Pedestrian-friendly neighborhoods within walking distance of schools, parks, and businesses may be more valuable than similar homes built where residents must drive to those amenities, according to a study by CEOs for Cities, a national network of civic, business, academic, and philanthropic leaders working to improve cities.

The group analyzed data from 94,000 real estate transactions in 15 major markets and found that in 13 of the 15 markets, neighborhoods that were more walkable had higher home values.

Walkability was based on a “Walk Score” rating of how close homes were to amenities such as restaurants, coffee shops, schools, parks, stores, and libraries. The group used the Walk Score to compare home values in neighborhoods that were different distances from amenities, but shared the same characteristics, including average homeowner income, home size, and home age.

A mix of common daily shopping and social destinations within a short distance added from $4,000 to $34,000 to home values, according to findings in the study, “Walking the Walk.”

The gains were larger in denser, urban areas like Chicago and San Francisco and smaller in less dense markets such as Tucson and Fresno.

What makes a community walkable?

Dan Burden, founder of Walkable Communities, has developed a 12-step checklist for defining, achieving, or strengthening a walkable community. Among the items on his list: a welcoming public space where people can gather and socialize, speed-controlled key streets, pedestrian-centric design, and a town center with a wide variety of shops and businesses.

Examples of walkable communities include Bethesda, Md.; Jackson, Wyo.; Madison, Wis.; and Savannah, Ga.

Safety and walkability

Although you can’t physically move your neighborhood closer to amenities, there are things you can do to raise its walkability factor.

Safety is a big concern for those on foot. To address safety concerns in Castle Hills, a walkable community outside Dallas, the developer built wider sidewalks, reduced speed limits, and installed solar-powered speed signs.

In Atlanta, a pedestrian safety advocacy group, PEDS, convinced 6,000 households to put up yard signs encouraging drivers to slow down, trained police officers on pedestrian safety law enforcement, encouraged local governments to use in-street crosswalk signs, and worked with the government to authorize red-light cameras to increase safety.

Improving walkability

In addition to making safety improvements, you can also try these tips for improving walkability from John Wetmore, producer of Perils For Pedestrians Television:

• Trim shrubbery that’s blocking the sidewalk in front of your house.

• Pick up trash and litter to make it a more pleasant place.

• Support initiatives in your town to build new sidewalks and repair existing sidewalks.

• Be polite to other drivers and pedestrians when you drive.

• Set an example by walking more by yourself or with your family.

Walkability programs

A relatively low-cost way to get people walking in your neighborhood is to organize walk-to-school or walk-to-work events. International Walk to School in the USA offers a good planning guide with ideas for events that you can plan in as few as seven days.

Walk-to-work programs, such as those supported by the American Heart Association, use incentives and tools, such as pedometers, to encourage employees to forgo their cars and walk to work.

Some programs strive to make walking fun. Walk Arlington, an initiative of Arlington County, Va., holds scavenger hunts and sponsors senior adult walking clubs.

As you think about improving walkability in your current neighborhood or moving to a place with a higher walkability score, remember that the health and social benefits are plentiful and the payoff for home value is long lasting.

Sacha Cohen is a Washington, D.C.-based writer and founder of DCGoingGreen.net and grassfed media. She has written about sustainable travel, green buildings, and green communities for such outlets as The Washington Post and Planet Green.

Source: http://www.houselogic.com/articles/does-walkability-raise-property-values/

The Federal Reserve’s periodic survey of economic conditions, known as the Beige Book, this week reported growth in all 12 regions for the first time since 2007.

Here’s what the Beige Book had to say about real estate:

Boston. Commercial real estate leasing was flat in some areas and noticeably improved in others.

New York. Commercial real estate leasing has picked up noticeably although vacancy rates continue to rise in some areas. Residential rents appear to have bottomed.

Richmond. Residential real estate markets are improving with the inventory of homes in the Washington, D.C., suburbs falling to its lowest level in 18 months.

