All Forum Posts by: Bryan O.

It seems like everyone is commenting about "use your reserves" or "kick them out". All of my bank documentation for rentals has a section that requires:
"RENT LOSS INSURANCE. Borrower shall maintain insurance against rent loss in addition to the other hazards..."
Which means your policy should have rent loss claim capability. My insurance company calls it "Fair Rent Value". I have not yet had a chance to look into the exact coverage scenarios, but assuming your tenants being forced out of work by the government and then halting evictions is covered then the scenario is already planned for and already insured against (by those using "normal" home loan leverage).

Any insurance folks have input here?

Has anyone looked into their insurance? Every non-owner occupied loan I have seen requires a Loss of Rent rider. I plan to reach out to my tenants over the week as things evolve to get a feel and then look deeper into those policies.

@Joe Villeneuve you don't understand what a lost opportunity is. In a $0 down scenario, you seem to believe that the only possible option that exists is the one you took, even if it is bad. You miss the understanding that the other 100 deals that you could have done that are significantly better are, well, significantly better. Because you blew your only $0 down option, you have significant lost opportunity because of all the deals you can no longer make because you no longer have capacity and you are building capital at no or low speed. I won't bother to reply anymore because your credibility with me is gone and there is no point wasting anymore time with it.

@Joe Villeneuve I don't know another way to describe it to you and am a little shocked since you are typically sharp. I will try to do it with basic math since you haven't had enough coffee for abstract. Which option you would choose:

Option 1: You have $0 down and super small reserves. Purchase a poorly chosen property that leaves you $0 remaining and nearly no increase in cash flow

Option 2: You have $0 down and super small reserves. Purchase a property that leaves you $0 remaining and provides $1k/month in cash flow and forced equity of $100k in 6 years

The difference between the 2 is called opportunity cost. By choosing Option 1, you stifle future growth and cost yourself years of compound or even exponential gain. That was what I did. No clue where you are getting "6 months" from in your post. Focus on quality of post, not volume. If this scenario doesn't help you understand, I don't have any other color crayons to draw it in.

@Joe Villeneuve how many $0 down, 30 year fixed loans do you know of? I used mine on a not very good deal, which means I was stuck making "infinite returns" and super low cash flow. It took me 6 years to build up enough to buy another property because my $0 loan was tied up, I wasn't building capital with a low cash flow property, and I didn't buy something I could force equity with.

Had I bought a smarter property with $0 down, I could have had great cash flow and used that to purchase an investment property within a couple of years, or forced equity to refinance out and reuse the $0 down again. Opportunity cost isn't a simple CoC or ROI formula. You have to advance past that and look at the greater picture.

@Anthony Wick it is possible, but when the only listed requirement is the 3.5% down payment, that's a pretty good indicator that there is a reason. PMI wasn't mentioned, interest rate wasn't mentioned, only a 3.5% down payment. That is why I assume reserves are low and I might be wrong, but to your small miss being a huge error of a conclusion, people should not buy duplexes without enough cash reserves to be able to do 5% rather than 3.5% ;)

@Min Kim I think you need to understand how to calculate returns or analyze a property a little better. Any specific rate of return is never guaranteed for any property. Your video is correct because your payment is higher because your loan is bigger. Is it a big deal? Not really, when many people are doing 3.5% down or 5% down.

@Joe Villeneuve "If you have a zero DP, and positive CF, how much did the property cost you?" It costs the ability to buy another with 0 down for the life of that loan. My first $0 down property cost me the next 6 years of investing. Opportunity cost is the most expensive part of many transactions.

@William Henry your 3.5% down pretty much sealed the deal for your choice. If you don't have enough for even 5% down you probably aren't in a good place to be buying a rental. With the FHA loan, you will pay PMI for the life of the loan, but the interest rate is lower than conventional. In my 1 FHA 3-plex it made the payment the same as conventional. If you went conventional with 5% down, PMI will still be there, but you can have it dropped without refinancing. Most conventional owner-occupied 5% type loans were for single family, but there were a couple out there last time I checked a couple of years ago that were doing for up to 4 unit.

@Michael Nahm it doesn't really matter if they bought renter's insurance or not at this point. It is their expense however it gets paid: from their pocket or from their insurance. Let them know it is on them to cover the cost.

@Adam Widder make it part of your contract that the seller delivers one unit (or a specific unit) vacant. The onus is on them to buy a tenant out and make sure they are gone. It also tells the lender that you will have the means to occupy, which will let your loan proceed. Without that, unless leases end prior to your occupancy requirement they will probably not authorize the loan.