All Forum Posts by: Aaron Porter

@Chris Seveney  I don't necessarily agree with you.  In my mind the whole point of a properly executed anonymity structure is to mitigate risk.  Yes it costs, (the old mantra "nothing in life is free")  but I think it is entirely up to each persons personal opinion towards what risks do I want to take?  

For me if I am going to go through the hassle of setting up LLC's to hold my real estate, and I am going to go through the effort of actually following the rules to "not pierce the corporate veil" Why wouldn't I spend the extra money to make sure that my entity structuring also protects my privacy and doesn't open me up to litigation and lawsuits? The structuring also has the added benefit of estate planning so that when I pass on and leave this world that my heirs and possibly my spouse are set up in a way that is going to be best for them as well?

You are very correct that anonymity doesn't stop someone from suing you, and I totally appreciate the "I don't give a ... mentality.  I live a large part of my life that way every day.  However, in my mind the only thing that stops lawsuits to be a good person, landlord, or tenant and to not be shady in your business dealings.  (be proactive instead of reactive to your tenants and clients needs) 

The entity structuring does isolate you from your properties, it isolates your properties from each other and only allows a lawsuit to go so far.  

In my mind the whole game of real estate investing and SFR to be more specific is to protect the gains that you make through equity and inflation. Most SFR properties that I have looked at, cash flow so close to breakeven that if you aren't protecting the gains that you make in equity and inflation of your property, why are you going through all the work and stress of being a landlord to only net 200-500/month for a $200-$500,000 dollar investment? SFRs are a huge investment to only get you an extra $2400-$6,000/year?

 I can print out a few of different illustrations for CV Life Policies.  Those will show guaranteed returns, the policies illustrate those returns based on either a 10 or 20 year lookback, depending on the illustration and carrier.  However, it is a mistake on my part to say or suggest that a life insurance policy is the same as an investment.  and I should not have done that I am working to stop doing that.  Life insurance isn't an "either, or", it is a "in conjunction with" strategy. definitely keep investing and building your portfolio, but the smart play and I say it is smart because all the really smart people and hugely successful corporations all use CV whole life insurance, to grow, to build and to pass on wealth. 

Life insurance is an investment in yourself, in your family, in your legacy, and they are designed as such.  That is why you can get 500k in death benefit for less than $20/month in a term policy. Or why in a whole life policy (illustrated on myself) 35 years old putting $400/month for  30 years ($144K) is worth about $420K at the 30 year mark.  

Cash Value Life insurance is a way to pass on substantial amount of money to our heirs while also allowing us access to that money while we are alive.  

@Kyle Mccaw  Very valid.  that is where knowing your agent, and your agent knowing the market and the products that they sell are absolutely gold!  Texas is hard, especially in the coastal regions.  We only have a couple of carriers that will even write a homeowners/landlord policy, and only one of them will include wind and hail.  In the eyes of the Insurance companies there are way too many roof claims in the coastal areas and if they have to pay out on them (insurance policies are legal contracts, they are legally required to pay out unless it is an exclusion in the contract)  as there are way too many claims in the coastal areas they are forced to make a choice, do we offer the insurance but charge an exorbitant amount for the insurance?  Or do we just not offer it?  

I don't know whether or not that decent price for your duplex or not.  I am part of an independent insurance group and just last week the discussion was about how for 2023 there is most likely going to be 10-15% increases across the board on all home, auto, landlord insurance policies and products.  In most of the states where I am licensed and appointed almost all of the carriers have requested rate increases for all lines.  There are also others (insurance carriers) that have ceased operations in certain states. 

As an independent agent I would need a bunch of information from you to give you an actual quote on what your duplex could cost for insurance.  Remember not all policies are created equal, not all carriers are created equal and insurance is a really cheap way to protect yourself for losing the most expensive asset you have, and getting the cheapest insurance is a good way to ensure that you will lose out on the equity if you need to file a claim on your insurance. 

I have a few clients that use a combination of strategies. With their HELOC they use a strategy called a Modified Endowment Contract. This is a Single Premium cash value life insurance product usually utilizes an Indexed Universal Life policy.

They will then Pull the cash value out of the policy (approximately 90% actual value)  The policy will generate a guaranteed positive return of 2-4% with the money pulled out, that includes paying the interest for the loan against the cash value of the policy)  

Then the client can take the money and invest it into other shorter term investment strategies such as private placements, hard money lending, or other such strategies.  

