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Another roof via Insurance

February 18, 2012

We called our insurance company on another property that needed a roof after the hail storms in Dallas last Spring. This one was on Property 3. We used the same roofer we just used on Property 2. Actually we used the same roofing material and color. We are out the deductible ($800), but did get an upgrade to the 30 year roof vs the 20 year that insurance pays.

This roof had a lot of wear on it when we purchased the property. This is a good reason to have Replacement Cost insurance vs Actual cash value. Our insurance company would have deducted a couple thousand from their estimate for depreciation with a cash value policy. We got the full amount to replace the roof minus our deductible.

They have added an extra step to the claim process in the last couple of years – you file the claim, they cut you an initial check, but hold back the “recoverable depreciation”. Once you get a contract from your roofer, you send them the signed contract and they cut you a check for the remainder of the replacement cost.

The old roof was in rough shape and we spent a couple hundred dollars making some minor repairs after purchasing this property from a bank in 2010.  I know another investor that likes to use day laborers and do some of the work himself and actually put some money in his pocket after putting on a new roof. This is too much effort – I just like getting a new roof for essentially the cost of the deductible. The new roof went on in one day and looks great. We went with the architectural look vs the standard flat roof and it looks much better. I don’t think you can charge more rent due to the new roof, but the value of the home certainly goes up  – maybe not by the roof cost of around $6,500 – but there is equity caputure here.

Below are some before and after pics. I almost did not get my before pics in time as they started really early in the morning.

Related Post:

New Roof on Property 2

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From → Landlord

6 Comments
  1. Melissa permalink

    Chuck may I ask how do you determine how much insurance you need on each property? I am constantly battling with having the appropriate coverage without paying too much AND making sure that I am building a relationship with a company that can meet my needs. If you have any suggestions I would like to hear them. Thanks

  2. Melissa,

    Insurance is a big expense for me so this is something I watch. I am actually in the process of bidding our insurance out to several insurers to be sure I am getting a good deal. My wife and I are with 2 different insurers and they seem to give you better discounts as you have more policies with them. Here in Texas insurance can get pricey so its something to watch.

    I insure everything at replacement cost with rental dwelling policies – not homeowner policies. They key to keeping your premiums down is to beat them up on the value that they want to insure your property at. I try and get mine as low as possible. I make them go back to their underwriters to get special approvals to go below their normal thresholds and still insure at replacement cost. Remember if your rental burns to the ground, the land will hold its value. They should only be insuring the home value – not the land.

    Getting the value down serves two purposes. 1) It keeps your annual preimum down and 2) your 1-2% deductible will be less in the event you need to file a claim. There is quite a bit more here to discuss….maybe I should post about this soon.

  3. Melissa permalink

    Chuck this is also what I do I was worried that my strategy was wrong but it seems I am doing just fine. On each property I receive 6-7 quotes and I go to town with my red pen making sure I am not under and over insured, I also make sure that they are not adding things to the insurance policy that I dont need. Thanks for replying I learn so much from your post please keep up the good work.

  4. Does making the claims affect the price of the policies?

    I had two claims for stolen AC units and then could not get coverage when I bought another house. I went to another insurance company, with a high risk policy, at a higher rate. It has been 3 years now and I moving back to regular policies.

    I have 15 houses, so a small premium increase on all houses will quickly erase the value of the claim. Now I never make claims and save insurance for a catastrophic claim like the house burning down.

    • Don,

      I have not had a theft or vandalism claim. I have had 2 roof claims and one water damage claim. All 3 of these were on separate properties. My premiums did not go up. Were your 2 stolen AC units on the same property.

      Thankfully, I have not had one stolen. Are you caging yours now.? I doubt my insurance company would dump with 2 stolen AC units..I wonder if you reached a maximum for policies per owner? I have not asked my company about this. They may just have too much exposure to your particular area. With 15 properties I might start using 2 different companies. Just to spread it out some..I think the discounts for multiple policies seems to cap out around half dozen or so..

      Good luck,
      Ch.

  5. My insurance was with AllState and the claims were on different properties. I did not get dumped, but they refused to issue policies on new houses. I then went to an independent insurance agency that writes policies for many different insurance companies. They found someone to ensure me – at a higher rate. As my existing AllState policies expired I moved them to the new agency – even though I pay bit more.

    One claim was for a stolen AC unit, and the other claim was for stolen wiring. The AC unit was in a cage when it was stolen. It looked like someone snatched it off with a truck. I think they only wanted the copper in the AC unit. I had to get a new unit – and a new cage.

    I now have a group policy that all houses are under – I just get one bill. I could probably move them around to save a bit but I like the convenience of having one bill.

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