All Forum Posts by: Mike H.

I'm currently at a reliable/well-known insurance company.
My agent is very good and my coverage is pretty decent.
My deductible is 1,000 and I'm at replacement cost with
some pretty significant amounts above what I actually owe.

The being said, my rates have really gone up considerably in
the last year. I was paying $500 to 700 a year and I now seem
to be getting rates from $700 to 1,000.

My biggest problem is the replacement costs are out of whack.
A house I bought last year has a replacement cost value of 250k.
I am all in 88k. I really see no reason to use insurance as
a lottery ticket. And my real estate company can't lower replacement
cost to what I want.

I just want to make sure I can pay off my mortgage and have about
10k to 20k to take care of the lot. But I also want to make sure
if I have any small to medium claims, I'm not coming out of pocket.

Found another insurance company - from a lead on here - that
has cheaper coverage because they'll let me drop my replacement
coverage amounts to something more reasonable.

It should save me about $300 a month (currently paying about 1k a month).

They make it real easy to add houses and cover houses that are vacant
and/or need rehab which will be convenient for my hard money lender requirement.

Am I missing something? Is there a risk in not having the actual replacement cost to rebuild the house? I know that I could get a windfall if
a house would actually have a complete loss event but is that really
where I want my $300 a month going? Waiting for that to happen?

The other big downside to switching is that the deductible on
the new plan is 3k and thats as low as they'll go. The deductible
on my current plan is 1k.

I've only had one claim in the 4 or 5 years I've been doing this and
have 15 total houses. So I'm not sure the deductible is really a big issue.

But it does mean I may end up coming out of pocket a little if I had
a small fire or some wind damage.

If you could help clear some of these options up, it would be much appreciated.
I'm leaning toward the new carrier because of the ease to adding properties
and the monthly price savings. I'm still insured in case significant damage occurs. But if its something minor, a 5 or 6k repair, its going to cost me $3k versus 1k with state farm.

Then again, 4 or 5 years with 1 claim, the 3,600 a year I save will cover the the extra 2k in deductible.

Honestly. If I was a money manager or hedge fund guy, I don't think this would interest me one bit. Why should I buy a bunch of properties all over the country when I could very easily buy the same number of properties in one state?

If you wanted to buy 2500 properties in the same state, you could very easily do it in a period of 12 to 18 mos. And have much better homes in much better areas as you could cherry pick the homes/towns you're in.

I guess the only way it makes sense to buy these bulk home packages is if the discount was so great that you couldn't resist.

Its interesting that many of them already have renters. I didn't even realize that the govt owned homes that had renters in them.

That would make it easier to deal with though since they probably wouldn't need to be rehabbed - at least right away.

Why do these govt agencies even bother selling them though? Just keep them, hire your own property management firms and let them manage the rehab and rentals and the govt would pocket all the profits until the market turns back up.

Again, If they'd be worth 60k apiece and you'd be all in at 52k (45 plus 7 for repairs), that still doesn't seem like much of a discount. I would think you could get "all in" to a house at least at 75% or better - especially given the fact that you're paying cash.

Count your lucky starts you found a private investor like that. And I'd be doing everything I could to find some deals with money that cheap and easy.

Good luck - although it doesn't seem like you'll need much after finding him. :-)

I second Mike J's post. That private money lender has to be a relative. My aunt does some for me and I thought she was overly generous (7% and 3 pts). But your lender is absolutely amazing.

I'd still pass on that deal though. Why pay FMV if it needs a bunch of repairs too. You shouldn't be paying anywhere near FMV in this market - particularly if you can pay cash.

My guess is your private lender will do 4 individual houses as well and I'm sure they would be even happier to be the note holder at 70% LTV versus 100% LTV - even moreso given that the 100% LTV deal would require some pricey repairs (roofs and foundation).

Why do you tease me like that? I was all excited.
Unfortunately, KB is not in Illinois.
Then again, if they were, they probably wouldn't be
offering these terms. :-)

Is there any reason you can't just get a loan from your IRA? Or convert it to a self-directed IRA and use that for the funds? Seems that would solve your issue with the owner occupant thing. I've heard all kinds of reasons why you can't get caught or whatever, but why bother risking that you'll be the one.

The difference is only a matter of about $50 a month and eliminates any risk or other issues you may have - i.e. if you actually try to buy an owner occupant house.

As for the rental, I don't see an issue with renting to your daughter. She'd be the least likely person to damage the place. But if she needs roommates, that would worry me. What if the roommates move out? Can she pay the rent?

I'd rather rent to one family than a group of people. Chances are very high that one or more of them will move out mid-lease and then how are the others going to make rent?

But if they aren't getting a mortgage payment for over 90 days, the loan should be categorized as a non-performing asset. It makes no sense that the banks should be getting a pass on allowing million dollar homes to continue going forward without making payments and the bank is continuing to treat them as good assets.

Thats a huge risk to the taxpayer because that means these banks can continue to pile up non-performing homes without any consequences and we're the ones that end up on the hook to bail them out.

And then some other bank gets to come in and clean up the profits when they buy the bank back from the taxpayer again.

To me, a house that hasn't made payments in 90 days, should be every bit the negative mark on the bank as a house that they've foreclosed on and are trying to sell.

Banks need to be regulated with some common sense and need to be required to do what makes the most sense. Getting nothing from that house for 2 or 3 years costs the bank more money than getting nothing for 1 or 2.

Read the link to the article above.

Whats really interesting to me is that, while I understand that there are all kinds of crazy accounting rules that make certain activities look good on paper. At some point, when does common sense take over a bit for these banks.

It makes no sense to me that the bank would rather sit on a million dollar home getting no payments then simply foreclose and sell it. The bottom line is they're going to have foreclose on it anyway.

Doesn't it make sense to want to do it sooner rather than later. The longer you hold it, the more it will deteriorate, the more taxes they'll owe, the less time they'll to use the proceeds of the sale to do something with.

It just seems silly to think that the accounting rules for a bank favor them to sit on a house making NO payments than to simply foreclose, sell and move on as fast as possible.

I don't care how it looks on their balance sheet. The bottom line is that money is still money. And the longer you let the asset go without returning anything, the more money its actually costing these banks in the end - UNDER ANY ACCOUNTING RULES!

These banks are simply run by people that are so worried about their stock price today, they don't make good decisions using common sense.

And anybody that wants to argue their nonsense, just take a look at the subprime loan fiasco that started this whole thing in the first place. Bankers that were making completely ridiculous loans but did so because it was adding to their bottom line in the short run but cost the banks billions in the long run.

Sure. I can tell you all the banks I've talked to as well. That is, if you like to read a long list. :-)

Send me an email and I'll give you my story since it probably doesn't belong on here.

thanks,

[email protected]

Hmmmm. Am I reading that right? 65% of the APPRAISED value if you pay cash and you can do that after a month?

I'm wondering if that would be a better way to structure my private loans. If my relative does a private loan with me and I pay cash, would I be better off no longer recording a mortgage?

Instead of waiting 6 months, I could do it in 1? Provided the appraisal value came in at 65% that is. But even if I have to put in 5% to 10% of my own money to get there, doesn't that seem like a better way to go?

Then again, the brokers out here where I'm at (Illinois) really seem completely clueless in doing investor loans once you get over 4. My plan was to refi into conventional until I get to 10 in my name and then move some over in a blanket loan to keep adding more.

I've got 7 in commercial loans now that don't count against my limit. But whats the point if I can't get any of these lenders to do the 5-10 financing....