Think-Realty-Magazine-January-2018

KNOWYOUR INSURANCE NEEDS BEFORE DISASTER STRIKES R eal estate investors know property insurance is a necessity, but did you know that basic homeowner’s insurance policies do not usually cover the kinds of damage that you will likely deal with in the wake of a hurricane? They will not cover damage done by winds due to hurricanes, and none cover flooding. Roofs are often covered only by an additional wind and hail poli- cy, and your flood policy must be purchased separately. Flood insurance rates depend on your elevation, what zone you are in and your physical distance from water. There are many homeowner’s policies out there, and they vary state to state. Check with your local agent on what works best for you. The differences in price can be astonishing so check around and get multiple quotes. Remember, although budget is important, it’s more important to have the coverage you need or be prepared to pay out of pocket if you get a policy that offers relatively less coverage. If your property is even in a one-percent, 500-year flood zone, by all means (in my opinion), get the insurance. And if you don’t know what that even means, find out! The additional coverage is not that expensive and depending on your lender, you may be forced to have it. process of gaining access to those funds for repairs, since the lender may hold the money in escrow until you meet certain benchmarks demonstrating that you will be making the repairs that are needed. You may not be able to get a draw on those funds until after you have estimates from a licensed contractor, the right permits for work in place, predictions about the scope of work needed, or even proof of work in progress. Working with contractors will be another complication. In our area of Florida, every tradesman is overwhelmed. Repair prices are skyrocketing. There is too much work and simply not enough skilled, licensed workers to go around.

and slow ordeal whether you are making your own claims or working with homeowners trying to file theirs. I have many friends and colleagues who were affected by Irma. They all tell me that it has been more than 60 days and they have no idea what, if anything they will be paid. One customer did the work for his claims adjuster and got estimates for drywall, flooring, mold remediation and all the repairs necessary to make his home whole again. Friends came over and pulled up flooring, removed all the baseboards and door moldings, and took out the lower four feet of drywall. Now, he is living in the house and awaiting instructions from their adjuster. 5. DON'T EXPECT TO FINANCE YOUR REPAIRS WITH A HELOC Often, homeowners will try to take out a home equity line of credit (HELOC) to finance the repairs on their homes. The thinking is that once the insurance company pays out on the claim, they will be able to pay back the HELOC. However, in cases like ours where the insurance companies are over- whelmed and the payout timelines are completely unpredict-

able, lenders are reluctant to finance this type of loan. If you failed to get the right insurance policy on your property to begin with, then forget it! I have several friends in the mortgage and banking industry who told me point-blank if a homeowner did not have the right insurance on their property before Irma, the bank will almost certainly deny an application for a home-equity loan. Not only will the value of the property not appraise in its current condi- tion, but lenders, like everyone else, are scared that there may be another storm around the corner and they will have made another loan on a property that is not properly insured. ONCE YOU GET YOUR CHECK, IT’S NOT OVER Even if you are a fortunate individual whose insurance company pays out quickly and in full on your claim, getting access to that money may not be easy. Flood insurance checks are often made out to the entity holding your mortgage only or to both you and that lien holder. That can complicate the

This is what our streets looked like at the beginning of the flooding during Irma! By the end, entire homes were underwater.

right now, we have to remember we have to sell it when the rehab is done. That means that we must be able to hold that property until some time has passed, and we also must be prepared to carry that property until we can get requisite repairs made. Over time, people tend to forget damage done by natural disasters, so if you have that time you can certainly get good deals in our area right now and really help people who just want out of their current situation. Do your due diligence, and keep a close eye on sales and days on market in those flood prone areas if you want to keep investing in a hurricane-affected area. •

WE DEFINITELY HAVE A NEW PERSPECTIVE AS INVESTORS

After living through Irma (and dealing with damage on multiple investment properties), we are looking at homes near the water from a different perspective. Even though we may be able to get a great deal on a property in a flood zone

John Tesh is a residential real estate investor based in Orlando, Florida, where he and his wife, Corinne, own Citygate Homes LLC. He may be reached at john.tesh@homevestors.com.

A gutted kitchen shows just how much damage a flood can do. Some homeowners actually try to continue inhabiting their homes while these type of repairs are underway despite the potential health hazards associated with this decision.

100 | think realty magazine :: january 2018

thinkrealty . com | 101

Made with FlippingBook - Online catalogs