Thursday, December 20, 2007

Thoughts on Investing in Real Estate - Part 3

So far we have discussed financing, tax issues, renting your property and zoning. The final piece of the puzzle is:

Be aware that how the property is occupied can affect your insurance coverage. It is relevant whether the property is being owner occupied or occupied by tenants. If it is not occupied at all, your standard policy may not provide coverage unless the property is being visited / inspected weekly, or even daily. Make sure your insurance agent understands the uses to which the property is being put and that you understand the coverage that is being provided and what, if any, steps you are required to take to maintain the policy in force (i.e. hiring someone to check the property). If you are operating a business out of the property, make sure your broker is made aware of this. Commercial insurance will be different than purely residential insurance coverages. The more your insurance broker knows about the property and its proposed use, the better he/she will be able to assist you. Make sure you talk about insurance BEFORE you sign the Offer if you have any doubts about the insurability of the property, as you will not get financing without it.

These are a sample of the type of issues to be aware of when considering an investment in real estate. My recommendation is to get the experts involved from the beginning. Make sure your lawyer, accountant, mortgage broker, financial advisor and/or insurance agent know what you are doing. Take advantage of their education and experience. And then, enjoy your property.

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