Consumption and Real Estate
How do I insure a slightly damaged home?
Question : How do I insure a slightly damaged home?
*After* I bought a home my insurer changed their minds about insuring it because of some damaged siding in the rear. After several fixer uppers, this is the first I’ve seen refused outright, which is odd because I’ve seen things in other homes that would appear to create more liability. All I need is the minimum insurance necessary in Austin, Tx to satisfy my loan requirements. Where can I get this insurance?
I cannot believe it is impossible, because buying a home cash is a poor choice, and any loan is going to require some minimal insurance, so someone out there offers some package for this situation.
http://img704.imageshack.us/i/rear.jpg/
In serviceable condition the home is valued at $ 125k, without a loan you’re still responsible for taxes/insurance, which amounts to about $ 400/month here in the lovely state of Texas. Rental income from the home would be $ 1200 per month. Annualized the ROI is around 7.5%. That’s reduced by maintenance and repair and time spent without a renter, but increased by appreciation on the home.
Twenty percent down is $ 25k, and the mortgage is roughly $ 400/month. The cash flow is halved but the ROI is around 20%, a little less than 3 times the own outright scenario, because of the smaller amount of money you have committed.
Appreciation. If the home appreciates 1% and you own the home outright, that’s a one percent return. But if you own only 20% of the home, the equity increase all goes to you and is a 5% return on investment.
I haven’t discussed tax benefits, legal liabilities, and other minor items. A mortgage is a lot more valuable than a home.
Answering why owning a home outright sucks: The value of the home is roughly $ 125k and the rental income is $ 1200. Owning it outright, you are still responsible for taxes and insurance, which are roughly $ 400/month in Texas. $ 800/month net, $ 9600/yr, around 7.5% ROI, modified by lost rent, maintenance, repair, and appreciation.
20% down is $ 25k, and the mortgage is roughly $ 400/month. $ 400/month net, $ 4800/yr, and around 20% return on investment.
Maintenance, repair, and lost rent hurt more, but appreciation is far more valuable. If you own the home outright, and it appreciates 1%, you add 1% ROI. If you own 20% of the home, though, you add 5% ROI because you get to keep the full appreciation even though your investment is 1/5th of what it would be otherwise.
Being unable to delete additional details is a crime, also, don’t try to post behind an inconsistent web filter.
austin home insurance
Best answer:
Answer by Common Sense
1. Where did you hear buying a home for cash is a poor choice? That’s ridiculous. Equity is a good thing.
2. Never insure for the minimums, it could leave you vastly underinsured.
3. Find another insurance company or get it fixed.
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#2 written by Dion J 1 year ago
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Do you have any plans to fix the damage? That’s the crucial question. Working with a local agent, you can get coverage with the understanding that the damage will be repaired within the first 30 days.
If you don’t want to fix the damage, you’re looking at a nonstandard policy – it’s going to cost you maybe 3X what regular insurance would cost, AS LONG AS the integrity of the siding hasn’t been compromised – that means, as long as water can’t get in through any cracks/dents/holes/gaps.
If the integrity of the siding has been compromised, even the Texas FAIR plan – the property insurer of last resort – won’t insure it.
Insurance companies aren’t in the business of helping you get a loan – they’re in the business of assessing how likely it is that your house will have a future claim. If the integrity of the outside is damaged, it dramatically increases the chances of you having a weather related claim.
**wow, after looking at the siding – it isn’t “slightly damaged”, it’s rotted out and missing. This is a house with major water damage/rot, at the bottom. If you don’t fix it, it will collapse. This isn’t a good investment property – the damage will depreciate the value of the house faster than the lot can appreciate. This type of damage, is a “self insure” only property. Not even Lloyds of London would insure it. Sorry.**