All Forum Posts by: Tom Kastorff

@Marisa Alvarez find me statistics that show how many children die in fires caused by a rental property (and not human error or arson). Then what the resulting lawsuits were and actual awards to victims. 

Good responses from @Ian Shinnick and @Gary L Wallman, @Marisa Alvarez. 

I don't live in FL and don't own 10 rentals so cannot specifically know if the price meets logical expectations. Insurance is really something that is hard to compare to others because there are dozens and hundreds of rating factors, down to the zip code and literal street corner. No 2 policies are alike. The only way to really know if prices are competitive is to shop around to 3 - 5 vendors and pool the answers. Call independent insurance agents and brokers who can shop many policies. 

On the surface they don't look competitive as 6 month rates, that does not make sense. As annual numbers they look more logical. A typical $1M umbrella policy is $200-300 (in CA). And your quotes are for $5M and $10M, that is a lot of coverage. Once you get above $1M and $3M the cost escalates. Someone underwriting five and ten million dollars needs to get a return on that potential outlay. Do you think it should cost pennies for someone to give you millions of dollars of protection? It's not cheap to insure for that much coverage. Frankly I don't know that you need that much unless your properties are that high risk or you really feel someone will sue you. I have a $1M policy on my vacation rental and sleep just fine at night. I really struggle to think of how someone could either cause more than $1M in damage or sue me for more than $1M in damages or injuries just by using my condo. Your other thread where the guy writes about spilling coffee or tripping on carpet.. ok sure. How do either of those situations result in a million dollar lawsuit to the property owner? You can let fear run your decisions, or logic.

@Mike Neubauer I am following this closely, please update us with your final product or combo once you decide. Currently Porter for Airbnb / Homeaway listings? Thx 

@Marisa Alvarez well there you go. "This guy was trying to sell a course on how to do LandTrusts"

Urgency is always created by people trying to sell you something. Period. Don't transfer that urgency to yourself. Just do your diligence and homework, which you are doing. Millions are sold and made every day selling doomsday stories. Don't get caught up in it. 

@Donald E Appleberry is pretty spot on and basically what I would answer. Excitement is good, keep reading, watching Brandon's free weekly webinars on this site (very motivational and I still learn small things, and love his enthusiasm), find some books, read the forums. But San Diego is a top 10 expensive market and $7000 doesn't even buy you a used Civic in this town. As Donald said, this is not a "cash flow goal" market, it is mostly a long term appreciation market, meaning you need to have the ability to weather negative cash flow to buy around here. My homes have appreciated hundreds of thousands in a few years in SD (I've 1031 upgraded my personal residence a few times) but at no point could I have ever rented it out and made money unless I had put down massive down payment.

Most SoCal folks without hoards of money or hard money backing look out of town or OOS (out of state) for cheaper alternatives. There are still cheaper pockets locally as Donald mentioned - Chula, Lemon Grove, maybe north to Oceanside and Vista, where you can still find $500k~ homes, but even then your $7k does nothing. After PITI and PMI and insurance you will not cash flow a rental.

Keep reading, keep learning, start making more money and saving so once you find the plan that works for you, you can execute. Rich Dad is a good place to start but honestly Kyosaki is flat wrong on investing and stock market, so I cannot get behind his beliefs fully. I watched one of his recent Youtube interviews with Patrick Bet David and he came off as a gas bag to me, he clearly has an agenda he sells and makes money on. Getting off topic, but point being educate yourself, earn, save and move with intention. More you learn the better you will be once ready to make a move.

Excellent examples for sure. How do any of those affect a non-op owner with rentals? Not your dog. Not your coffee. The slip and fall / house burn down maybe, but how common? Certainly insure for those but let's be realistic they are not "common" across tens of millions of homes and claims. Spilling coffee in the McDonald's drivethru has nothing to do with owning a rental. Know your personal risk and adjust. 

Excellent way to say it James. I am still looking to do a BRRRR but it really has to be a unique situation, and the market is pretty tough to find one worthwhile right now. The BRRRR model is exciting but just not as repeatable as you'd like.

