Builder's Risk Insurance

Builder's risk insurance covers a building and materials while construction or renovation is underway. Standard landlord policies often exclude or limit coverage on vacant properties under major repair, so BRRRR investors and their lenders commonly need a builder's risk or vacant renovation policy during the rehab.

The policy protects against fire, theft of materials, vandalism and weather damage during the work. Hard money lenders usually require it, naming themselves on the policy, before they release rehab draws.

Once the work is finished and a tenant signs a lease, the coverage switches to a landlord or rental dwelling policy. The default deal budgets $2,500 a year for insurance after the refinance; the renovation-period premium is part of the monthly holding costs during the rehab.

Further reading: Builder's Risk Insurance on Wikipedia.