Most people in the real estate investment business hope to find that “great deal” for the right price to add to their portfolio; but many times the property that has the right price, may have a few issues that can make it a bit more challenging to purchase. Those same issues may make the property challenging to insure.
Here are a few key buzz words:
Purchase “as is”
Some renovations required
“Vacant or lower occupancy”
Needs some TLC or the right management
While these are good teasers and may actually be a great opportunity; it does offer some challenging insurance options. Listed below are some helpful questions that will help the insurability of the property.
- What is the current status of the property? What is the current occupancy as compares to the neighborhood? What are the conditions of the units? Can you obtain a list of what renovations have been done? What is your ability to continue the renovations? Do you need a contractor to help determine the costs and to perform the work?
- Have there been any claims at the property? Can you obtain prior claims history? Have all damages from claims been repaired.
- Determine the age of any repairs done during the lifetime of the property; also determine the type of wiring.
- Why is the occupancy low? Is it due to the current ownership/management or will the local conditions and neighborhood allow you to increase occupancy to an acceptable condition or is the occupancy similar to other local properties?
- What can you do differently to help the property? Be specific.
- What renovations or improvements can you do to improve the property? Be specific and have a budget.
- Have a schedule of renovations and detail when either units or buildings will come on line.
- What new marketing will you be doing? Onsite management? Better maintenance?
Be as specific as possible with details and time lines for yourself. This detail will help paint a much better picture for an insurance underwriter.