Home Owners Insurance
I am a new investor, and was confused about who carries homeoners insurance if you are doing a lease option? Does the origional homeowner?...if so, what are my liabilities if my renter/buyer damages the house or even burns it down?
please help clear this up for me.
Mike
Hi Mike,
The property, since it is now, I assume, not "owner-occupied" needs to be written on a "landlord" type policy. 2 options:
1. You insure it as the 1st named insured and name the "owner" as an additional insured and loss payee (almost as if they are the mortgage company...for that matter they may be, if owner-financed).
2. The owner needs to have the property re-written on a "landlord" policy. They would be the 1st named insured, and you would need to be at least an additional insured (for liability protection benefit). If you have any vested interest (such as rehab value) you should also be a "loss payee", for at least your vested value in the property.
I prefer option 1 as you are the primary policy beneficiary. If the roles were reversed (you are the lessee/property owner) I would also recommend option 1, for the same reasons.
Though the article link here pertains to the sub2 scenario, it may help:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=472
Best regards,
Tim