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Construction safetyDuring the year 2015 Porter-Brandenburg Agency, Inc wrote general liability, workers compensation and builders risk insurance for two start-up home builders, both of which had previously worked for major homebuilders.   Starting a new homebuilding company was a smart and timely move on their part because there are not enough new homes being built in the Dallas-Fort Worth area to satisfy the demand.

There has been a huge influx of people moving to the DFW area from other states ever since the economy tanked in 2009.  Major corporate relocations have made the DFW area one of the fastest growing areas in the country for the last several years and there is more to come when Toyota, Liberty Mutual and FedEx buildings are completed.

Dallas-Fort Worth area scored a third place finish in the 2015 race to create more employment and 98,900 new jobs were added in 2015.  While the DFW area trailed New York City and Los Angeles, this  was very good growth considering that Texas is suffering job declines in the energy sector. Usually when oil plunges below $30 per barrel, the entire state of Texas experiences a recession.  But this time is different especially in the diversified economy of the DFW area. The energy sector may be in a recession but there is still growth in other sectors.  

Corporate relocations are bringing more jobs to Texas, especially the DFW area.  Not only is there a demand for more new homes, but apartments as well.  And lets not overlook the demand for existing homes especially those that have been recently renovated.  There is a great opportunity for investors to buy a home, fix it up and then sell it for a profit. 

How do you insure a home, dwelling or building during the construction phase? 

There are three distinct ways to insure a property during the remodeling period.  The property may be insured as a vacant or occupied dwelling fore or homeowner policy with permission granted for remodeling.  This approach would be appropriate when the repairs are cosmetic and the duration of the repairs is less than three months.  Be sure to check with your current insurance agent to make sure that you have permission for remodeling and that it will not affect your coverage. If the money spent on remodeling increases the value, be sure to increase the amount of insurance on your homeowner or dwelling policy.

builders risk policy may be written to just cover the improvements or additions.  This approach is best used when there is an addition and the homeowner will continue to live in the home during construction and there is already an existing homeowner policy on the home. Be sure to contact the agent writing the homeowner policy before construction begins and let him know your plans.  Also after the addition is completed, let your agent know so that the amount of insurance on the homeowner policy can be increased to include the addition.   

Finally, a builders risk policy may be written to cover both the existing structure and the improvements.  This approach is best used when the home is unoccupied during construction.  The amount of insurance should not include the land, but the insurance amount will be the cost to replace the existing structure less depreciation and the full value of the improvements and additions.  When the home is completed or occupied, a dwelling fire policy or a homeowner policy must be written to replace the builders risk policy.

Since conventional mortgage bankers are strict about requiring a 20% down payment on a home purchase, most home buyers cannot come up with a huge down payment and then have enough cash to pay $30,000 to $100,000 or more to fix up the house  turn the property into the home of their dreams.  This lack of cash scenario creates an opportunity for an investor to buy a home, fix it up and then sell it for a profit. 

Home prices in the DFW area as well as most of Texas are estimated to be 25% more in 2016 than they were in 2008 prior to the meltdown.  Home prices will continue to escalate due to the demand outpacing the supply of homes listed for sale.

Call 972.234.5588 for a Dallas builders risk insurance quote.

Do you buy older homes, remodel them, then sell them for a profit? Do you know what kind of insurance you need for that? See part 2 of builders risk insurance series.

Jim Porter
Contact Jim Porter
(972) 234-5588

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