All Forum Posts by: Jim Goebel

@Cara Lonsdale

Great to hear of some other options/companies out there that offer warranties.

One benefit to Homeserve that we found was that there's no deductible whereas for instance an American Home Shield has a $75 co-pay deductible for the folks to show up.

However, on the downside there are a max number of calls/year (I think 2) per warranty category. And then, like you say, the 1lb charge is a joke.  From my experience those companies just say that you need some, put some in, and that gives them a chance to get a $100-500 padding for profit with little ability to verify what they've done in most cases.

So Cara, out of curiosity, have you gone with a home warranty?

Also, and we aren't wired to file many insurance claims but my assumption is that actual home insurance doesn't cover typical items that require maintenance over time?  IE a water heater goes out - insurance would be more for catastrophic items such as a windstorm blows a big branch down on to the roof, or a fire, or something?

We were just yesterday looking at some options for home warranty type of services and I think crowd-sourcing this one may help:

The provider we were looking at specifically was HomeServe, however there are numerous other companies.  Details in the fine print do matter, for instance a typically large and padded, profitable expense for HVAC companies is their crazy markups on their refrigerant, and there's a max of 1lb of charge that would be covered under the HVAC portion of the plan.

Our biggest pain points given where we are (7 rentals currently) has been finding competent and trustworthy people in the HVAC and plumbing fields.  We are in that middle ground where we don't have enough stuff come in where we can keep the good people locked in/engaged, but we've got enough stuff that we need help.

The two strategies that we think are most viable are to evaluate doing a piecemeal (a la carte) approach to the use of these warranties, or to just pay for all for all properties.  For instance, of our 7 rentals perhaps the ones with 10+ year old water heaters, we pay the $7/mo or so for the water heater repair/replace plan.  The available options for warranties break down into things like:

1. exterior main water line coverage
   
2. exterior main sewer line coverage
   
3. interior plumbing line coverage
   
4. HVAC (cooling system) coverage
   
5. HVAC (heating system) coverage
   
6. hot water heater coverage
   
7. electrical system coverage

We broke down two viable options:

Option 1:  Evaluate Risk/reward likelihood on each property as to whether we get individual coverage, total yearly cost of this is ~$2100/yr which comes to approximately ~2% of our gross rents

Option 2: Go with full coverage on every property we own, total yearly cost of this is ~$5100/yr, which comes to approximately 4.5% of our gross rents.

We usually work off a 15% goal/assumption (of gross rents) that allows for costs tied to vacancy/maintenance/capEx items, which so far (been operating for 3-4 years) we have been significantly under that. Barring a few major CapEx items like new furnace/ACs, we have been fortunate and doing well based on this. Our rents are towards the top of market.

I'm often cranking on actively managing a project, as I am now - the cost/hit to profitability is big but it does feel like we are at a point to absorb it and it makes business sense.  I'm getting pulled in enough directions that evaluating options for property management has already been 

We enjoy the tenant management side of things, think that the rent pricing is absolutely critical to keeping things on the up-and-up, and we also think managing the turns is something that makes sense for us over time - so I think getting the help per the above makes some sense.  I would say I'm leaning towards pulling the trigger on the Option 2, but I wanted to crowd-source other thoughts from the community.

Going this route wouldn't completely excuse us from the 'hands on' management, however things like roofs, wrapping windows, and other maintenance items I've found the ability to provide a lot of value between using our bucket truck and metal break.  Other past maintenance items that may come up that we've had would include things like:

1. Garage doors/opener issues
2. Bugs
3. Roofs
4. Exterior maintenance items (gutters, fascia, soffit, etc)

I'd be really interested in any thoughts from the community from going down this road. To me this seems like a reasonable other option for the current point in time given that we are in the area and still actively manage our properties. It seems that retail rates for property managers have us give up too much - we usually are looking at terms like : 6% of gross rent, 1st month rent for tenant placements, and that's not even counting costs and markups from the actual work (ie: Capex, maintenance etc)

Thanks in advance!!!!!!!!!!!!!

Jim

@Dmitriy Fomichenko

I'm sorry if this question gets the thread off topic.  Before just now I had never heard of a solo 401k.

I'm curious if there is any way that my wife, who is currently w-2 employee, may more actively utilize some of her existing 401k funds to more actively manage.  I don't know what form that would possibly take, however we have been achieving much better returns on our real estate dealings than we would count on in the stock market, etc.

I am familiar with a self-directed IRA and understand that while she is still working that is not likely an option for her.

Are there any other options?

Something that just came to mind would be for my wife to simultaneously get self-employment started while working full time, would she be allowed to then start a solo 401k and do a rollover/transfer of her existing 401k?

Thanks

With most banks, NO.  

With some banks, perhaps.  Depends on what your track record and credibility is as someone doing this stuff.  If you have other properties that are producing income, that may help.  Time may help.

Some couples often have one traditional W-2 wage earner and someone doing RE or other entrepreneurial items.  That's kind of what we do, but we have gotten to a point (40-60k net) / year with rental income that banks have to consider that as a real thing in terms of lending.

I'm sorry a correction: the basic and standard product DOES lend itself to scaling more effectively.  The high end custom one does NOT.  I responded too fast.  What market do you serve?  Would growing your team and going faster not come with some crazy challenges with ensuring quality, etc?  I see that as the key question.

Hm

I'd think slow and steady but it depends on what your product is.  The basic and standard product doesn't lend itself to scaling quite as easily.  More capital doesn't always help.  

@Caleb Stephens

looks like you double posted

@Renae Pinkney

I'm an engineer so have a brain defect but one of the biggest realizations about myself that I made was that I often lacked the ability to take the 'first step' because I would continually be thinking / analyzing etc.  Your first step is your most important but there's also lots of wisdom in the saying 'do something.'  Literally.  Do something.  Not think about doing something, but do something.  

Don't do something that causes catastrophic failure...  But other than that, most of the time a bias towards action is a very good thing.

Yeah that's strange @Danielle Baylor

We've never run into that.

My guess is that they are just wanting to verify current balance and payoff info, and/or ensure that you are current on things.  I'd recommend offering a balance/statement which usually only shows last 4 of your card information.  Seek clarification.

In one case we had a lender request to literally see transactional data from our bank account.  After getting it we went down a rabbit hole of constant requests for more information (clarify this transaction, etc).  It got to a point where there was no end in sight and we eventually just said, no, we're done answering further questions as we had done so in good faith.  We let them decide if they wanted to lend to us at that point and from that point on things went just fine.  We will push back on that if ever requested again.

I would strongly consider the advice to wait to show until current tenant moves out but here's a devil's advocate view: 

You can send 24 hour notice that you will be dropping by to show.  Unfortunately the place may not show WELL, and that great tenant prospective may be less than impressed.  If you do go this route, I'd recommend being honest and open with the new tenant about the situation.  Use it as a learning opportunity and way to get some communication flowing with your new tenant.

It may depend on where you are financially as to the 'call' here.  If you can't afford the vacancy and need to get the place filled ASAP after current tenant moves out, I'd be inclined to just give the notice requirement you need and don't worry if they don't respond.  Use your key.  Here 24 hour notice is required except for emergencies.  Obviously a valid reason if in front of a judge would probably be appreciated... Etc.  This sounds valid to me.  Based on what you shared, I don't think a judge that's reasonable would determine current tenant's behavior to be considerate, courteous, and/or helpful.