St. Louis. Commercial and industrial real estate activity remaina slow, but the suburban office vacancy rate increased in Little Rock; Louisville, KY; and Memphis. It was flat in St. Louis.

Minneapolis. Home construction is rebounding with building permits in the Minneapolis-St. Paul area doublinf year-over-year in May. Vacant commercial real estate increased in Minneapolis.

Kansas City, Mo. Home sales rose, but practitioners are less optimistic about upcoming months.

Dallas. Housing demand has improved, but bankers say many potential borrowers are being turned away because of poor credit.

Source: Associated Press, Christopher S. Rugaber (06/09/2010) http://www.realtor.org/RMODaily.nsf/pages/News2010061001?OpenDocument

Working with a contractor takes effort and know-how in order to keep your project on time and on budget.

You’ve chosen a great contractor, you have a clear and well-designed project plan, and now you’re ready to sit back and watch your dreams become a reality. Unfortunately, the hardest part of your job has yet to begin. No matter whom you’ve hired to construct your home improvement project, you’re going to have to actively manage the process in order to keep it on target, on time, and on budget.

Get apathetic or lose your focus for even a single day and you may pay for it—quite literally. Here’s what you need to know to stay organized and maintain strong communications with your contractor and construction team.

Avoid allowances

An allowance is a line item in the contractor’s bid for something that’s yet to be determined. Let’s say you haven’t chosen your plumbing hardware for your new master bathroom or the decking you’ll use for your new three-season porch. The contractor will put a number in the budget as a placeholder. But with such a wide range of price points for these products, his guess may be far lower than what you wind up spending, which can lead to cost overruns. Try to eliminate allowances by sorting out all of your material and product selections before the contractor gives you an itemized bid for the job. Otherwise, at least do enough shopping to give the contractor an accurate ballpark price for the materials you’re considering.

Establish a communication routine

Ask the contractor how he prefers to communicate with you. Depending on the size of the job and how his team operates, he may say that he’ll be on site to talk with you every morning before you leave for work. He may give you his cell phone number and say, “call me anytime,” or tell you that his foreman can handle whatever comes up. In any case, try to meet with the project leader at least once a day. This is an opportunity for you to hear progress reports and find out what work is scheduled over the coming days—and to ask your questions and voice any concerns you have.

Keep a project journal

Part scrapbook, part diary, part to-do list, a project journal will help you stay organized. Use a notebook to record progress, note things you want to ask your contractor, jot down ideas, record product order numbers, and anything else that comes along. It’ll help you keep things on track, communicate with the team, and provide a record of exactly who said what when—which could help you iron out disagreements later on.

Track all changes in writing

No matter how thorough your planning is, your home improvement job will inevitably evolve as it moves along. You may encounter unforeseen structural issues, or you may decide to include additional work as you see the project take shape. Any good contractor can handle these changes—just make sure that he bids them in writing first. Tell the contractor at the outset (and put in the contract) that you want to sign off on written change orders for anything that’s going to add to the bottom line of the job. That means he has to give you a bid (a description of the change and a fixed price for what it will cost) and you both have to sign it before the work is done. This eliminates the risk of expensive changes happening without clear communication about how much more you’re spending, and it helps you keep track your bottom line from one change to the next.

Check their work

It’s much easier to nip problems in the bud than to undo mistakes after the fact, so try to be proactive about checking your contractor’s work. As fixtures arrive on site, compare the model numbers on the boxes against your receipts, invoices, and the contractor’s bid to ensure that the right product was delivered. As walls get framed, check their locations and the locations of window and door openings against the blueprints. To the extent that it’s possible, conduct these investigations after hours or during lunch breaks so you don’t seem like you’re looking over the workers’ shoulders (even though you are).

