All Forum Posts by: Neil Goradia

Thanks for correcting me @Amy Webber and @Joe Homs! The assessor's office here in Indy must but a little more laid back! :)

I think in general, you should show some empathy, but also let her realize that you count on every dollar that you get as well. We are not in this to lose money. What I'd do is reduce the rent a little (maybe a hundred or two?) for a limited amount of time (perhaps until you move out in March?). This will give her time with the court to figure out what her income situation changes to. At that point you can reassess the situation and either raise the rent back up to the original or have her move out so that you can rent both upstairs and downstairs to someone new at the original rent amount.

@Mark DelRosario, If I were in a 50k neighborhood and had cash value up to 50k, but homes cost 100k to rebuild, that's when I just walk away with my 50k and invest it elsewhere. You can't do this if you have a mortgage on the property for more than the 50k, which is why I mentioned on leveraged properties usually you have to insure for replacement value (the mortgage lender you use has certain requirements). Generally insurance proceeds from a total loss are not considered taxable income. Also, you'd still own the lot, which you would either have to sell, or continue to pay property taxes, or the last scenario would be to just "let it go" (stop paying property taxes) and let the city repossess the land in a tax sale/surplus sale scenario.

Following.

Seems like you'd need to go through probate since he didn't have a will. The property should go to his heirs, but I'm not sure if you will be "first in line" or not. I hope someone else can chime in and let us know.

As you know, market value is what someone is willing to pay, which usually depends on location.

Cash value is how much you'd be ok walking away from the house (if there was a total loss from a fire, for example). This is independent of the market. You determine how much you'd want out of it.

Replacement value is how much it would cost to actually rebuild the home from scratch. In rental/lower income areas replacement value will be higher than market value. In really nice/affluent areas, this will be lower than market value. 

Since I invest in B/C areas, I only hold cash value insurance on my properties (i.e. would I really want to spend $100k to rebuild a home where the neighborhood homes only sell for $50k? No way). If I invested in A class areas, then that same home that costs $100k to build may be worth $150k and it would make sense for me to be covered up to that value.

Hope that made sense.

Hey @Mark DelRosario,

We use a company called Westfield Insurance (based out of Cincinnati) and they've been pretty good with investors. There is another company called Foremost which I've heard is good for vacant properties. A third one I've used is called Shepherd insurance. Try to stay away from the big guys like State Farm, they will drop you as soon as you file your first claim. 

I always do a standard liability and dwelling (fire) coverage at cash value. On some nicer homes or ones that I have mortgages on I get replacement value, but you won't need to do that on most of them. Good luck!

There are quite a few companies out there that do it these days, and I really can't comment on those per say. 

What we always did was just use chase or pnc bank (since there are a million of them here in Indy) and had them deposit directly into our account and write their address on the deposit slip. They could even do pop-money or quickpay if they had an account. If you're worried about giving out your account number, just set up a second account and have any money deposited in the first one automatically transferred to the 2nd one. We never did that because your account number is already on your physical checks...so it's not really a secret. 

Worked great for us and you get notified on your phone whenever there is a deposit.

Getting an appraiser is probably the best way to determine value when dealing with 2 owners. You'll spend $300 to get it done, but it will be worth it. The value from the tax bill is the "assessed value" and is not a true indication of the market value (what someone is willing to buy it for). It is just for tax assessment purposes.

Your property taxes won't go up just because you buy him out. It will get adjusted every few years whenever the city does a new tax assessment on the property, which they do automatically without contacting you. If you feel the tax assessed value is way too high compared to the market value (determined by the appraiser) then you can put in a tax appeal to try and get it lowered. Good luck!

Hey Jessica, you could do either one, but I'd save up for a new down payment. No reason to build up equity if you're just starting out and you will likely need that money for future repairs or purchases.

By the way, renting out rooms is a great way to maximize the rental income from your property. Hope it goes well!

There are some free ways to determine an approximate value. Go to Zillow and filter on "recent solds". Also, I hear Realtor.com has even more up to date sold data. Try to look for homes that have sold in the same area, with same square footage and beds/baths. Keep in mind if the description/pictures show the home needed a lot of work, then the price will be lower than normal, and alternatively, if the description/pictures show the home was completely renovated, then the price would be on the upper end. Compare those to your property to gage market value. If the home is worth much more than what you are getting for it, then you can talk to your mortgage lender and see if they can use some equity in the home as your "down payment". If it isn't worth much more than you're paying, you'll need to come up with a downpayment somehow. Good luck!