Posted by B.L.Renfrow on March 11, 2000 at 20:56:40:
Tony,
Your point regarding potential liability for personal injury in the MH is well-taken. My response was based more on the perceived risk of loss of the home from fire during the holding period.
While it’s certainly true that those doing a large number of deals could presumably better afford to defend against a civil suit, the other side of the coin is that the person just starting out with few assets makes a much less attractive target for the personal injury lawyers.
I would think the libility exposure could be reduced even further - whether or not insurance is carried - by holding title to the homes during the interim period in a LLC…though I suppose if it’s holding title to a significant number of homes at any given time, the idea is less attractive.
I will admit that I am still at the stage of holding MHs in my personal name, though I am reconsidering that as we speak. Since the majority of my deals are SFH’s with only the occasional Lonnie deal, I probably haven’t given it quite the consideration I should.
Any advice on having some type of insurance to cover my exposure between the time I buy the mobile home and the time I sell the home? If so, what is it called and where can I find it?
I just did my first MH deal this month and asked the seller for the name of their insurance co. Called that company w/ the info. Told the agent that I’d be holding title, etc., etc. The agent said that they could transfer the policy to my name and called the seller for me and got permission. So they’re sending me the paper’s to sign and the policy is effective as of the day we talked on the phone. Since the policy has been in force for 5 months, only the remainder of the year was due (through October), which was like $106 bucks… which my new buyer paid.
Before I found out that could be done, I figured that if I felt interim insurance would be a needed, I was willing to start a new policy and see if I could just add someone’s name later (my buyer’s). Then tell all prospective buyers I found a really good deal for the required insurance, and that of course they could get it wherever they like. As it was, none of them seemed to be too interested in shopping for insurance, which worked out fine for all of us. I’m just a newbie, but that was one way the insurance thing worked out in this case.
Anyway,
Success to you~
Re: Lonnie deals and Insurance - Posted by Dave_in_IN
Posted by Dave_in_IN on March 11, 2000 at 14:41:45:
I have done only a small number of lonnie deals but I wound up getting insurance coverage from the same insurance company that does my home. They will want tor raise rates if it stays empty for long but that has not happened. I also offer to my MH buyer the option of getting their own insurance or reimbursing me for the policy I have. They opted to continue with my policy. At least I’m covered, right.
Re: Lonnie deals and Insurance - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 11, 2000 at 12:39:08:
Robert,
I asked this question of both Lonnie and Dirk Roach in Atlanta recently, and both indicated they don’t use any interim coverage, and simply “self-insure” during that period, as the cost could be prohibitive.
Interestingly, both said they have never incurred a loss during the period between buying and selling; not that it couldn’t happen, but they’ve got an awful lot of deals between them!
Obviously, it’s a decision every investor needs to make for themself, however, and it clearly depends on how much you’ve got into the deal, your tolerance for risk and whether you could afford the loss.
Out of curiosity, I did mention the question to one of my insurance guys, and he was - as Tony suggested - confused, to say the least. Probably we could have come up with some sort of umbrella coverage, but I just didn’t feel the potential benefits were worth the cost.
Try calling different Insurance Agencies. You will likely need to spend some time explaining lonnie deals. They will devise some sort of Blanket policy for you that will cover your “inventory” during your holding period. The hard part is getting them to remember how these deals work. They will call back several times to clarify as the underwriter’s ask them questions.
Are you sure? Does your insurance company know that you have sold the MH and are carrying the note? If not, they would have grounds to deny any claim.
Just curious.
Glenn
You know the saying. It only takes one incident and you could be sued for all you own. Maybe if you limit your exposure by dividing up your mobile home purchases into several corporations. If someone sues the corporation the worst that can happen is they get awarded all the assets of that corporation only.
So many T’s to cross and i’s to dot. Just looking at all posibilities.
Dividing homes up into different corporations would not only be cost prohibitive but you would spend all of your time conducting annual meetings with yourself.
You might consider forming an LLC to purchase the notes from your corporation at a discount if you wish to safeguard some of the assets. (NOTE: I am not an attorney so be sure to check with one.)
Renfrow is correct, neither Lonnie nor Dirk have insurance during the interm. Consider this. Who is best able to afford a civil suit? Lonnie who has been doing these deals for a decade. Dirk who does 12 deals a month, or someone who is just starting out and maybe does a deal or two a month?
The cost of the insurance in my opinion was minor. Simply a cost of doing business. It may even be a means of protecting your coroporate vail, especially if you pull most of the cash out of this corporate entity. Showing insurance coverage, I have been told, helps prove that the corporation is not a shell. Although you maintain little capital in it, you do have insurance for larger amounts.
I did not price around much. I simply went through a couple of phone calls until I found a place that would write such a plan. The plan runs $400 (and change) per year. I can live with this. You may even be able to find it cheaper for all I know.
I am not concerned about losing the home during my short holding period. My concern is someone claiming an injury while in the home. I don’t mind paying a deductible on the policy if we go to court, but let the insurance co. lawyers battle for the bigger bucks being saught.