All Forum Posts by: Aaron Porter

There is 2 ways to think about setting up the structure... if you do it now in the beginning the initial setup is cheaper as opposed to setting up the structure further down the road. right now the structure is small and as you acquire more properties and grow your portfolio there is more to add in so the initial setup is more expense because there is more. I love asset protection structure that utilize land trusts, series LLC's, agent and living revocable trusts, when needed DST's. If you check out Royal Legal Solutions that is what they do and they really are the best at it.

As far as having the needed insurance.  Make sure that your property is insured with a Dwelling/landlord policy and that the insurance carrier has the ability to cover short term rentals.  there are some carriers that will only do long term.  I always suggest to my clients that they set their liability coverage to the limit that is required by the carrier for use with an umbrella policy.  then you purchase an umbrella policy to raise your limits to cover you with the coverage amount that your personal risk desires.  whether that is 1 million, 2 million, 5 million, 20 million... (if you set your limits that high the carriers will want to have an understanding as to why especially if you only own 1 rental property)  but your umbrella can also offer extra coverage for your personal home, and autos.  

@Michael Baum  I would love to!  

 To my understanding (having had some conversations with underwriters from several different companies)  there is nothing different between the coverage offered by Proper, Foremost, CBIZ, Allstate, Progressive, Travelers, American National, Liberty Mutual, Pure, or any of the other insurance carriers.... in fact the underwriters, E-suite, and actuaries from all of the companies hop between one another every few years. This is one of the reasons that property/auto/commercial/BOP policies are cyclical (company "A" is the cheapest today, next year company "B" is the cheapest, the year after it is company "C" and within 5-7 years company "A" is the cheapest again)

Now that doesn't mean that every company is going to insure whatever business you send them.  In fact most carriers only like to actually win 20-25% of the quotes that they issue.  and some companies have restrictions on location (city, state, and even neighborhood), type of house, build type, ownership type, what the property is used for, etc...

So they all offer the same stuff as far as the policy goes, the difference come in when the landowner decides how much coverage he/she/they want in each specific line of coverage.  

By letting carrier XYZ know that your property is going to be used as a STR or an Airbnb they are able to charge you the appropriate monthly, annual, bi-annual premium so that they the insurance carrier feels like they can take on that risk of business.

Proper Insurance has a great product, they know it and they charge a premium because they have set up an awesome niche that they work well in.  They have also done a really good job marketing themselves in that niche.  similar to PURE insurance marketing to the "luxury/high net worth" market. similar to Geico saying switch to us and save 15% or more... every company has their marketing gimmicks.  

So the best practice is to build a good relationship with a knowledgeable insurance agent (there are pros and cons to using an independent agent or a captive agent).  

@Andrew Rellinger Figuring out your numbers beforehand is a must... I have witnessed too many people jump into purchasing a home and not realizing what hidden costs can pop up.  that being said finding the right house will have impact on those hidden costs...

In my local area, if lawn care is included in rent, the rent is higher... but most of the time the tenant is responsible for yard care and for general property appearance.  it is a mix of included or not included utilities power, gas, water, internet, garbage...

the landlord is responsible for property taxes so make sure to budget for that accordingly.

if there is a mortgage on the property the bank requires insurance on the property.  

a tenant cannot get a homeowners policy as they do not own the property.  

landlord policies are worth the money for taking the risks associated with not only damages to the property but also liability.  

Also never let a tenant occupy your property without them having renters insurance, and make sure that you the owner of the property is listed as an additional insured on the policy.

as an insurance agent I say mortgage insurance has a place.  it is all about mitigating risk.  do you want the risk of paying the mortgage to go to your heirs in the terrible chance of your death or would you like the mortgage to be paid off should that happen?  but that also goes in hand with do you have other life insurance coverage that could pay off the mortgage should you pass?  In that case maybe mortgage insurance makes less sense.  but I do know many many people that carry more than one life insurance policy.

regardless of the LLC or land trust Insurance is a must... We recommend setting up a dwelling policy (landlord policy) making sure that it is set up for short term/Airbnb rentals, has adequate coverage for furnishing, decorations, and personal property. and then also having an umbrella policy is recommended, also umbrella policies can add extra coverage to some if not all of your other assets and insurance policies including your auto policies (this all depends on how your policies are set up, you may need 2 umbrellas, 1 for the business side because of commercial policies, and 1 for personal policies)

California has intense rules and regulations when it comes to asset protection, having your LLC's properly set up and making sure that the proper entities are getting taxed by the state government.  Getting with someone like Jason Marino https://www.biggerpockets.com/... or Richard Bechtol https://www.biggerpockets.com/... would probably be a really good idea.  Both are real estate attorneys and work with Royal Legal Solutions setting up asset protection structures.

@Michael Marcotte  It is all about your end goals.  I work closely with an asset protection law firm that specializes in land trust, asset protection and estate planning. Royal Legal Solutions  Using their setup in conjunction with a good independent insurance agent offers the best protection.  But like others have said it is completely up to you what your risk management strategy and risk tolerance is.  

@Pradyumna Vanam Make sure you keep your property insurance updated.  If the home is vacant and has been for more than 60 days your insurance company can most likely deny a claim on the property.  Also once you decide whether or not you are going to rent out your home make sure to change your coverage so that it is a landlord insurance policy and require your tenants to get renters insurance with you as an additional insured on the policy.  

@Ernesto Barragan JR the infinite banking strategy is a great strategy that has many pros.  there are cons as well... you need to work with an agent that is well versed in setting up these policies as they can be set up wrong.  That is where the horror stories about life insurance policies imploding and falling apart or not performing as advertised.  according to my mentor there is less than 1% of life insurance agents that have done the homework, and have the understanding of how to set up and manage a "infinite banking policy".  So getting to know and understand the policies and making sure that your agent properly explains how these policies can and should be used is imperative to the policy staying in good standing and you the client/owner of the policy being able to use the policy in the way it is intended.

@Chandler Rehbein just like Kevin said in his 1st sentence... not all companies are created equal. in my agency we don't work with carrier that have anything other than A ratings unless the client specifically requires it...  

I do one thing different with my clients than Kevin, 

I only recommend maxing out your liability coverage if you only have 1 or 2 rentals.... if you have more than that it is more cost effective and beneficial to place your liability coverage at the level that is required by an umbrella policy.  This is because umbrella policies are relatively cheap and when you place them over multiple base policies they tend to make the liablity coverage more affordable while also increasing your liability coverage to $1 million or more.

I have heard through the grapevine... by no means direct from a source and you should definitely do your research on the matter.... But I have been told that if interest rates go up much more and if the real estate market drops banks are going to start calling HELOC's and if you have unused HELOC's the bank doesn't have to give you access to that money.

But I agree with William Harvey a HELOC would be much cheaper money.

You may want to check out Royal Legal Solutions.  They are a real estate law firm that specializes in land trusts, asset protection, and estate planning.  I don't know all of the in's and out's but I do know that there are a few people on here in the forums such as https://www.biggerpockets.com/... Jason Marino and https://www.biggerpockets.com/... Richard Bechtol who know all the things related to that topic.

as far as maximizing on your estate for tax purposes there are a few different ways that Cash Value permanent Life insurance can be beneficial not just to your heirs but also creating extra leverage for your investment strategies while you are alive.