payments are like bonds and interest rates in that their relationship is inverse. The larger the deductible, in general, the smaller your payment and vice versa. So, if you are willing to risk not having to pay any claims, you might carry a larger deductible and save money short term. But accidents happen, so choosing the largest deductible to try to save a small amount of money in the short term might not make any sense at all because you risk paying that large deductible if something happens. Finally, the real estate mantra “location, location, location” is just as true when it comes to insurance costs. What you pay is related to the property’s appraised value and location. What works in one geographic market may not work in a different part of the country. And, if you move from one market to another, expect differences in insurance costs and coverage. All in all, with the right insurance broker as a partner, real estate investing can be an incredibly rewarding experience, financially and professionally. As you can see, there are many ways in which real estate investing can go wrong. You do not want them to involve insurance, because an insurance mistake can cost you in a big way. But with a little common sense and a well-written insurance policy from an experienced broker, you can set your business on a firm footing from the start. •
clear language. If something occurs, there is no “he said, she said” battle. All terms are spelled out in the written, signed document. Finally, make sure you have appropriate security and safety devices installed in the unit and that they are checked as suggested by local fire and police authorities. This includes locks, theft prevention systems, and smoke and carbon monoxide detectors.
of liability coverage could mean the success or failure of your business. Especially if you are just starting out, do not skimp on liability insurance thinking you can skate by without it for a while. Accidents happen and people sue. Discuss liability thoroughly with your broker. It’s worth spending a few dollars upfront so you still have a business at the end of the day. It is also common not to insure business property inside the invest- ment property. Always be sure to cover appliances and other internal property that belongs to the busi- ness. When working on rehabs, make sure your contractors and subs carry insurance and that anything stored to be installed is covered as well. You will benefit greatly from a fundamental understanding of dedu- ctibles. Deductibles and insurance
AVOIDING COMMON INVESTOR MISTAKES WITH COMMON SENSE
Andy Matz has been active in the insurance industry for more than 10 years. As a broker agent for Constructive Insurance, he works extensively with real
Besides what we have covered previously, there are a few more common mistakes to avoid as a residential real estate investor. We live in a litigious society, so obtaining the right type and amount
estate investors. Constructive Insurance is an independent insurance broker that offers residential real estate investment and landlord insurance from some of the nation’s top carriers. You can reach Matz at amatz@getconstructive.com or (312) 429‑2693.
26 | think realty magazine :: june 2022 :: SPECIAL LENDING EDITION
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