Pay only for completed work

Money is power. As soon as you’ve paid the contractor, you no longer have the upper hand, so it’s crucial that you keep the payment schedule in line with the work schedule. The contract should establish a series of payments to be made when certain aspects of the job are completed. For example, your contract could stipulate that you’ll pay in three equal installments, with the last payment to be made after the project is complete, and after you and your contractor agree the work is satisfactory. Never put down more than 10% upfront; that’s too much cash to hand over before any work is complete. Your contractor should be able to get any necessary supplies on credit.

Be a good customer

One of the best ways to get quality work out of a construction crew is to make them enjoy working for you. That means being decisive with the contractor—and giving him a check promptly at the agreed-to points in the project. It also means being friendly and accommodating of the workers in your house: designating a bathroom that they can use, greeting them by name each morning, and perhaps serving them cold lemonade on a hot day. Complimenting their work (as long as you feel it’s worthy of praise) can be a great way to motivate them to do their best for you.

A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.

Source: http://www.houselogic.com/articles/getting-best-work-contractor/

Attractive custom built 1.5 story brick home with many upgrades at time of construction.

Numerous windows allow plenty of natural light into the living room. The open floor plan makes this room appear much larger than it is. The gas log fireplace with a wooden mantel enhances the elegance of the living room. A well designed large open kitchen with dining room is great for intimate gatherings or family reunions. The kitchen features an abundance of cabinets,counter space and 2 lazy susan's. All appliances including washer and dryer will stay. There is a half bath off the kitchen in the hall way to the den/3rd bedroom. The spacious master bedroom has a large closet and there is a walk in shower stall in the bathroom. The upstairs bedroom has a large closet and nice sized bathroom. There is an air conditioned storage room adjacent to the bedroom which could be finished as a bonus room or recreation/hobby room. The 2 car garage has additional storage areas for garden tools and plenty of space to park a riding lawn mower. The back yard has many nice features as well. You can enjoy breakfast or a candle light dinner in the screened-in patio. There are decorative trees and beautiful landscaping as well as a wooden fence for your privacy. Homeowners Association fee of $125/YR. has been paid until April 30th,2011.The living room has just been painted and all the carpet on the main floor has been replaced. Seller offering a one year Home Trust Warranty with a $ 75.00 trade fee.

http://thetrentiniteam.com/inc/pmisc?pid=1247

Many Americans are dealing with the stress of being in debt and their credit score is suffering as a result.

There are a number of steps a consumer can take to improve their score on their own, says a report from KTAR radio in Phoenix. While some companies promise to fix consumer's debt for a price, more often than not they aren't capable of doing so, and if they are, it can take years and ruin the consumer's credit score in the process.

Any credit damage can be repaired by the consumer or with help from free services, the report said. All a consumer needs to do is start following three steps.

The first step, the report said, is to start paying bills on time, every time, making sure to pay in full so that there is no outstanding debt of any kind. The second step is to pay down any remaining debt and to stop charging until that debt is paid off. And when paying off debt, consumers must make sure to pay off the debt with the highest interest first because that's costing consumers the most money.

A recent report in the Pittsburgh Post-Gazette said that payment history makes up the biggest part of what goes into a credit score, a full 35 percent. Therefore, it is important that payments be made on time every time. Missing just one payment for more than 30 days can knock 50 to 100 points off a credit score.

Source: http://www.credit.com/news/credit-debt/2010-06-02/the-dos-and-don-ts-for-repairing-a-credit-score.html

Working from home can offer many advantages including tax deductions, just take care what you try to write off for your home office on your return.

If you work from home, even on a part-time basis, you can probably save a few dollars come tax time. That’s because if you itemize your deductions on your federal tax return, you can write off as a business expense part of the cost of owning and operating your home. Everything from electric bills to property taxes may be fair game.

Those tax deductions can add up, thus lowering your taxable income and reducing the amount you owe Uncle Sam. Before you start spending that refund, however, there are a few rules you need to understand and heed. It’s a good idea to consult a tax adviser to be sure that you’re filing the right schedules and maximizing your deductions.