(I am not a financial manager so I cannot suggest what or where to place your money, I am only an insurance agent and relaying what some of my clients currently do and find successful for them)

if it is truly a small gathering for the ceremony I know tons of people that do that in their parents backyard with no issues.

Most people are in support of marriage and so they tend to look the other way or be happy about seeing and hearing a wedding reception.  At least when it is not a regular occurrence. 

I would still recommend purchasing an event policy.  Almost all insurance companies have the capacity to write a policy like that.  call one of the local agents near the property.  I would look for an independent agent as they will have more options.   

@Quaid Cde Baca Not to be "That Guy" but definitely need some more info about the property.  I have seen duplexes that the Landlord policy is $4K/ year/ side.  That being said in most cases $4K/ year does sound a bit excessive.  

Finding yourself an Independent Insurance Agent who not only has access to multiple carriers but has experience helping real estate investors is the key to not only keeping your insurance costs down but also making sure that you are properly covering off the exposures you have with your properties. and making sure that you understand the coverage that you do have.  Education is the key to keeping your financial freedom going up and to the right!

 Every clients needs are different.  But my personal recommendation would be as soon as you feel the need for more coverage.  I know other insurance agents that work in more local style agencies (all of their clients are local to them, where as my agency is nationwide and I work exclusively with clients that are real estate investors, just the Niche where we ended up)  but the local guys offer umbrellas to everyone, and the pitch goes something like this.

Hey there Mr. or Mrs. Client, I see that you own a home and have a vehicle both insured with good coverages, however how do you feel about making sure that if you, your spouse, or one of your children get into an accident that not only are they covered to pay for the accident.  Which just for reference in the US right now, the average cost of an accident where the vehicle is not a total loss but there are injuries is over $80,000. but what if we can make it so that if you get sued you have coverage for up to $1,000,000 or if the person you get in an accident with has no insurance, guess what your insurance covers that up to that $1,000,000!  and you can get this coverage for the measly cost of about $250 per year.  How does that sound to you Mrs./Mr. Client?  is that extra coverage worth $250 a year?

Conversely for my average clients my recommendations are based on their needs to cover their liability and excess coverage for their rental properties.  If you only have 1 rental property it may be more economical to carry the extra Liability coverage in your 1 landlord policy as opposed to having the umbrella.  

Umbrella policies are extremely cheap when look at the cost of the coverage they offer.    

@Mike Hinkley  yes you will need a landlord policy.  this is mainly as you will have tenants and tenants create a different liability class than what is covered in a homeowners policy.  

requiring your tenants to have a renters policy is also a good call.  make sure that you are listed as an additional insured on their renters policy.  

having an umbrella is also a good call, but you have to have underlying coverage for an umbrella to work.  

The policy/policies that you will need may vary from one carrier to another.  one insurance carrier may be able to put the landlord with added personal property into one policy or they may want you to have separate policies.  working with a good independent insurance agent is what you actually need to do.  either use google and find someone local (make sure that your agent works with real estate investors on a regular basis.  as you scale and grow your needs will change and your agent needs to be able to understand how to set up your policies.  

@Julie Marquez  I have a few clients that have tried to go the "self insured" route.  Not to say you can't do it becuase I have a few clients that do go the "self-insured" route.  

However I want to take a minute and clarify.  Self insurance and no insurance are 2 totally different things.  true self insurance actually means that you set up a mineature insurance company for yourself (or your company)  you get licensed with your states insurance regulatory office and you actually pay yourself annual insurance premiums that go into a totally separate account and you don't get to use the money for anything.  there are major rules about what the money in the "insurance"  account can and can't be used for.  In most cases to do a true "self-insured" strategy if you are paying less that 6 figures of premium it isn't worth it.  

There are other strategies including just starting yourself an investment account of some type.  place the money you would normally use into it (something with a zero floor would be preferable unless you can handle a market call on an investment account)  build up the savings account and hope that you don't have any type of large claim.  

when it come to the liability side that can add up super quick and if you don't have an underlying property policy having an umbrella policy won't cover you.  

I have been looking into starting some type of insurance captive strategy where a group of SFR real estate investors band together to create a mini insurance cooperative in a sense. Doing this ups your purchasing power with an insurance carrier and can help getting lower rates. But I haven't made it a reality yet.

working with a good knowledgeable top of the game insurance agent who has access to lots of carriers can be beneficial.