House flipping is risky business. To make it work right you have to be able to buy low, sell high, and make improvements in between buying and selling with minimum investments of time and money. Most efforts at house flipping miss the mark on at least one of the three points. Fortunately, if you buy low enough, you will still make money at the end. Protecting your investment during the flipping process is important. To do this, you need to have the house insured. It is best if you have a blanket insurance policy. You need to make the decision about how much insurance to buy.
It is tempting to buy the least amount of insurance available.
Since insurance costs money, a house flipper may view this as an area to conserve cash. Buying only liability insurance will protect you against lawsuits for injuries during the flipping process. It will also keep professional victims from sending you into bankruptcy by manufacturing an injury that looks like the result of negligence. This type of insurance will not protect your tools and materials from a loss to theft. It will also not take care of your capital investment if the house burns down or a tornado comes through.
If you are working with borrowed capital, you may not get to vote on the type of insurance to buy.
Even if you are using money from a private investor, insurance coverage will probably be mandatory. A blanket insurance policy will be needed to protect the investor’s cash. When institutions and individuals have financial risk, they like to see insurance policies that protect their assets. The cost of this type of policy should be less than two percent of the value of the investment. This makes it cheap protection from the lender’s perspective.
Most house flippers rely on the value of their personal labor to help maximize profits.
As the time required to complete renovations during the flip builds up, you will begin to see your time and effort as worth protecting. This means insuring your sweat equity. After only a few weeks of work, the value of the improvements resulting from your hard work can reach into many thousands of dollars. As this amount grows, the cost of an insurance policy will seem smaller and smaller relative to your potential profits. A blanket insurance policy will protect this value.
A blanket insurance policy on your house is the only way to get all of the coverage that you need.
This policy will protect your investors and your labors in the event of a catastrophe. It will also give you security against theft and vandalism. Blanket insurance provides the liability protection against the unexpected possibility of injury. If the flip works right, you will only need this insurance for less than six months. It is a bargain that you cannot afford to live without.