All Forum Posts by: Mackal Smith

You absolutely should feel good about walking away. I recently had my first 8 unit apartment building deal under contract. It was awesome! The owners had kept the building in great shape over the years, it was a mom and pop operation who were terrible property managers. They were paying way too much for insurance, there was room to improve rents, everything said go, go, go. Unfortunately (or fortunately however you look at it) during our due diligence we discovered that a couple of years ago FEMA had designated the whole area as a flood plain. That alone was not enough to deter me (after all it was my first 8 unit apartment! ... see... a little emotion). What did deter me was the $8,000/yr with a $10,000 deductible for flood insurance. Even with that, the property would have cash flowed a couple hundred dollars per month but that doesn't fit my financial model. So I walked and you know, even though I liked the property a lot, I have found that the DEAL of a LIFETIME seems to pop up about every 3 weeks. So congratulations on walking away. That takes as much guts as buying!

Great Julie! Thanks for sharing. Like you, most of my tenant issues stem from inherited tenants.!!

PM me and I'll send you a spreadsheet I use to evaluate properties. Welcome. I'm an investor here in STL. Love the market here and relly love investing in real estate. You're at the right place and this is the right time!!

I did a really extensive search when I first found the guy I have been using so far. I reached out toy local REIA and got numerous recommendations as well as vetting him against 3 others I got quotes from

 Those were all for 2.3.4 units however and I may have made a mistake thinking that because he has done well by me up till now, he might not be the best for commercial. So long story short, no I didn't shop around. But I will now...

I posted this in the multi-family discussion topic then found this forum. Oh, and btw, the apartment building I'm talking about here is in St Louis MO. Apologies for duplicating...

Hey all,

Up to now I have only bought 2,3, and 4 unit buildings. I have 15 units total and have had a lot of success so far. I just got my offer accepted on my first 8 unit apartment building. I ran my numbers including an estimate on my part about what the insurance costs would be. I mistakenly doubled the insurance costs I was paying for my 4 plex to use as the number for insurance on the 8 unit. (the 8 unit cost is 179.9K, my 4 unit was about 90K so I thought this would be fairly close)

After the offer was accepted I found out that (wow!) true commercial property insurance is much higher (about triple) what I have been paying for my smaller properties. The property still cash flows (and really still cash flows well) even with the increased cost of the insurance so I haven't made a huge mistake. Let's just call it a disappointment and a learning lesson.

My question for the forum however is this:

Is this typical for >5 unit buildings (true commercial buildings). Is there a way to get creative with the insurance? Just to give you some rough numbers:

Typical insurance rates for my 4 plex here in St Louis is 519.00/yr. This is with a 1,000 deductible and the insurance covers my actual cost of $90K (not replacement cost)

The quote I got for the 8 unit is $3600/yr. This is with a 2500 deductible and the insurance uses some kind of complicated (Marshall and Swift) formula to come up to 40% of the replacement value (which gets it to about double what I'm paying for the property). The property price is 179.9K. I got a long email from my insurance guy explaining that > than 5 unit buildings are just more risky and are more prone to partial losses. His replacement cost figures for the building are some like $442,000 (with 40% depreciation because of age).

Sorry, I know this is a long post. Just wondering if this is typical for insurance on commercial properties or if anyone has other ideas?

Thanks!

Hey all,

Up to now I have only bought 2,3, and 4 unit buildings. I have 15 units total and have had a lot of success so far. I just got my offer accepted on my first 8 unit apartment building. I ran my numbers including an estimate on my part about what the insurance costs would be. I mistakenly doubled the insurance costs I was paying for my 4 plex to use as the number for insurance on the 8 unit. (the 8 unit cost is 179.9K, my 4 unit was about 90K so I thought this would be fairly close)

After the offer was accepted I found out that (wow!) true commercial property insurance is much higher (about triple) what I have been paying for my smaller properties. The property still cash flows (and really still cash flows well) even with the increased cost of the insurance so I haven't made a huge mistake. Let's just call it a disappointment and a learning lesson.