Passing the IRS litmus test

To meet IRS guidelines, your home office must be your principal place of business, or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn’t mean that all your work has to be done from home. If you’re an outside salesperson, you probably spend most of your work time elsewhere. But if you do you billing and return customer calls primarily from your home, your home office should qualify.

You can also qualify for the deduction if your employer requires you to work from home, as long as you don’t charge your employer rent. One big catch is that you can’t deduct expenses for your home office if you choose to work at home even though your employer provides you with an office. IRS Form 8829 can be used by self-employed workers to calculate the home office deduction, which should be reported on Schedule C.

Measuring your home office

The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn’t need to be a separate room—a table in a corner qualifies. But it has to be an area that’s used solely for business. The tax break also covers separate structures on your property, like a detached garage you’ve converted to an office. Unlike an office inside your home, a separate structure doesn’t have to be your main place of business to qualify for a deduction. That’s because the IRS believes your family is less likely to use a separate structure as a part-time play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH. 

To calculate what percentage of your house the home office occupies, divide your home office’s square footage by the total square footage of your home. If your home is 3,000 square feet and your office is 150 square feet, for example, you’d use 5% to calculate your deductions. Not sure how big your house is? Check the documents you received when you bought your home—there’s probably a detailed rendering—or measure the outside of your home and multiply length times width.

What can you deduct?

Once you’ve figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:

• Mortgage interest
• Real estate taxes
• Utilities (heating, cooling, lights)
• Home repairs and maintenance (painting, cleaning service)
• Homeowners insurance premiums

Just take each expense and multiply it by your home office percentage (the 5% mentioned above). That’s the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year. If your annual business expenses total $10,000, your deduction is $500. In 2009, lowering your taxable income by $500 to $99,500 would’ve cut your tax bill by $113.

Save bills or cancelled checks to prove what you spent in case of an IRS audit. Take an hour a week to file them away. Also, only repairs can be expensed; improvements must be depreciated. One catch: You can only deduct expenses if your business generates income. Expense deductions are limited if they exceed your gross business income, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service.

Don’t forget depreciation

Depreciation is based on the idea that everything—even something like a home—wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home: generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for you home office. Finally, multiply that by a depreciation percentage that’s set periodically by the IRS. There are caveats. For a crash course, read IRS Publication 946 or talk to a tax professional.

One reason to think twice before taking depreciation on your home office is that it reduces the capital gains deduction you can get when you sell a home. If you’ve deducted depreciation, you have reduced your capital gains exemption ($250,000 of profit if you’re a single filer, $500,000 for joint filers) by the depreciated amount. That could mean you’ll owe taxes when you sell, especially if you’ve lived in your home for a while.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

Donna Fuscaldo has written about personal finance for more than decade for Dow Jones Newswires, the Wall Street Journal, and Fox Business News. She’s currently a freelance writer with her own home office.

Source: http://www.houselogic.com/articles/tax-deductions-when-you-work-home/

Home equity loan and refinancing scams can cost you more than money—these scams can cost you your house.

Refinancing a mortgage to a lower interest rate can make sense for some homeowners. So too can taking out a home equity loan against the value you’ve built up, perhaps to finance a kitchen remodel or pay Junior’s college tuition. What doesn’t make sense is losing your home because you fall for home equity loan and refinancing scams such as loan flipping and equity stripping. Although scam artists can be very convincing, homeowners who know what to look out for are less likely to become victims.

Loan flipping

Loan flipping is a scam targeted at homeowners looking to get money back when they refinance a mortgage. This is often referred to as a cash-out refi. Scammers take advantage of this desire to tap the equity in a home to pay for things the homeowner couldn’t otherwise afford.

A cash-out refi in itself isn’t a scam. For some, it’s a smart way to borrow. What is a scam is when a lender, after receiving a few payments, comes back to you with an offer of another refinance, this time to fund a vacation or a new car. The easy money is difficult for some homeowners to turn down.

