All Forum Posts by: Costin I.

We had a roof damaged in a hail storm and got it replaced and paid (minus deductible) via an insurance claim. This is on a property that had a CSS done on it some 6 years ago when we got it (and placed a new roof at that time too part of the rehab). I talked with our CPA about doing a partial disposition but he thinks that "the insurance proceeds won't be taxable assuming all the money was put back into the property" and the "partial disposition is probably less favorable than doing a direct offset and just not putting new assets into service".

I understand the first part ("the insurance proceeds won't be taxable"), but I disagree with not doing the partial disposition. From my understanding of CSS and partial dispositions, one (taxing insurance proceeds) has nothing to do with the other (tracking depreciation or doubling on depreciating assets). 

CPA and CSS experts, can you help me confirm or correct my understanding? 

@Rick Trivedi - BP is no longer accepting new files in their Fileplace, so I can't upload it here anymore. The image pasted above is low res, but the link was supposed to take you to a full-res image. I'll try a GDrive share - CSS Diagram.png - does this work better?

@Igor Stankevich @Carter Manley @Lee Ripma - Here is a CSS Decision Diagram flowchart intended to bring together all the various questions when assessing the benefits of a CSS (via a professional or DIY). Hope it will give you some guidance in your quest.

[Past performance is no guarantee for future results, but if you liked this post, don't forget to vote]

@Sung H Kim - the general answer to this kind of question is NO. In today's age of information, you can find actionable intel online for free (or cheap, like on a $50-200/month budget) more than you can digest and act on it.

The only time a guruship might make sense is if you meet these conditions:

1. If you have a lot of time and are eager to get to work heavily.

2. If you have a ton of money burning a hole in your pocket and don't know how to put it to work for you.

3. From a source with good reviews and long history of doing it (rare occurrence). The expected return should be 10x, supported by "returning" students' testimony.

IMO, the higher it goes over 2K, the less likely (exponentially I would say) it's to provide you with knowledge/benefits. But for sure the sales speech is going to be better and mesmerizing playing on your emotions.

@Roseann Koefoed - Solo401K is a very powerful SDIRA (and the best of all SDIRA variants IMO). It has only 2 caveats for all I know: 1. You can't roll over Roth funds from other IRAs into the Solo 401K Roth portion (so beware of that, if you have now a big chunk of your retirement funds in a Roth). 2. You can't have employees.

Also as a general rule, placing a tax-advantaged investment into a tax advantage account nullifies the whole idea of tax-advantage - thus, IMO, purchasing and holding real estate in your SDIRA is not the best use of the IRA money. You can't take advantage of depreciation (both on your RE holdings and from syndications, and that is one the most trumpeted "advantages" of investing into syndication), you can't actively participate in flips, etc. You can however do other investments, private lending (HML), personal loans.

@Martin Nesta - if you bought under your name and with mortgages, then 1. You already left a trail behind yourself that will lead to you, even if you start using a land trust, and, 2. If you have mortgages, the note itself is a form of asset protection (because that lien takes precedence in the case of a forced sale). 

So, do you really need asset protection? What are you trying to protect? How are you doing on the precursors to asset protection?

See here a couple diagrams to help you in this quest:

Asset Protection Decision Diagram - to help assess the need for asset protection, and what to implement : https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-decision-diagram

Asset Protection Onion Diagram - what, when and at what cost one should implement in terms of asset protection - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2

@Owen Rosen - yes,$2,000-$2500 general and 1%-2% (or 2,5K-5K) wind/hail deductible is pretty standard (that's what I currently have on my policies).

What do you call a policy with $5,000 general and $10,000-$12,000 wind/hail deductible that offers 10K coverage on other structures, 5K coverage on water damage and with roof replacement cost of ~15K? At those numbers, the insurance will never kick in other than for catastrophic losses.

And also, are you saying Allstate, Progressive, and Safeco don't know what they are doing, or conspiring to offer only 230K coverage (on a house with a market value of 250K, which includes 40-50K in land), while Steadily considers necessary 340K minimum coverage (house only, and that for $2-$300 less in premium)? 

FYI - I checked with my insurers about increasing the coverage values, and I was told by the agent that is the value their construction cost algorithm shows and, while my choice, I would overinsure by paying for more coverage.

On the surface, it's great insurance - more coverage for less premium. Till you realize for what deductibles and have an actual need to file a claim.

@Kristi K. - not to me. They saw I was in Texas, saw I had in my claim history hail claims, and they "tailored" the policies offering such a way they made sure the policy was unusable for anything else other than a total loss. As I mentioned, for saving a couple of hundred dollars a year we would gain the "privilege" of paying $1K-3K MORE in general deductible (5K total) and $4K-6K MORE in hail/wind deductible (10K+). With that kind of deductibles, can't imagine too many scenarios where you could use the policies other than massive or complete loss.

Steadily might be a good policy for a place where nothing happens or one for total catastrophic insurance, but not for something in between. See my experience with them here. 

And their roof loss settlement is "variable by roof age", not actual replacement cost, nor depreciation adjusted (most insurances will hold the depreciation portion of a claim till the repair is done and only then release the funds).

Make sure you compare apples to apples when shopping around, pay attention to what they give you for "free", what deductibles apply and when exactly you can get coverage from the insurance and to what limits. Steadily failed the test for us.

I heard about Steadily from the authors of the latest BP book on self-managing. I thought to give it a try and ask for quotes from them. The process went fast online, and I was contacted right after through SMS and phone by an accommodating and polite rep. Their quotes were for much higher coverage (e.g current policy is 260K on a house with market value of 275K, including ~50K land, their coverage was 340K) and cheaper (~$350 less than current premium). It included similar "loss of rental income", same liability limits, included building code upgrade, vandalism and even 10% for water damage and 5K for rot.  This was the good part.

The bad part - not much. The "other structures" were only 10K, while everybody else goes by 10% of the coverage (on 340K coverage of the main structure, you get 34K other structures).

The ugly part - much higher deductibles: $5000 general deductible and 3% wind/hail deductible (on a 340K coverage it comes to a whopping $10K+ deductible...makes you understand their "largesse" on unnecessary higher coverage...if they know the rebuilding cost is 250K, they can give you 300K+ because they will not have to pay more than rebuilding cost, but it pushes the deductibles higher).

We concluded:

1. For saving a couple of hundred dollars a year we gain the "privilege" pay $1K-3K in general  deductible and $4K-6K in hail/wind deductible (and likely 80% of the cost of a new roof here in TX). General "return" in 15-20 years (vs. getting hit by a storm and having to cover that huge deductible), longer than the lifetime of a roof. 

2. A good policy for a place where nothing happens or one for total catastrophic insurance - the type where a fire destroys the house, or a tornado takes it away, including the bed bugs. But nothing in between, as those deductibles prohibit you from opening any claim that is not total.

3. More hype than usefulness. We decided to stay put.