My question for the forum however is this:

Is this typical for >5 unit buildings (true commercial buildings). Is there a way to get creative with the insurance? Just to give you some rough numbers:

Typical insurance rates for my 4 plex here in St Louis is 519.00/yr. This is with a 1,000 deductible and the insurance covers my actual cost of $90K (not replacement cost)

The quote I got for the 8 unit is $3600/yr. This is with a 2500 deductible and the insurance uses some kind of complicated (Marshall and Swift) formula to come up to 40% of the replacement value (which gets it to about double what I'm paying for the property). The property price is 179.9K. I got a long email from my insurance guy explaining that > than 5 unit buildings are just more risky and are more prone to partial losses. His replacement cost figures for the building are some like $442,000 (with 40% depreciation because of age).

Sorry, I know this is a long post. Just wondering if this is typical for insurance on commercial properties or if anyone has other ideas?

Thanks!

@Pandu Chimata

In response Pandu, it is working amazingly well. I have only been doing it a couple of months, but I have not missed a single day. I read all the hype about the Miracle Morning. There is a lot of "magical thinking" going on out there. I'm not one to believe that opportunities just "pop out of the ether" because you visualize yourself rich, or some of the other crazy stuff people have written about it. What I do believe is that I start the day centered and focused. I think it gives me an edge over people who start their morning jumping out of bed the last minute and rushing through the day without a thought for where they are heading for the week/month/year or even that day. I truly believe that it leaves my mind open and alert and I think my subconscious mind comes into play when an opportunity does avail itself. I think it helps me see opportunities that I may have missed before.

I can tell you that on a professional level, it has helped me hit goals at my day job that I thought I wouldn't hit for 6 months. In my real estate investments, I have acquired 2 duplexes and a 4 plex since January, I'm closing on another duplex next week, and I am partnering with another investor on an 8 unit apartment building we are closing on in July. That will get me to a total of 23 units in about a year and a half. This has exceeded all goals I set for myself.

On a personal level, I am truly a more loving husband, and a better Father because I stop and think every day about how my wife and children have enriched my life and how much I owe them. It makes me treat them with a level of  love and respect that I used to forget to do. I also get a great deal of personal satisfaction meeting others and helping any way I can. My whole day is made when I can meet with and inspire someone.

I have some really big goals. I started out with my "big number" thinking it was more than I could realistically achieve in 5 years. I have doubled that number now (not saying I have made that number, but my realistic potential to get there has very much materialized).

So, after all that... Yes, it is working for me. I think there is a plethora of reasons why (none of it magical) but it is a ritual I have incorporated into my daily life and made personal. I have really combined concepts from "The Miracle Morning" and "The One Thing" and even added some of my own "Mackal Juice" in there.

I hope this post inspires you or anyone else that reads it to give it a shot. If it does let me know... you'll make my day!!

After reading the "Miracle Morning", i have incorporated it into my life. Every day I wake up between 4:30 and 5:30 and spend 10 minutes in guided meditation, 10 minutes reading and saying my personal affirmations, 10 minutes of visualizing the biggest things I want in life, 10 minutes of reading (plus and hour of audio books while I drive in), 10 minutes writing, 20 minutes exercising (most days anyway), and finally 15 minutes looking at my yearly goals and aligning my monthly goals to meet that, then aligning my weekly goals to achieve my monthlies, then setting the day's goals to achieve the weekly goals.

i do this for 4 key areas: 

• Spiritual - what am i doing to make myself a better person?
• Real Estate - what am I doing to make myself a better investor?
• business - what am I doing to make sure I'm hitting my best potential at work?
• Personal - what am i doing to make sure I am the best husband, father, and mentor?
• Giving back - what am i doing to pay my many blessings forward to others.

sure, just send me a private message..

Jeremy,

Thanks so much for the lead! I just got an accepted contract on this property at 179.9K. It was very competitive. I think I only locked it up because I came in with no financing contingency. This is a better than 2% price to rent ratio. I'm very excited!!