Many borrowers don’t realize how much they’re paying in fees to refinance. The U.S. Federal Reserve estimates the settlement costs on a typical refi to be 3% to 6% of the loan amount. Loan flippers often charge much more, plus they may quietly roll the settlement costs into the loan to disguise the total charges. Take a day or two to get quotes from several lenders and compare terms.

Loan flipping ultimately leaves you with more debt and more years that you’ll owe on that debt. When the equity finally dries up, you might not be able to afford your higher monthly payments and another refinancing will be impossible. You could be forced to sell your home.

Equity stripping

Equity stripping can occur in several ways, but at its heart is a scam artist who gains ownership of your home, borrows against it or sells it, pockets the proceeds, and disappears. You’re often left with a hefty mortgage balance and no place to live.

A telling sign of equity stripping is a lender that offers more loan than you can afford or that encourages you to pad your income on a loan application. Homeowners with low incomes but a good amount of equity built up are prime targets because they otherwise would have a hard time borrowing. According to the U.S. Federal Trade Commission, a lender that’s pushing a home loan with too-high monthly payments is likely counting of foreclosing on the property when you fall behind.

A variation on equity stripping has a scam artist talking you into selling your home at a discount or signing over the deed, perhaps with a promise of securing better loan terms if your name isn’t on it. The scammer promises to let you stay in the home as a renter until the refinancing is finalized, then you can buy back the home. In reality, the scam artist drains equity by borrowing against the house or selling the house, perhaps after evicting you.

According to Consumers Union, don’t agree to a home equity loan if you can’t afford it. A good rule of thumb: Your combined home loan payments shouldn’t exceed 28% of your gross income. The nonprofit publisher of Consumer Reports magazine also warns against signing any documents unless you understand them and turning over you property to anyone without first consulting a trusted adviser.

Phantom help

Watch out for unsolicited offers to refinance from companies claiming government affiliations. In particular, don’t be fooled by the use of official-sounding acronyms like “TARP” or official-looking website addresses. Scammers use these to gain your trust. Once they do, they’ll likely try to charge you for access to government assistance. Worse, they might extract enough personal information to commit identity theft.

You never need to pay to find out about legitimate government programs. A housing counselor approved by the U.S. Department of Housing and Urban Development can point you in the right direction. For federal refinancing and loan modification help, check out the Making Home Affordable program.

New disclosure rules make spotting scams easier

Many unscrupulous lenders have relied on confusing paperwork to dupe borrowers into paying excessive upfront fees on loans. Others would pull last-minute rate switches at closing. Still others would disguise prepayment penalties, which can prove costly if you ever try to refinance again or retire a loan early.

Balloon payments, which come due at the end of a loan term, can also catch borrowers off-guard. A lender may offer a low monthly payment on an equity loan, but only because the payment is interest-only. The principal is due in one lump sum. Surprised homeowners must scramble to refinance again, tap other assets, or sell.

Disclosure rules that went into effect Jan. 1, 2010, make spotting these types of deceptions easier. All lenders are required to use redesigned Good Faith Estimate and HUD-1 Settlement Statement forms that clearly disclose key loan terms—including interest rates, prepayment penalties, and balloon payments—and closing costs.

The GFE is an estimate of loan terms and closing costs, while the HUD-1 is a final accounting of terms and costs. The redesigned forms, cross-referenced by line number, must be used for mortgage refinancing and home equity loans (with the exception of home equity lines of credit, or HELOCs). The only fee a lender is allowed to collect to issue a GFE is a charge for a credit report, which averages $37.

If you don’t receive the new forms, don’t do business with the lender. If the estimates on the GFE don’t match the final figures on the HUD-1, ask why. Some, but not all, fees are allowed to increase within a fixed range.

