All Forum Posts by: Ken Maddis

Watch credit card spending. Credit to debt ratio is important as well, you probably want to keep your credit card usage to around 25 or 30% or so of your available credit. If you have a $2000 credit card that is usually maxed or close to maxed out, it's probably hurting your score. But if you can pay down that $2000 card and keep your monthly balance at no more than $500 or $600, you'll likely see your score increase. 

Hey Marcus, I'm also in Denver (Westminster) and new to RE investing and just bought my first two properties in Byram if you need some contacts in the Jackson area.

Who are you using now for your PM?

I just bought two properties in Byram if you need some contacts.

I agree, closed on my first property with them in January and will be closing on a 2nd with them in the next week or two. They're great to work with.

I'm a newbie, so I can't give the ins and out of LLC's. However I've personally decided for at least my first few properties, I'm just going sole proprietor and I'll look at the LLC later. In lieu of the LLC I'll be carrying the highest amount of liability I can get on the landlord policy, and I'll be adding a multi-million dollar umbrella policy.

But even if I do set up LLC's, I'm still going to carry a multi-million dollar umbrella because  owners of LLC's can still be sued pesonally if their decisions resulted in a serious injury/death (such as the failure to not remove snow as stated above, or not to fix that faulty furnace that was emitting CO into the house, or some other form of negligence).

From another agents perspective, I am going to assume that policy A is an "actual cash value" (or ACV) policy, and policy B is a ''replacement cost'' policy.

On both ACV and replacement policies, when valuing a claim, the adjustor is going to determine the actual cash value of the property first. They will depreciate the property based on age, wear and tear, useful life left, etc. For example, a roof with a 20 year lifespan gets hit with hail when it is 10 years old. Very generally speaking for example, the adjuster will likely depreciate it by 50%. 

If it's a $10,000 roof and an ACV policy, you can expect a check for $5000 minus your deductible. That is all you will be paid, period, and you will be responsible to pay the other $5000 to replace the roof.

If it's a replacement policy, you'll get paid the $5000 minus the deductible up front, and when the roof is replaced the insurance company will pay the other $5000.

So replacement policies obviously cost more since the insurance company is willing to pay more. That's the 'safer' but more costly way to go.

Which you choose all depends on your risk tolerance and how well capitalized you are. You could go 20 or 30 years and never have a claim, in which case the ACV policy would have put several thousand into your pocket. On the other hand, if you have a considerable claim in the first couple of years, you might have to cough up a good amount of cash with ACV to repair the damage.

We recently paid a claim on a 65 year old home that had a small kitchen fire. Cabinets, countertops, appliances, clean up, smoke damage, etc added up to $50,000. Fortunately it was a replacement policy so the full claim was paid. He would not have have been a happy camper had it been an ACV policy.

In my case as a new investor, I'm going with a replacement policy for those reasons, as well as what was said above about the higher liability coverage.

You asked if the #’s makes sense, and you need to be heeding the advice of these folks who are telling you no. 

I'm a newbie at this myself trying to get into my first property and I'd be running the other way real fast. Add your mortgage, HOA, and taxes and you're already over $1450. The HOA and taxes right there would be a deal killer for me.

Now add in property management, insurance, repairs, vacancy, and capex, and you’d be lucky if you only lost $100/month. IMO, best thing that could happen to you is they turn down your offer. 

Nevertheless I wish you the best. 

I was able to get in touch with Allstar PM. They're in Jackson, Memphis and Cleveland

Along with learning the market is the issue of credit which will be needed if you intend to use a loan at some point. If you don't have any credit yet (car loan, credit card, etc) a good place to start is getting a secured credit card with your bank, which should help you start building a credit report and score.