When you decide to start purchasing rehab houses to flip for a profit, there are so many things that you will need to consider that some things could get lost through the cracks. However, if you create a checklist of all the things you need to do and consider anytime you purchase a house for flipping, then you can make sure you do not miss any of these things. Of course, you most likely have already considered the process of setting a budget for your flip, determining timeframes, how to find contractors and finding the best way to sell the home.
However, one very important thing that you may accidentally overlook once the renovations are complete is vacant property insurance. Do you know what this is? Have you ever even heard of vacant property insurance? If you have not, then it is time to learn.
What is Vacant Property Insurance?
This insurance is a specialty policy designed specifically to cover properties that will be left vacant for more than one month after your renovations are complete. There are damages that can happen to vacant properties that will not usually happen to properties that are occupied. Because of this, the vacant insurance policies are designed to cover these problems.
One of the things that you will need to know is that vacant property insurance usually costs about three times what a standard homeowner’s policy will. This means you will need to keep this in mind when you are creating a budget for your house flip, this will also take effect after any major renovations were completed, a builders risk policy would be in effect during the rehab, that’s a topic for another article.
Why Can’t I Just Take Out a Homeowner’s Policy?
Since vacant property insurance is so expensive, you may be wondering why you cannot just take out a homeowner’s policy. This will not work, though. If you look at most homeowner’s policies, they will not cover homes that have been unoccupied for more than three months. If you try to use a standard homeowner’s policy and then something happens, most insurance companies will deny your claim, leaving you with a very big bill. If you still think you might be able to get coverage through your homeowner’s policy, you will definitely need to check with your insurance. Very rarely will vacant homes be covered.
Why Do I Have to Have This Insurance Anyway?
Since the insurance will cost so much, you may be wondering why you have to have it in the first place. What could possibly happen to a house you are flipping? There are actually numerous things that could go wrong. Vacant houses are much bigger targets for burglars and vandals. You may come in one morning and find that someone has stolen wiring, fixtures or even doors. In these cases, you will have to cover replacement cost on your own if you do not have a policy. Other things could go wrong too, like flooding, fire, or storm damage. In any of these cases, without the right coverage, you could find that your flipping budget goes out the window and your flip becomes an overwhelming nightmare in a hurry.
This is why you must have a vacant property insurance policy. Once you have understood why it is so important, you will have to start looking for the right place to purchase it. Your current insurance company may offer these policies, but it never hurts to shop around. You may find that you can save money by choosing a different company from which to buy. No matter what, you must budget in your flip to cover this vacant home policy. If you do not, the cost you could end up paying could far outweigh the cost of the policy for the few months that you actually need it. Do not try to cut corners by not taking out a policy.
Joe Abbascia is an expert property investor providing vital knowledge on how to buy properties wholesale, about flipping homes successfully, and more. You can learn more by visiting PropertiesCentralWholesaleDeals.com
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