Home Insurance

Home insurance covers damage to a building and liability for injuries on the property. Rentals are covered by a landlord or dwelling policy, since a standard homeowner policy assumes the owner lives there. The premium is an operating expense that reduces cash flow and cash on cash return.

The default deal carries $2,400 a year. A $600 increase at renewal cuts cash on cash from 6.3% to about 5.9%. Insurance costs in some regions have risen quickly in recent years, so a quote on the specific property beats an estimate from last year's listing.

Coverage choices matter too. A higher deductible lowers the premium but raises the size of repairs you pay directly. Loss-of-rent coverage protects cash flow if a fire or flood leaves the unit empty. Flood or wind policies, where required, add a separate premium that belongs in the same expense line.

Further reading: Home Insurance on Wikipedia.