Landed my first deal - help calm my anxieties and analysis paralysis please
Member since 2022 · 48 posts · 15 votes
So as the title states, I just landed my first deal. 120k property, appraised for 128k and I will be adding new carpets, paint etc - just some light rehab. Mortgage, taxes, ins, etc will be about 1k (requires flood insurance) and market rent is about 1400-1600. So, on paper, it will cash flow fairly nicely. The only larger CapX that is potential is a new roof within the next 5 years - everything else is less than 3 years old, windows, electrical, furnace, hot water heater.
Of course, as per usual, I am getting all of the negativity from the peanut galleries about lawsuits, etc. So my questions are:
- I have umbrella insurance through my home owners insurance that will cover up to 500k liability, those more experienced, is this enough? Being that it is in my name and not an LLC, I am concerned about that
- What do you use for leases, etc to ensure that you're covered? I know there are some here, wondering if anyone can point to a template for me?
Being that I'm about to drop almost $40k on this, I'm having a lot of analysis paralysis and second thoughts haha. I appreciate any assistance!
In my opinion a lot of the stories you hear about someone tripping on your property, hurting themselves, and suing you for millions are just that, stories. I know there are some cases like this, but I personally don't know anyone that's ever experienced one. 500K should be more than enough to cover you, but also ensure you renters get reputable renter's ensure with you as an additionally ensured home owner. You can dictate what's covered and the amount. This scenario is often cited as the reason to put your properties in an LLC, but a judge can still hold you personally liable for damages. It's called "piercing the veil".
I use Zillow to list my properties and draft leases. It's free and you can add in your own clauses to the lease. Doorloop.com also has free templates.
In general, make sure you have a healthy emergency funds. This will make a lot of the worry go away. To take it to an extreme, if you had 10 million cash would you have any worries?
Good luck!
@Justin Dziedzic Congratulations!
Your insurance on the property itself should be fine. Umbrella gives you an extra layer of protection. Insurance companies do not want to pay out. We all know that. And they’ll fight tooth and nail before accepting any large settlement. Which means they are in your side. You’ll be fine.
Leases will be state specific. Sometimes even more local. Network around and see if any other landlords will share theirs. Heck you can even ask tenants. DM me I’d be happy to share mine, but a local example would be better. They aren’t copyrighted—at least I’ve never seen one copyrighted so you can copy them verbatim. Also BP sells state specific lease agreements.
As for worry or stress, everything in life has that. Worrying about losing your job or keeping up job skills. Worrying about having enough for retirement. Worrying about the stock market. Worrying about missing out on coulda woulda shouldas. You’re not going to escape it by doing nothing and you’re not exactly rolling the dice here. You have a very limited downside. You’re likely going to make some money and more importantly learn a lot and so even better in the future because of that education.
@Justin Dziedzic Congratulations!
Your insurance on the property itself should be fine. Umbrella gives you an extra layer of protection. Insurance companies do not want to pay out. We all know that. And they’ll fight tooth and nail before accepting any large settlement. Which means they are in your side. You’ll be fine.
Leases will be state specific. Sometimes even more local. Network around and see if any other landlords will share theirs. Heck you can even ask tenants. DM me I’d be happy to share mine, but a local example would be better. They aren’t copyrighted—at least I’ve never seen one copyrighted so you can copy them verbatim. Also BP sells state specific lease agreements.
As for worry or stress, everything in life has that. Worrying about losing your job or keeping up job skills. Worrying about having enough for retirement. Worrying about the stock market. Worrying about missing out on coulda woulda shouldas. You’re not going to escape it by doing nothing and you’re not exactly rolling the dice here. You have a very limited downside. You’re likely going to make some money and more importantly learn a lot and so even better in the future because of that education.
This is fantastic, thanks Larry! Pretty much exactly what I needed to hear. I'll check out the BP leases!
Thank you so much again.
In my opinion a lot of the stories you hear about someone tripping on your property, hurting themselves, and suing you for millions are just that, stories. I know there are some cases like this, but I personally don't know anyone that's ever experienced one. 500K should be more than enough to cover you, but also ensure you renters get reputable renter's ensure with you as an additionally ensured home owner. You can dictate what's covered and the amount. This scenario is often cited as the reason to put your properties in an LLC, but a judge can still hold you personally liable for damages. It's called "piercing the veil".
I use Zillow to list my properties and draft leases. It's free and you can add in your own clauses to the lease. Doorloop.com also has free templates.
In general, make sure you have a healthy emergency funds. This will make a lot of the worry go away. To take it to an extreme, if you had 10 million cash would you have any worries?
Good luck!
I cover mine up to 1M, wether it is in your name or LLC liability will fall back to you. Use a generic lease a property management company uses.
In my opinion a lot of the stories you hear about someone tripping on your property, hurting themselves, and suing you for millions are just that, stories. I know there are some cases like this, but I personally don't know anyone that's ever experienced one. 500K should be more than enough to cover you, but also ensure you renters get reputable renter's ensure with you as an additionally ensured home owner. You can dictate what's covered and the amount. This scenario is often cited as the reason to put your properties in an LLC, but a judge can still hold you personally liable for damages. It's called "piercing the veil".
I use Zillow to list my properties and draft leases. It's free and you can add in your own clauses to the lease. Doorloop.com also has free templates.
In general, make sure you have a healthy emergency funds. This will make a lot of the worry go away. To take it to an extreme, if you had 10 million cash would you have any worries?
Good luck!
Fantastic also, thank you!!
I've bought about 8 properties in my life and have felt nervous about every one of them on the closing date. Being anxious and that "I hope that I didn't just make a huge mistake" feeling is part of the process for most of us. As you scale and buy more, remember that you're not a proper real estate investor until you've asked yourself "What have I done?" and "Why did I think this was a good idea?" on a semi-regular basis.