You are now ready to purchase your first investment property, but before you do, consult before you buy! 

You have contacted your attorney to create the structure that is going to own the building, whether it is an S-Corporation, an LLC, or a partnership. You are working with your accountant to calculate cash flows and accounting controls. Next, you go to your bank to set up the financing for your purchase. You are now ready to make that first purchase.

STOP! Another member of your advisory team, your Trusted Choice Independent Insurance Agent who can assist you in many ways, needs to be contacted.

As an investor, you are looking at properties differently from the way your agent is, but the agent’s critical eye on your properties will benefit you in multiple ways. Here are some scenarios.

1. You are looking at an older apartment building in Lakewood, Ohio. Your agent asks if there is any knob and tube wiring in the building. Many insurance companies will not insure buildings with knob and tube wiring. If you purchase this building, insurance costs could go up or you may be saddled with an expensive rewiring project.

2. The next building you are looking at is a great eight-suitor in Cleveland’s Little Italy neighborhood near Case Western Reserve University, The Cleveland Institute of Art, and The Cleveland Institute of Music. Your agent may ask if your tenants are undergraduate or graduate students. Many insurance companies will not insure buildings with a high percentage of undergraduate students, but if they do, the premium may be substantially higher. The higher premiums could adversely affect your cash flow.

3. The last building you are looking at is in Old Brooklyn. This 12-suitor has six units occupied by people receiving housing vouchers through the Housing Choice program. You expect guaranteed payment and well-screened applicants. However, once again there are underwriting concerns and many insurance companies will not insure properties with subsidized housing.

Hopefully, these examples will not scare you off from purchasing a rental property; however, they show you why it is so important for you to get your Trusted Choice Independent Agent at Richey-Barrett involved earlier, rather than later.