Real Estate Investing: When Should You Buy Property Insurance ...

Real Estate Investing: When Should You Buy Property Insurance?

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Real estate risks can be more daunting than in other areas of investment: a risk in real estate may mean you lose a property, can?t rent out a room while you are losing money from the mortgage, or can?t perform when you have a property on the line to buy. ?In other words, real estate risks could leave you owing a lot of money. ?These risks are daunting for many people entering the business, but there is a way to mitigate these risks. ?Other than knowledge and due diligence, real estate risks can be mitigated with the help of insurance.

Ever pass on car rental insurance? How about the insurance when you buy a brand new Mac? ?Your assessment of whether to buy these insurance policies or not probably depended on your judgment of the likelihood of an accident. ?In the case of a computer or car rental, this may feel like an assessment of your own ability to drive safely or keeping open beverages around the laptop. ?In these examples, the risk depends on your own, personal behavior. ?However, in real estate, these risks are, more often than not, completely out of your control. ?Due to the nature of dealing with properties, damage from natural disasters or even your own tenants could end up costing you tens of thousands. ??Insurance is absolutely critical when it comes to real estate.

However, property insurance is only critical when you take title of the property. ?If you assign a contract without taking title, then there is no reason to worry about insurance. ?However, if you rehab and retail or own rental properties, there is no question about it: buy both property and liability insurance.

Double closing is a separate scenario. ??In that situation, you are responsible for the property in between the two closings, which may be immediate but can also last for a week. ?You should assess your tolerance level and the price of the property to decide if insurance is worth it. ?If you are conducting the second closing immediately, then there is very little risk involved. ?If you are doing the second closing in 3 days and the property is a low end property, there may still be very little risk if you determine you can absorb the loss if something went wrong. ??If the property is a mid-high end property, and any loss could wipe you out, get the coverage even if it is for 24 hours. ?Probably nothing will happen in those days between closings, but then again, why take the risk if it could wipe you out. ?Pay the fee to protect yourself.

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Source: http://www.itweb7.com/business/real-estate-investing-buy-property-insurance/

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