Posted by Randy -IL- on January 18, 1999 at 20:19:32:
You only need insurance for the things you can’t afford to lose.
When you purchase RE under a contract for deed you are, in effect, building equitable interest. I personally can’t afford to lose any equity I already own or have created in any real estate.
Could you imagine being 2 or 3 payments away from a free and clear building when a fire/tornado/earthquake/etc. guts the place? Well, without insurance payable to you, guess what happens? The beneficiary of the policy gets ALL the insurance payout. That, in your case, would be your seller, not you. Or even worse, the seller doesn’t have insurance at all. You both lose. What happens if a tenant falls through the floor (It really could happen)? You, the seller, and everyone involved get sued. Without insurance, guess who pays? Well, you get the idea.
For the amount of protection you get for your buck, it really is an inexpensive expense. Better than that, just build in the cost of your insurance into your deal so your seller or tenants pay for it! If there isn’t enough room in a deal for my security/protection, it really isn’t a deal.
Always CYA! (Cover Your Assets)