@Marisa Alvarez I would again review @Jon Crosby's answer. Think it through, understand what risk you are trying to mitigate here. Insurance is about risk.

If you own properties in an LLC, then you've already taken the most common step to protect your personal risk, because the main hope (and reason to spend the money) by forming an LLC is to separate the properties from your personal life and name, so you never get sued. The lawsuit exhausts the LLC value only. If you have the property in an LLC with a proper $1M GL policy, in most cases you are probably above the norm. Perhaps bump it to $2M or add an umbrella layer, to whatever risk profile makes you comfortable. But at some point the costs of all the LLC's and insurance will far outweigh the benefits as it eats into profits and complexity. Unless you're a multi millionaire in your day life, what exactly are you worried about getting sued for? I used to sell insurance, and found the most paranoid people honestly didn't have that much to lose. And honestly, people don't get sued all that much especially at massive dollar sizes. You own rental homes, not gun stores or high risk sporting events where accidents happen frequently. How many ways can a tenant or someone on your property truly cause $1M+ damage or get hurt at that level? That's what you have to think about. I would call your CPA and an attorney to talk through these.

Personal lines insurance is different - you have your auto policy, homeowners, boat, whatever, and add the umbrella on top. Thus you are protected if you hit someone or someone slips and falls at your house. Different risk and scenarios than being a landlord. And these policies should never intermix - personal and LLC.

Sounds like an investor got you a bit too worried about disasters, but it doesn't hurt to do your homework. Just don't stress too hard.

I am not a lawyer or insurance agent, just trying to help. 

Great thread @Mike G., would love to chat with you offline sometime to exchange research. I've also spent the last month heavily investing in this market. Taken a couple swings, and heading up this weekend to look at another prop.

I think it would be real tough, especially remote 3000mi, to fully automate and manage a big SFH STR without a full service PM, but for the cost, it might be worth trying to go without. My math has found it tough to be profitable with 30% fees, but @John D. makes it work with much larger properties and I assume a fully built out team that costs him much less. If you can find the right balance, there is definitely opportunity here.

I've had several conversations with the City Ordinance guy and he admits "Palm Springs vacation rental ordinance is the strictest in the nation. The current ordinance requires in person contact." So, every investor has to understand that coming into PS.

The rules state: "Someone must meet your guests within 24 hours upon the guests arrival in person. There is a Rules & Regulations form all guests must sign and only a copy of the primary responsible party renting the property is to supply a government issued ID and these items must be available if a Code Enforcement official is called via Hotline call to the property. Any properties for long term rentals (29+ consecutive days) does not fall under the short term vacation rental ordinance. There have been a handful of $5,000.00 citations for condo owners operating without a registration." They police Airbnb and try to make fake reservations to catch people.

More:"for rentals that are 28 consecutive days or less they are considered short term rentals, which require a Vacation Rental Registration Certificate and TOT permit. Short term rentals are only for single family residences or condos."

The Cert is $944 per year, every year. Eats into profit. The TOT taxes are like 12% and if you don't properly add that to your listings and have the customer pay, will eat big time into your revenues.

More: "Long term rentals are rentals that are 29 consecutive days or longer and they require no registration with the City. There are no rental requirements or regulations for long term rentals. For long term rentals you can use single family residences, condos and multi family dwellings."

This is the likely route I am going, self-manage an LTR, albeit tougher for 29+ days rentals than nightly, but has none of the hassles with permits, TOT taxes, no requirement to meet every guest every time, etc. If I found a SFH I really liked, I would consider it for STR, but the math really has to work given all the requirements PS has put in place.

Would love to hear your ongoing thoughts on whether you go with a PM, and how your current relationships with housekeeper, pool, gardener, and handyman work out. I am going to start amassing my own list of these contacts very soon. I have one PM referral I can send your way, they are 25% boutique level. I would call at least a half dozen if I were you, and ask them to send you statements from properties that are in like kind to yours, they should easily be able to do that. Let me know.

Hi @Betty Snowie .. I love Havasu, would be a rad place to find my next STR. What model are you doing out there? The bigger party type houses near the bridge area, condos, or something else?

(just realized my profile avatar photo is from Lake Havasu too!)