All Forum Posts by: David Call

Here's the Dave Ramsey way to ask the question - -- If you had no student loans, would you go borrow $40k and put that money in your checking account? If you say no to that, then pay off the debt.  You can always -reborrow money.  Most really wealthy people are debt free. 

@Gervon Thompson

I would pay off the debt so you have a clean slate. There are things that being debt free will do for you that are not math related or crunched with numbers. You’ll have the ability to run your life ultra lean which might allow you to invest in something slower growing at first but with long term potential with low overhead.

Your options become broader. If and when you decide to buy an investment you will also look better to the mortgage company for the loan with a low debt to income ratio.

@Boone Tyson, I like the way you clearly laid all of that out. It's written well and simply illustrated. I think 75% LTV or lower is a pretty safe position to be in on any property. I'd prefer or recommend being closer to 50% max LTV (loan to value) just in case something goes sideways. The best laid plans always look great until 2 or 3 unplanned and unexpected things happen at the same time. Your tenant loses their job and you face an unexpected financial setback at the same time. It doesnt take too much for plans to go awry. Add to this a small decline in market value and it can take 5-7 years to recover. I guess it all depends on where you land on the risk continuum. Great article and food for thought!

@Alonzo Moreland - your best option is to get in touch with an independent insurance agent.  They can shop around for you and know the coverages available with different companies.  There are so many different policy types and coverages that you could spend a LOT of time learning about it and still not get the best coverage and price.  Most Independent agents have access to 30+ companies so it allows you to do what you do best while they do all of the research for you.  This is what I do for my primary income in Texas and Utah, but not in MD so I have no skin in MD. 

If you're looking for replacement cost, you can find this easily using a Special form or DP3.  This type of policy is very similar to a standard homeowners policy but for landlords.  Make sure to consider loss of rents because it can come in handy if you have a vacancy as a result of a covered claim.  Let me know if I can help in any way.  I have a guide I made for investors and insuring rental property if you want to DM me and shoot me your email.  You may find it beneficial.

Manish, as an independent agent, I'm very familiar with limits set by different companies like you mentioned with Travelers.  With the wildfires in CA, many companies like SF seem to be restricting their exposure which they're doing in TX as well by being "premium priced" to slow the flow of new business.  I don't get anything out of it, but I know a lot of great CA agents that can shop around for you and can point you in their direction if you want someone that's good.

@Nathan G. You are correct. There are some insurance companies that will cover aggressive breeds but you’re narrowing your options greatly by doing so which is most likely going to cost you more.

FYI, I heard this week that Safeco insurance is now rating their homeowners policies for Airbnb/short term rentals for homeowners policies so these companies are starting to come around slowly but surely. This could work for you as a landlord.

@Nathan G. Like Karl B mentioned above make sure the dog is never a mix or full bred pit bull, Rottweiler, Doberman, German Shepard, chow chow, etc. These dogs will cause your insuraNce company to either drop you or they will exclude liability. Even if one of these dogs jumps on someone in a friendly way and that person gets hurt, you could be in the middle of a lawsuit.

I know of a case where a friendly dog knocked an elderly person down on a sidewalk, the person hit their head and later died.

Btw, I’ve been self employed now for 8 years and it’s hard but rewarding. While you’re young, this is a great time to take more risks (maybe not debt so much) with career choices. Graduating from college debt free is awesome! Great job. Being debt free will open up opportunities for you later. It allowed me to start a business while being the sole income earner for my household of 4 because I didn’t have to make a huge living.

@Timothy Cavalieri, the turtle wins the race.

My little bro did some super aggressive and risky real estate deals when he was younger and made a LOT of money quickly then lost it all quickly and had foreclosures and probably bankruptcy. Meanwhile I’m over here doing boring regular investing. Years later he’s a doctor and my net worth is still much higher because I planted seeds while he was hunting for killer deals. Take your time and make regular investments along the way to find a great deal. Timing isn’t always on your terms. Look for a good opportunity when you’re ready.

I’ve passed up great real estate opportunities because I wasn’t in the right financial position. Do I have some regrets? Yes, but if you’re broke, you can’t put a down payment on an investment.

Best of luck to you