Donna Fuscaldo has written about personal finance for Dow Jones, the Wall Street Journal, and Fox Business News for more than a decade. Like many homeowners, her mortgage is precariously close to being underwater.

Source: http://www.houselogic.com/articles/avoid-home-equity-loan-and-refinancing-scams/

The near-record low mortgage rates seen during the past few weeks may not be around much longer.

Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.

The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.

In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months.

“If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, N.C., who formerly worked at the Fed in Washington.

Source: Bloomberg, Bob Willis and Anthony Feld (05/28/2010) http://www.realtor.org/RMODaily.nsf/pages/News2010052801?OpenDocument

Private mortgage insurance is unavoidable for some homeowners, but don’t pay PMI premiums a day longer than required by your lender.

Private mortgage insurance provides protection to a lender in case you default on your home loan. Unless you make a 20% downpayment on a house, you’ll most likely be required to purchase PMI. PMI premiums on a median priced home ($198,100 in 2008) can run between $50 and $100 per month, according to the Mortgage Insurance Companies of America.

PMI might be unavoidable, but it isn’t eternal. Knowing exactly when you’re entitled to cancel coverage can save you a bundle. If you own a median priced home, you’ll pocket between $600 and $1,200 for each year’s worth of premiums you can avoid. That extra cash can be used to pay down your principal instead.

When PMI is cancelled automatically

Though often maligned, PMI plays an important role. Many aspiring homeowners, especially first-time buyers, simply can’t afford to put down 20% on a house. Without the safeguard offered by PMI, lenders would be reluctant to extend mortgages to low-equity purchasers.

For many borrowers, the coverage is short-lived. The Mortgage Insurance Companies of America, the industry trade group, estimates that 90% of homeowners are done paying PMI premiums, which are tax-deductible for some, within five years.

If you purchased a house since 1999 and are still paying PMI, you probably fall under the Homeowners Protection Act (HPA) of 1998. Your lender is required to automatically cancel your insurance once you’ve paid down your mortgage to a 78% (0.78) loan-to-value ratio, or LTV. Put another way, once you have 22% equity built up. Many lenders will treat pre-HPA loans in a similar fashion. Call to confirm.

To calculate your LTV, divide the outstanding loan amount by the original price of your home. If you have a $190,000 mortgage on a house you purchased for $200,000, the LTV is 95%. You’d need to get the mortgage balance down to $156,000—78% of the original value—to qualify for automatic cancellation of PMI.

When you need to request cancellation

You don’t necessarily have to wait for automatic cancellation. When your LTV hits 80%, you can petition your lender to end its PMI requirement. The process can take several weeks. Your lender isn’t obligated to grant your request, but you’ll bolster your case if you have a good payment history.

Start by calling your lender, not the PMI provider. You’ll probably need to make a formal request in writing and pay out of pocket for an appraisal. The average cost of an appraisal is $362, according to a 2009 Bankrate.com survey. Your lender will usually select the appraiser.

Although an appraisal is conducted primarily for the benefit of the lender to confirm that your property hasn’t declined from its original value, a high appraisal can work to your advantage. As your property value increases, whether due to a general uptick in real estate prices or specific home improvements, your LTV decreases.

Justine DeVito Tenney, a CPA and financial planner with Weiser LLP in Lake Success, N.Y., points out that even if you don’t meet the 78% or 80% milestones, you can get PMI cancelled when you hit the mortgage midpoint. On a 30-year fixed-rate mortgage, that would occur after 15 years of payments. This can come into play for certain high-risk loans that call for a longer PMI period.

A way around PMI premiums

In search of a PMI loophole? Look for so-called piggyback loans, also known as 80/10/10 or 80/15/5 loans. Basically, the home lender finances 80% and immediately gives you a second loan for 10% to 15%. You put down 5% to 10%. No PMI is required.

This alternative has traditionally been available for homebuyers with minimal capital but excellent credit. In tight lending environments, however, this arrangement is harder to come by. And even when piggyback loans are available, the extra interest you usually pay on the second mortgage may actually cost more than PMI premiums. Do the math.

