| One of the least considered, but perhaps most | | | | property owners to carry a sufficient amount of |
| important aspects of successful real estate | | | | liability insurance to protect themselves and their |
| investment is insurance against losses. Even | | | | personal assets. It may also help to have your |
| though the market for residential real estate has | | | | insurance professional "walk" the property with |
| begun to cool, commercial real estate investment | | | | you to point out potential hazards before they |
| opportunities abound. Commercial properties have | | | | become law suits. |
| additional risks that need to be mitigated and in | | | | Hazard insurance provides protection in the event |
| today's litigious society, it is important for | | | | of damage from fire, accidents, theft, and |
| investors to take the steps necessary to protect | | | | vandalism. Depending upon where you live, you |
| themselves and their investments. | | | | might want to look into adding protection from |
| As the housing market begins to cool off, the | | | | storms and natural disasters. All owners of real |
| investment risk of real estate has increased | | | | estate should have this insurance and again, if a |
| somewhat. Residential and commercial real estate | | | | loan is involved, the lender will require you to |
| investors can no longer rely on a continually | | | | purchase it and name them as an additional |
| increasing market to bail them out of mediocre or | | | | insured. |
| bad purchases. The only real insurance you have | | | | Environmental insurance is a new form of risk |
| here is to study investment analysis further and | | | | management that is gaining in popularity with |
| to really check your market before committing | | | | lenders. Instead of performing Phase 1 and Phase |
| funds to a transaction. | | | | 2 environmental studies, more lenders are opting |
| There are other risks in commercial real estate | | | | for insurance against this type of loss. Because |
| that you can mitigate through third party | | | | lender liability is limited in current law, the focus is |
| insurance policies. The most common form is title | | | | on paying the outstanding loan balance or the cost |
| insurance. Most real estate professionals | | | | of clean up, whichever is less. A word of caution |
| recommend that buyers obtain title insurance on | | | | here: Make the lender get the insurance (you'll still |
| any property they purchase and if a loan is | | | | have to pay for it) … it's not your job to |
| involved, the lender will make it a condition of | | | | understand the intricacies of environmental |
| obtaining the loan. The purpose of title insurance is | | | | pollution and its risks. |
| to protect the buyer in the event that problems | | | | In addition to these basic forms of real estate |
| are found with the title after the close. Even | | | | insurance there are other types of coverage that |
| though all sales of real estate include a title | | | | you may wish to consider. For instance, those |
| search, it is a good idea for the buyer to | | | | properties located in or near flood zones may |
| purchase separate title insurance as an extra | | | | wish to purchase flood insurance, while those in |
| measure of protection against mistakes in the | | | | earthquake prone regions may want to consider |
| search. This extra insurance will help protect the | | | | the purchase of additional earthquake insurance. |
| buyer in the event of any undiscovered liens, | | | | And in the wake of 9/11, there is even the |
| disputes over property lines, or other matters | | | | opportunity to purchase terrorism insurance! |
| affecting title. | | | | In the final analysis, each real estate investor has |
| Another common, but important form of | | | | to look at his or her own level of risk tolerance |
| insurance for investment property is liability | | | | and what might actually affect the real estate |
| insurance. This provides the investor protection | | | | investment. From there, with the help of an |
| from liability in the event an individual is injured | | | | experienced commercial hazard insurance broker, |
| while on the property. It is all too common for | | | | you can then purchase the right mix of insurance |
| individual property owners to be sued for | | | | needed to adequately address and mitigate those |
| seemingly frivolous reasons, so it is vital for all | | | | risks. |