All Forum Posts by: Greg Kasmer

Luca - When it comes to rental property insurance some key questions on coverage are:

Actual Cash Value / Replacement Cost - Replacement Cost is what is costs to rebuild the home and is generally more expensive and has better coverage (more $$). I typically use that as it's a "worst case scenario" coverage for me in case the house burns down because I know I have the money to rebuild. 

Deductible - I started out at $1,000 or 1% of value, but recently have increase that to something higher 2% to keep my premiums more reasonable lately as rates have gone up.

Rental Income Loss - I usually have this on my policy as if their is a major loss I know I can obtain coverage for income loss during the repair/renovation if I didn't collect rent.

Sewer Line Coverage - I don't have that on my policy, but more recently I wish I did. I've had two homes with sewer lines that needed to be replaced and wish I would have obtained that coverage.

Lastly, I'll state that obviously depending upon your area you may also need flood, wind, etc.. coverage. I don't have them because I don't need them, but I know those are big variables as it relates to the premium.

At the current moment, most of my home values are between $150-200k and I pay about $1,000-1,200 per property per year. That's my sweet spot that I've comfortable with. Hope this helps!

Sean - I'll defer on the LLC and legal protection question and go back to the bank account question. My credit union has a "master account" (one I first created) and then for each additional property creates a "sub account" with a slightly different account number that exists under the master account. I'm able to access all accounts with one login and keep the financials separate. Recently, I've started using a property management company and the financials are kept separate (generating income statement per property) so the need to have separate bank accounts is less needed now than before. Let me know if you have questions. Good Luck!

James - All the banks/credit unions I've delt with that loan to an LLC ultimately want a personal gaurantee on the loan. The good news is that once the loan is to the LLC the loan doesn't show up on my personal credit history. Now, that's not to say that a bank/credit union won't offer a non-recourse loan, but I think it's going to be an exception rather than the rule from my experience. Good Luck!

Edward - I don't have any recommendations for your area, but here's some suggestions on how to find some potential painters: 

1) Search on thumbtack website in your area for service people looking for work (www.thumbtack.com)

2) Go to your local REIA organization/meeting and ask for referrals from members/attendees.

3) Go to a local Sherwin Williams and pick up business cards and/or ask the person at the front desk who is a local painter.

4) Do #3 above at Home Depot or Lowes

5) Ask other contractors (HVAC, drywall, electricians) that you  know if they have a good referral for a painter. 

Hope this helps! Good Luck!

Ryan - I would second Gino's suggestion. I would check with regional banks/credit unions as they typically can provide funding for the purchase as well as rehab. Of course, the terms vary, but I would think you should be able to find a bank/credit union willing to offer 70-75% LTV on the purchase and rehab. Good Luck!

Mica - This is an age old question and one that you'll have to weigh the pros and cons yourself. I will say that you can always start off managing yourself for the first 6-12 months and see how it goes. If you don't like it you can always hire a property management company. I started off my managing my rentals and it was a great experience for a while until I hired a property manager. I'm now much more astute/aware of the role and what I look for in property management. 

A few suggestions to manage your own properties would be:

1) Read 2-3 good property management books. One of the best ones is a Bigger Pockets classic:
Amazon.com: The Book on Managing Rental Properties: A Proven System for Finding, Screening, and Managing Tenants with Fewer Headaches and Maximum Profits (BiggerPockets Rental Kit, 3): 9780990711759: Turner, Brandon, Turner, Heather: Books

2) Never tell your tenants your are the owner. I prefer that you tell them you're the property manager for the owner. Or, in your case maybe you live in the 4-plex and you manage it on behalf of the owner/other partner because he/she put up all the money for the deal. In that way, you can always get more time by saying "I need to check with the owner/partner and will get back to you"

3) Look around for several service people/contractors. Find 2 handymen, 2 electricians, 2 HVAC, and 2 plumbers that you can call on for repairs if needed. I've used a decent resource called thumbtack to find new contractors in a particular area I wasn't familiar with. (www.thumbtack.com)

4) Decide on the standard forms (leases, late notices, etc..) that you will use. Most leases need to be local to the state you're operating in, so double check the lease you have works in your state. 

5) Set up a google voice account (vanity phone number) and email account so that tenants can call/text you not using your own cell phone number and email. That will help separate personal from business. 

You'll pick up plenty of other tips along the way, but those should get you started. Let me know if you want to chat. Good Luck!

Luke - It's hard to say what you'll loan terms will be in 5 years, especially given the changes going on now with lending requirements. If I were you I would call 3-5 local lenders (banks and credit unions) to see what type of terms they are offering now. To be conservative, you can always assume the lowest LTV offered today and use that as a baseline for what you might expect in 5 years. Good Luck!

Hannah - This is always an interesting question. My personal bias is to generally use the funding to expand your portfolio (down payment) instead of paying off debt. However, this is considering you are comfortable with your current loan structure (term, interest rate, etc..) and that it's fixed for a long enough period of time. From an analytical standpoint you should think about where you would invest the money for your next deal and then calculate the potential return on that money. If the return on your $25k is greater than 6% (interest on your loan) you can be confident that the money is "working harder" for you in another property. However, this assumes you can find another property within a reasonable time and get that money working in the new property. If you have questions, let me know.  Good Luck!

Xorge - Sounds like this is a scenario in which you and the tenant need to go your separate ways. Not sure what you have in your lease, but read through to see what type of early termination clause you have in the lease. Hopefully it states some financial penalty (1-2 months rent plus security deposit). If I were you, I would suggest you go for an early termination and ask to meet them at the property and do a "walk through" as part of that early termination process. You can then assess if someone else is in house and get a sense if any damages occured. I would then set a date for the early termination and get a document to state the agreement on the date of the early termination.  Assuming you have that happen, I would go in and change the locks the day they leave the house to avoid anyone else coming into the house and squatting. Also, the day they leave I would begin marketing the house for rent. 

James - Congratulations! You've made a HUGE step in your real estate investing career! I wish the best of luck to you... The next deals you do will be even better than this one. Just to stretch you're thinking, do you have a plan for capital for the second, third, forth, and fifth purchase? Hopefully you do! If you want to talk, please let me know!