All Forum Posts by: Michael Norris

You need a vacant insurance policy if the house exterior isn't too bad and if the condition is more rough (hanging gutters, broken/boarded windows, missing siding, debris in the yard) then you will need a builders risk. You need an agent who understands the investor needs and can get you the right policy. 

Quote from @Bob Stevens:

Quote from @Robert Ellis:

Quote from @Justin Brin:

@Bob Stevens I noticed Cleveland OH population is declining:

How much will it affect appreciation in the long run?

Where are all the vacant units in the area?

This article spells it all out and describes why my opinion it wouldn't make sense to invest in Cleveland. Too much housing stock, less mega projects, declining population in the past 2 years, not enough macroeconomic data like Columbus has. 

https://www.daytondailynews.com/community/ohio-aims-to-add-p...

Go to jobsohio.com if you want to read the opposite. In the last 5 years columbus average value has gone from 170k or 180k to 300k+. Cleveland Is still half the price of columbus or even less on average. 

10 of the some of the only growing counties are part of the Columbus MSA out of 12 counties. I wouldn't want to be investing in a market with negative population even if I could get it for free. Older homes that need updates are hard to keep up with deferred maintenance when your value hardly goes up. 

https://www.dispatch.com/story/news/local/2023/03/31/census-...

 Too much housing stock, hmm, go try and get a deal, there are none. Older homes are hard to keep up with, not sure where you're getting your Info but its incorrect. They were built better back then. I have had dozens, I have bought and sold about 500 out there. As long as you reno properly all is ok. Values hardly go up, again this proves my point I always post about, sitting on the internet is a 100% waste of time. So, the props that we paid 25k for and now selling for 125k -150 .The MF we paid 10k per unit and now are 45- 65k , how about the ones in Ohio City that were 20k and now 200k. Again, the internet is a waste of time All my properties are built from 1910- 1940 No issues.  Try buying a 4- 10-unit, good luck, nothing out there.  No mega projects, hmm not sure what you're looking at, but go there and see for yourself. Massive projects everywhere. I have NEVER sat on the internet to analyze a market; I go and see for myself. For 10 years I have been hearing from people that just analyze things to death and never do a deal, well how wrong were they? Coumbus is a great market as well, my buddy has 250 props there. 

All the best 

Shhhh let them think it's a bad place to invest 

This may sound harsh but that is not my intention at all. 

I have bad news for you - regardless of what your agent told you SF will not insure vacant/rehab properties. I know this because my agency regularly gets referred these type of properties to insure for local SF agents. My handshake deal with them is once the rehab is done (and if it will be a landlord property) I will not take the landlord policy business and they take it back as a SF landlord policy. 

Beyond SF no carriers will insure a vacant/rehab property at full replacement cost coverage which is double the proof of the policy being on junk paper. The agent, if aware of your property being vacant/under rehab is doing an intentional misrepresentation on an application and could have their agency terminated by SF. The carriers take mis-reps by an agent as one of the biggest sins only topped by stealing premium.

The cheap premium you found for 1/4 the price of everyone else is great as long as you don't have a claim.

But... If you have a claim - when the claims adjuster finds out the property is vacant your claim will be denied. When you say the agent said it was ok my bet is the agent becomes stupid very fast and the claims reps will pull up the policy application you signed and ask if that is your signature on it. You obviously say yes. The claim stays denied even though your agent was shady because on that app (aka contract) it will have verbiage asking if the property is occupied. 

Signing the mis-represented application keeps you at fault beyond what the agent did wrong and you'll be forced to sue the agent under an E&O claim and if you don't have any proof in writing from the agent saying it's ok to insure the vacant property then you are SOL.

So what now - don't blow up your agent just ask them direct questions by email and get it in writing back that your vacant/rehab property will be covered on the existing policy as written. Then if you have a claim you'll have documentation for the E&O claim.

If the agent won't put it in writing... you have your answer and need to move your coverage to a propert vacant/rehab policy. 

Thanks = all good advice.

We've talked about the S corp for the fix and flips but the challenge is that it's not a cash flowing business. Let's say hypothetically the flip generate 100,000 net profit per year. 

What would be an acceptable amount to set up for payroll on the S corp strategy with the rest coming as bonus? My understanding is the salary has to be "reasonable" vs the bonus at year end. 

"Could" we set up payroll and front load it - yes of course it's just one more thing to keep track of. 

Check out the website servicesold.com

It's pretty much a cleveland only thing at this time but is pretty cool especially for out of towners to find contractors (the hardest part of investing). Service sold is a reverse auction where you post as much info as possible about the job(s) with photos etc and the max you are willing to pay. Be realistic if you want good people to actually bid the job and give your auction some time to run. Then the contractors will bid the price down from there.

The contractors are rated on there and you don't have to pick the lowest priced one. All of them should be able to provide references and photos of past work. There are some jack of all trades types who can do all the work but if you keep your auction simple you may have better results - such as.. remove and replace these 14 windows with vinyl double hung or whatever you want. Then a different one for painting interior or exterior. 

Scroll around at the other previously completed auctions to see how people set them up and you should be able to sort out how to set yours up. 

Good luck

Mike Rieke / Angelo Russo sponsor my REIA and they are great

Besides expense write offs what strategies can be used to avoid or reduce the self employed tax (penalty)?

James isn't wrong - 3 miles from downtown could be a warzone or it could be detroit shoreway, tremont, etc.

DM me some info if it's south or west of downtown. 

 I am an investor but I also own an insurance agency so this topic comes up a lot with my landlord clients and yes... you can say my advice is from their experience in real world situations.

Quick note - regardless of term if you allow dogs or the tenant has one undisclosed and the dog bites someone or another person's pet the attorneys for the injured party will name the dog owner to the suit (obviously) but also name the homeowner to the lawsuit even if the event occurred off site such as walking the dog.

You can say that's wrong all you want and I'd 100% agree - this is how it works.

Your first layer of protection here is the tenant having renters insurance (that does not have an exclusion for dog bite or an exclusion for the tenant's dog breed). Ask for a copy of the policy - I have seen some with tricky wording in the liability exclusions that are not totally obvious.

One of them had a breed exclusion that said something like "if the breed of dog is considered dangerious or outlawed in ANY state, city, municipality, etc..."

The key word here being "ANY" - the location of the property did not have a breed restriction but the bordering city did. The rep for the carrier we spoke to tried to say that the exclusion wouldn't apply but would not put it in writing so... it applies.