All Forum Posts by: Bao Nguyen

@Jay Hinrichs Jay, you have some very good points - especially about paying $500-$600/yr on units I own that have a market value of $40-$50/sqft while the insurance company is quoting me based on re-build cost of $125/sqft.  I told them their crazy to think my property is worth twice what they want to insure for, and I even submit proof that my neighbor's home just sold last week at a high price of $40/sqft.  Regardless, they don't care, they quote based on re-build cost.  Is there another way to get more economical/less expensive/more appropriate insurance for rental units?  I only have 3 units now, but looking to build to 10 to 15 units in the next 12-24 months.  I've heard that insurers will offer "packages" once you have 10+ units, which is a bit cheaper, but I don't have exact numbers to know what "cheaper" means.  If it's a 10% discount, that "cheaper package" is moot, my rate went from $600/year/unit to $540.  Big deal.  Please share if you have strategies that are more economical and/or better coverage appropriate for rentals.

@Wilson Churchill You're absolutely right about not getting insurance if you own enough properties, unless the insurance company offers some kind of "bulk package" that is significantly less expensive per unit than normally.  Also, from what I've noticed, most of these insurance companies insure based on "rebuild cost", which is around $125/sqft in my city, while the houses I own (75yrs+ old) have a market value of $35-45k (or about $40/sqft).  I'm forced to buy too much insurance - it's ridiculous.  As soon as I hit 30 properties, I'm definitely going to call the insurer and tell them to get lost - self insurance is cheaper at that point.

@Jon Holdman You're probably right Jon, they send out these policy packets which I never read - and I'm the type that reads EVERY word in a contract I sign my name to, unless that contract is a booklet like these insurance packets are.  I'm sure that packet states everything, but back to technicality - technically the insurance company is right, else they'd be sued and they'd change their ways by now.  But from an ethical standpoint, I can't help but feel this is a not a good and honest business relationship between me and the insurer.  For example, I point out to all my prospective tenants of extra expenses on top of rent: that their dog is an extra $20/month in rent and that they will need to purchase renter's insurance.  I didn't have to take the time to point it out because it's buried deep in the lease agreement somewhere in fine letters, but I feel it's just an ethical thing to do.  I don't get that same feeling with insurance companies.

@Aly W. Yes, the tenants did get a police report.  They called me before the police, and I told them to call the police asap.  Ironically, this was the first thing the insurance agent asked me "Do you have a police report for the vandalism?".  Once they get the police report, it's proof it's vandalism comes the news : "I'm sorry sir, we like taking your up front cash, and I'm calling you on a Saturday because I can't wait to let you know you're not getting a dime from us so don't call us on Monday when we're busy coming up with more fine print".  Those weren't their exact words.  :-)

I got a call from my tenant yesterday that the bay window in our rental unit has been smashed in by vandalism.  I submitted a claim to Allstate, and the promptly called me to today to let me know that my landlord's policy does not include the "extra provision" to cover theft and vandalism.  $4500 Bay window replacement bill - that's my entire year's cash flow for this unit gone, all because of some technicality that I wasn't even aware of.  Quite upset at Allstate at the moment for not informing me of this to say the least.  I can't help to start to think that insurances are in the business to collect upfront money while focusing their attention on loopholes and technicalities to avoid any payouts.

Perhaps I should get into the insurance business.  

@Account Closed 3hrs/month spent managing your homes, these must be fairly new properties (less than 25yrs old)?  I have some properties built in the early 1900's that I manage, and when doing an upgrade like new flooring or new driveway - and these old homes need A LOT of upgrading - just one of those tasks alone requires me to be on the phone for 3hrs vetting contractors and scheduling them for an estimate (I manage remotely as well - but with a brother on-site for keys/showings/etc).   On these older homes, I would say I spend on average 3hrs/month (low end) to as much as 3hrs/week when something goes wrong and needs fixing.  Perhaps I should offload these older homes and get newer ones?  But these older homes cash flow about 300% better than homes that are less than 20yrs old.  Let me know your thoughts.

Also, I would imagine there's a lot of trust between you and your leasing agents.  For me, I call my brother (who's local) to go and inspect all work from contractors before I pay.  I don't think I could manage remote without my brother because I wouldn't feel safe nor secure paying people I've only spoken to on the phone for work I've never seen in person.

@Robert Szalay Hi Robert, just curious, do you have someone physically available on the ground in Michigan or did you fly back and forth for this deal?  I've always wondered how investors manage to purchase/manage properties remotely like this without a brother or someone trustworthy that's local.

@Roy N. Thank you for this valuable info.  I didn't know such provisions exists.  I will check with Michigan laws.  

@Russ M. That's what I figured - we must honor the existing lease, which isn't as bulletproof as the leases I use for my other rentals.   The tenants on both sides of the duplex has 8 months left on the lease.  That's 8 months of headaches, and possible eviction (which is 6 months of no rent + destroy property).  I'm trying to calculate what this equates to in terms of dollars and reduce my offer accordingly.   The worse aspect is that the current seller has trained the tenants that they can get away with being bad tenants - even the lease spells it out "rent will be discounted $25 if tenant pays rent before the 5th of the month".  I can't believe the penalty for late rent is nothing!  Paying on time gets rewarded with a discount.  Wow.  No wonder the seller is trying to get out of managing this place.

@Roy N. Thanks for the input.  I'm starting to prefer this unit vacant since it appears the seller doesn't vet his tenants at all.  I'm not aware that you can request the property to be vacant.  How will the seller kick the tenants out?  I didn't see such a clause that allows the owner to do so in the lease agreement.

@Wayne Brooks Thanks Wayne.  I'm just a newbie offerer for multi-family units : vetting tenants in addition to a property inspection.  I'm learning though.  :-)

@Account Closed Very good points Jon.  Question: how do you find and vet good contractors/handymen when you are new to a city?