Issurance issues threaten first deal-Help!

[aaronj231 0]

I have almost put together my first SLO. I got a call from the seller/landlord today. He talked to his property issurance company and they told him they will not cover the property on a sublease deal. They will only cover it if the primary rent is living there. I called around to other companies and town and got the same story. The reason they have given is that

there is no tie from my tenant/buyer to the homeowner. If the tenant/buyer burns the house down then the issurance company can't sue the tenant buyer because they did'nt have a direct agreement with the Seller.

 

What do I do? Nobody will insure the property and the Seller is not going to risk his house being burned down which is completely understandable.

 

FYI I am getting $350/month cashflow and $2500 option consideration for this deal with $10,000 cash

if the option is excercised.

[MichaelC 160]

The first mistake made was the homeowner getting into the details of the deal and mentioning that dreaded word, subletting. What I always instruct the homeowner to do is to just switch their policy from a homeowner's to a landlord's. There was no need for him to embellish the request. Too late for that now, however. The only suggestion I can make is for the homeowner to find another insurer and simply state he will be renting the premises and wants a landlord's policy.

[aaronj231 0]

The first mistake made was the homeowner getting into the details of the deal and mentioning that dreaded word, subletting. What I always instruct the homeowner to do is to just switch their policy from a homeowner's to a landlord's. There was no need for him to embellish the request. Too late for that now, however. The only suggestion I can make is for the homeowner to find another insurer and simply state he will be renting the premises and wants a landlord's policy.

 

Thanks MC, What I was thinking, because the issurance company is going to want a copy of the lease/option agreementwas deleting the section that says "I have the right to assign/sublet" and replacing it with "I have the do not have the right to sublet or assign without written permission" Then I would just have the seller right me persmission to sublet after the fact, would that work?

[MichaelC 160]

I suppose it would but I can't recall an insurer asking me for a copy of the lease agreement.

[aaronj231 0]

I suppose it would but I can't recall an insurer asking me for a copy of the lease agreement.

 

My backup plan would be to do a contract assignment get the $2500 up front and

then $350/month for 18 months for a total assignment fee of $8800. That way I would

still get my $2500 plus my cash flow Then I guess

I would just walkaway from the $10,000 profit on the backend and let my tenant

buyer have the contract at my price. There should'nt be an issue with accepting part

of the assignment fee in installments would there? Thanks for the help

[MichaelC 160]

Aaron, I think you're better off just collecting whatever assignment fee you can upfront and be done with it. That is, after all, what an assignment is. You sell your interest in the deal, collect your money upfront, and you're now out of the loop altogether. You may find it difficult to collect that $350/mo. What's your leverage if the t/b doesn't pay? You can't evict him. You're not the landlord and you're not even a part of the deal.

[Gordon Holtner 0]

Aaron

 

Make a promissory note if you want installments, get a lawyer to witness the signing and get the payments in post dated checks upfront. If you know some company that will help you automatically take the money out of the Tbs account every month that is even better.

 

Gord