, but educating yourself on the subject is the first step. Whether you sign up for an online course or read everything you can find that covers real estate investing for beginners, more knowledge supports more long-term success as a property investor.
Once you expand your knowledge, you’ll then decide which types of real estate investments interest you the most. This can help you narrow down your list of possibilities when using a platform like Privy to locate great real estate deals in your target market.
For some investors, their preferred way to invest in real estate is to focus on turnkey rental properties. For others, rental properties make up the heart of their real estate portfolio. When it comes to real estate investing flipping houses can be a great way to go. However, as you start researching and investing, you’ll want to assemble the right team before you get too far down the road.
How a Good Insurance Agent Can Help Real Estate Investors
There are a number of different professionals you’ll want to have on your team. Among them should be your insurance agent. Compared to other types of real estate investing flipping houses can come with additional risks. That’s why you’ll want to protect yourself and your investment by acquiring insurance coverage.
Insurance Policies For Your Fix-and-Flip
It’s important to note that a typical homeowner’s insurance policy won’t cover you if you’re flipping a property. Instead, you’ll need to obtain different policies that are specific to house-flipping and that cover the risks involved.
In most cases, the three types of policies that fix-and-flip investors need might include:
- Builder’s Risk Policy
- Dwelling Policy
- General Liability Umbrella Policy
A builder’s risk policy would be an appropriate choice if you’re having structural renovations performed on the property. This policy will cover any direct physical damage sustained during construction. In addition, you may want to add a builder’s risk rider to your policy to cover renovation or materials.
A dwelling policy is designed to protect vacant buildings undergoing renovation. Since these structures are at greater risk for water damage, arson, and criminal activity, this policy is essential for most fix-and-flips.
A general liability policy can be used to cover you if someone is injured on the property during the renovation. Note that these policies will not cover contractors or other for-hire workers who may become injured on the premises, so you’ll want to make sure that anyone you hire to perform renovation or repair work carries their insurance.
What About Rental Properties?
Plenty of things can go wrong when combining a real estate investment property you own with tenants you don’t know living in it. Whether you own a rental property in one market or several properties in multiple markets, make sure you have the right landlord insurance to protect your investments. Remember: in most cases, homeowners coverage does not cover rental properties.
Finding a Specialized Insurance Agent
So which policies does a real estate investor require, and how much insurance will they need? These questions and others can be answered by a qualified insurance agent.
When learning the basics of real estate investing for beginners, you’ll find that investment properties—especially fix-and-flips—are more complicated and expensive to insure. Therefore, you’ll probably need to find a specialized insurance agent who regularly works with other investors like you. Remember: the best way to invest successfully is to work with others who possess the right experience!
Start by asking members of your investing community about the insurance agents they use to protect their investment properties. You can also look online, provided you read reviews carefully and vet their experience. Be sure to ask about their knowledge of investment property insurance policies as you narrow down the list of candidates.
Create a Lasting Relationship With Your Agent
Once you find a reputable agent with the knowledge you need, you’ll be able to benefit in several ways. This is especially true if you build an ongoing relationship with your agent. That’s because they will:
- Clearly understand your investment goals and guide you to the insurance policies that make the most financial sense
- Help you obtain the coverage you need to protect your investment without pressuring you into acquiring policies you don’t need
- Be available to you whenever a time-sensitive opportunity for a new fix-and-flip investment or rental property comes along
Having the right coverage—and the right agent—is non-negotiable. Without it, you could lose significant time, eat the costs of theft or damages, or even sacrifice the entire property.
Protect Investment Properties With an Insurance Agent
By investing in insurance coverage and partnering with an excellent insurance agent, you’ll protect yourself and your investment properties while building your business.
Before investing in the next property Privy sends your way, contact experienced insurance agents in your area and find the right one for your team. That way, you’ll be able to obtain the right coverage for your investment as soon as it’s under contract. If you haven’t already experienced the Privy Advantage to find the best investment properties at the best prices, let’s talk soon about how we can help!
Get more insights into the team you need for success! Download "Assemble Your Real Estate Investing Team: A Worksheet” for free!