Rental Properties – What I’ve Learned So Far

As you know I’ve recently bought a single family rental unit that required a TON of work. Well I’m currently in the process of jazzing it up and everything is going according to both the plan and budget. I thought it might be valuable to share what I’ve learned so far about the income property buying process.

Basically, other than the buyer and seller there are 4 parties involved in the transaction. The real estate agents, banks, lawyers and insurance. The first 3 were a breeze and I’d go as far as say they were a pleasure to deal with. However, INSURANCE and insurance brokers/underwriters/sales people have to be the biggest pain in the ass.  I found the whole insurance procurement process excruciating painful. I’m generally a reasonable guy but multiple times when dealing with insurance industry “professionals” I’ve had to put the phone down, take a few deep breaths and call on my inner zen to prevent the top of my head from exploding off it’s foundation.

Long story short I eventually found a company that would insure it but just for kicks here’s a real conversation that I had with a broker who was not willing to insure it.

INSURANCE BROKER: We can’t insure it because there is too much clutter in the yard.

ME: Yes I know I will be removing all the clutter within a week of closing. However, I can’t remove it now because it’s not my property yet and that would be stealing.

INSURANCE BROKER: Ya but the clutter is a safety hazard.

ME: Yes I agree and it’ll be removed as soon as I take possession. I’d be willing to sign something to that effect.

INSURANCE BROKER: Well there are other issues.

ME: Oh Ok.

INSURANCE BROKER: the back roof doesn’t have a pitch.

ME: What do you mean?

INSURANCE BROKER: We had our underwriter drive by and he said there isn’t a pitch on the back roof.

ME: Um..there is a pitch on the back roof.

INSURANCE BROKER: That’s not what he said. He even took pictures.

ME: O good, if you look at the pictures you can see that there’s eave troughs.

INSURANCE BROKER: Yes

ME: Um. If it had no pitch how would the water get into the eave troughs?

INSURANCE BROKER: O. I guess I’ll have to talk to him. And the back door will require a step because it’s 2” lower than code allows.

ME: Ok. No problem I can put a 2” patio stone under the back door upon closing.

INSURANCE BROKER: ya I guess that would work. Do you think it could be done before then?

ME: um. No because I’d be trespassing. But I’d be willing to sign something stating that these changes will be done within a few days of closing. I could take some pictures and send them over.

It goes on from there….needless to say that insurance company eventually DECLINED to insure me. However, the best part of the story is that I later found out that the same company (but a different branch) was actually who insured the home for the old owner. Ha!

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