All Forum Posts by: Jer Yeung

Aunt and mom looking to cash out then?  Not to be insensitive, but is the $750k/year asking price beyond what you're able to afford today because of the lack of a down payment that could be solved via seller financing?  Or is it due to the income required to support the mortgage if the property is purchased at $750k?

Additionally, depending on what your aunt / mom's timeframe is for selling, you may want to consult a cpa or trust attorney to figure out if there are other ways to transfer the property with fewer (if any) tax implications.  

Are you going to buy it and live in it?  Is it just the emotion of it being your grandfather's house that is driving you to want to keep it? or does it make financial sense somehow in the long run?

Why is it that your aunt and mom are so adamant about selling it?  Is the house paid off? or is there a mortgage that they have to pay if the property isn't sold?

yeah, mortgage should have no issue with it one way or the other then.  I'd contact a local insurance agent who handles commercial and personal lines to get the coverage squared away.

I wouldn't think that it would cause an issue with the mortgage, as that didn't change from when they did their appraisal - it was always a storefront, correct?

The liability exposure is going to be different as a landlord and as an owner/occupant, so as @George Skidis said, you're going to need to get a commercial policy to write the coverage as a landlord, and then get a renter's policy to cover your own property and liability.  Part of the issue will be that not many carriers will write mixed (personal and commercial) use if it's 1-4 units (at least where I am based on the earthquake coverage requirements).  You might end up with a non-standard or a surplus lines policy.  

Where are you located?

infinite banking, at least in the US, is predicated on being able to take loans against your cash value without it being recognized as income, with the entire balance (or remainder of it) accruing dividends.  Are there specific tax clauses that would preclude you from borrowing your own money out of a cash value life insurance policy?  That should be something that any qualified life insurance agent could tell you, as that's not an infinite banking concept - that's just a cash value life insurance concept.

As far as whether it's better to manage the funds yourself and buy term... maybe.  Part of it depends on your timeline, and part of it depends on the rest of your portfolio. I like selling permanent life insurance as an option for a more stable long term return, allowing you to get a little more aggressive in your stock market holdings.  It's also a good way to get some sort long term care or chronic illness coverage.  

the downside to a term is what happens if you need life insurance later, but your term expires and you're not as healthy as you used to be?  then... you pay through the nose.  It's something you should discuss in detail with a life insurance agent - just make sure you ask all the questions up front and aren't just buying what they pitch. If you're going to do it, consider IULs, and make sure you max out the cash value accumulation without running into tax implications (not sure if that's a thing in Canada or not).

agree with @Brian Armstrong - the options are limited, though they are out there.   Generally they're a little more expensive as well.  Pairing a regular landlord policy with a daily or "per rental" policy doesn't work, as that's still not what your landlord policy is designed / rating the risk for (if / when they find out, you'll get cancelled or non-renewed pretty quickly).

It's similar to the uber / lyft / rideshare insurance in that you really want to make sure you have a policy that is intended to cover the exposure.  

Once you're in escrow, you'll get a copy of the CC&Rs - read the clauses related to insurance and what you as the unit owner are responsible for.  The vast majority, as others have said, insure the structure, or common walls, or some just the exterior wall's studs and you're responsible for the interior.  SOME (and as an insurance broker, I've seen very few of these), cover EVERYTHING, including the interior and betterments - however, there is a catch.  They insure / cover that to how it was ORIGINALLY built - meaning if it was built with carpet flooring and linoleum countertops... you're not going to get hardwood floors and quartz countertop back.   Still though, the vast majority will say that you're responsible for the interior.  The CC&Rs will dictate the rules here.

Condo coverage though, is typically really cheap - though in CA, it's become VERY limited as to who will write a tenant occupied condo as new business.

If your HOA does happen to cover everything as far as the property is concerned, you would still want to get a liability policy to cover your exposure as the owner. You could sometimes have your primary homeowner's policy extend liability, but typically getting a standalone liability policy is the ticket.

put together an amortization table and compare the 5/1 ARM and the 30 year fixed... if you paid both at the 30 year fixed payment (with the balance on the 5/1 ARM going towards principal). Even with the maximum increase on the ARM, you'd still come out ahead after close to 10 years IIRC the last time I calculated it. You could then refi the smaller amount at a higher rate and still come out ahead.

At that spread, I think it starts to become worth looking into - though for simplicity's sake, almost everyone will go with the 30 year. For what it's worth, the 30 year, even at 5.75% is still historically a low rate. It's not like you're locking yourself into a HML type rate.

^^ This.  Your liability changes as a landlord (compared to an owner occupied home).  It might actually be less expensive considering that you're likely not going to have the same amount of personal property in there to insure anymore, and that's even if you were renting it out fully furnished. Unfortunately, it's not something you can "convert", but your insurance agent should be able to get that set up pretty easily.

I didn't go through any deals with MTP, but am working with MI.  The process is smooth, and my first property was leased out on a 2 year lease before we closed, with another that I'm working on in the same situation. 

I'm not sure how long others have operated this business model, but with MI having worked through the recession, that made me just that much more comfortable with their business.  I'm also more comfortable with their metrics given that every house they put on the market fits within similar criteria and has similar renovations, giving more weight to those metrics.  I'm looking forward to getting out there in a few weeks and checking out their operations and hopefully see some of the properties in the pipeline.

Based on what I've seen here, if you're willing to go TK, then those that you listed are good ones to choose from.  

Best of luck!