All Forum Posts by: Andrew M.

@Michaela G. I'm sorry, that may have been a bit of a  stretch. This is by no means a short term rental situation.

@Jay Hinrichs Thank you for the recommendation. But I'm having a hard time seeing why a commercial line is necessary for these two homes. Does a collegiate rental home with 4, 6 or 8 students living together need a commercial policy? Does a room to room rental home need a commercial policy? Do three folks in their golden years, with no health concerns, not live in a home together without it needing a commercial policy? Would I be able to work out the other policies, that are standard SFR rentals on one year leases with one family living in them, or were they in the right to cancel them all since one policy was questionable?

Hello all,

I'm curious how you would handle a situation, or if it has happened to you, how did it play out?

I've got 7 properties (4 traditional SFR rentals, 3 room-to-room rentals), all insured with one local broker. One tenant who subleases/manages two of the properties from me got in touch with them to obtain auto/umbrella policy. In the course of discussion, the tenant brought up that there are elderly people living in the home and someone who cooks, cleans, does laundry, etc.

To make a long story short, the broker called the insurer, asked if it were legal to operate a 'commercial' operation on the current DWF policy we had. With that mis-information, the insurer said no, and they agreed to throw a blanket over all 7 of my policies as 'commercial' and cancel them, the earliest being in 30 days. 

All of this without as much as a phone call to ask. I don't think there is anything wrong with this. It's no different than insuring a room-to-room rental, AirBNB, college rental, etc, simply because the folks are elderly.

Should I try to work it out with them by addressing the facts? Find someone else? Have they crossed so many red lines here that I should be pulling my hairs (the little I have left) out?

Alex Kamunyo You will not need to wait 12-14 months to refinance. If a third party owns a lien on the property (hard money in your case), you can go through with the (rate and term) refinance with no seasoning period. What you are referring to is if you bought the property yourself and then wanted to do a (cash out) refinance, then you have to wait six months.

That seems high. Are they an investment focused lender? Are they trying to get you on buy-down points? I assume that if it's 30 year fixed it's a Fannie/Freddie loan. Six weeks ago I was getting 4.625% and now am getting in the range of 4.875% because I've got >6 properties. With good credit and your first rental you can do much better. In fact, 5.5% is Wall Street prime + 1% as of today, that's in the range of a portfolio loan. PM me and I can give you the names of people I've worked with and have done well.

....buy the vacant property?

@John Mocker You are completely correct in your assumptions. Thank you for the actionable items.

@Jason Bott This is a four bed facility in Texas. There is not a lot of guidance and regulation associated with this small of a setting. I don't actually own the business (just lease to the business for them to sub-lease to residents) and therefore have a more primitive knowledge of the guidelines. This is to help out a friend. As @Shane H. said, the workers comp is what gets expensive! Whom do you use as a broker? From what I understand, there is a very large difference in licensing and regulations between a 36 bed and a 4 bed facility, even just from state to state. 

Thank you both for the input! I'll post our outcome when finalized!

This question is for those who operate or have an understanding of residential assisted living facility, residential care homes, RALF, RCH, etc., as a business specifically, not the underlying real estate. 

1. What type of business insurance do you carry? Professional liability, general liability, anything else? 

2. Who underwrites it?

3. What limits do you carry?

4. What is the average price you are seeing/bed or /resident?

I see that there are a handful of insurers that specialize in this type of underwriting from a simple Google search, but I'd be curious to hear about your success!

I currently hold two properties on the very, very fringes of 78244. 'Fringes' as in, right across the street is a different zip. I've got good tenants in above average rental ARV type homes and they have performed well. The exit strategy is to sell retail and it won't be a problem.

Steven Gillmer It looks as if your numbers are VERY conservative. Offhanded, it looked like it would cashflow without issues. My assumptions would be $110,000 purchase price, 20% down, $2,200/yr taxes,$600/yr DWF insurance, $25/mo HOA, 4.75% interest. That makes your mortgage (PITI) in the neighborhood of $712/mo. Subtract your other assumptions and it still looks like a decent cashflowing property. Cash on cash reruns will be low, but for turnkey, not too shabby.