Source: http://www.houselogic.com/articles/cancel-your-private-mortgage-insurance/

If you’re renting out your home, it might not be covered by homeowners insurance, so look into landlord insurance instead.

Maybe you’re moving up to a bigger home and holding on to your former residence as a rental property. Or maybe you’ve tried to sell your home without success. Whatever the reason, if you’re thinking about renting out your home, you need to look into landlord insurance.

Homeowners insurance covers your house if it burns down, your possessions if there’s a break-in, and medical and legal bills if someone gets hurt on your property. Problem is, homeowners insurance might not offer protection if you decide to rent out your home. Landlord insurance does. Set aside half a day to research policies.

Renting out your home raises risks

Homeowners insurance typically covers owner-occupied, single-family residences, says John W. Saunders, president of Slemp Brant Saunders, an independent insurance brokerage in Marion, Va. When your home doesn’t meet that definition because it’s being rented out regularly, it’s no longer covered.

Most homeowners policies will cover an occasional short-term rental if, say, you’re going away for a few weeks, says Dave Millar, a partner at Riley Insurance Agency in Brunswick, Me. “But if you have a summer home you’ve decided to use as an income property and are putting different people in there every week,” he explains, “that’s a lot higher risk for the insurance company.”

The risk is also higher for both you and your insurer when you rent out your home on a full-time basis. You have an increased responsibility for injuries on the property, whether to your tenants or your tenants’ guests, says Bob O’Brien, vice president of Noyes Hall & Allen Insurance in South Portland, Me.

Insurers also experience more claims on tenant-occupied properties because tenants typically don’t care for properties as well as owners would. Renters are less likely to either identify or report maintenance needs, says O’Brien, and may be unfamiliar with a home’s systems like the location of the water shut-off.

Look into landlord insurance

When you decide to become a landlord, inform your insurer and ask about a specific landlord insurance policy, sometimes known as a dwelling fire policy or special perils policy. Coverage from a basic landlord policy isn’t quite as broad as a homeowners policy, says O’Brien, but it includes big risks like fire, wind, theft, and ice damage.

There are several levels of dwelling fire policies: DP-1, DP-2, and DP-3. The higher the number, the better the coverage. “A DP-3 policy might provide replacement cost on the house and theft of contents coverage for your belongings,” says Millar.

Expect to pay about 25% more for landlord insurance than you did for homeowners insurance, according to the Insurance Information Institute. In recent years the average cost of homeowners insurance was $822 a year. Tack on 25%, and that would put the average annual premium on landlord insurance at about $1,025.

A landlord policy covering a one-year rental for a home in Maine insured for $370,000 and personal property for $10,000 would cost $1,170, for example, says Millar. Expect to pay even more if you allow short-term rentals. The same insurance for the home if rented by the week for 12 weeks during a year would be $2,170.

Other insurance policies to consider

Landlord insurance typically covers the house itself, other structures on the property such as sheds, the owner’s possessions (but not the tenant’s possessions), lost rental income if the house is damaged and uninhabitable, and some liability protection for the owner in case of injury or a lawsuit. Policies vary, however, so read the fine print. If lost rental income isn’t included, you might be able to add the coverage for an additional $50 a year, says Saunders.

Also consider an umbrella policy that provides additional liability protection beyond the limits of your landlord policy. “If you’re talking about owning more than one house, and your net worth is starting to build up, then you should consider an umbrella policy,” says O’Brien. You can usually get an additional $1 million worth of liability coverage for $250 to $300 a year.

Finally, O’Brien advises that you require tenants to buy renters insurance that protects their own property. Remember, landlord insurance only covers the owner’s property. In recent years, the average cost of renters insurance has run $182 annually.

Source: http://www.houselogic.com/articles/renting-out-your-home-get-landlord-insurance/