All Forum Posts by: Michael G.

1. Always overestimate - especially maintenance & vacancy

2. for taxes, you can search this online and get the exact exact figure. don't guess

3. for utilities, ask the owner/seller to send you most recent bills. he should be willing

4, insurance you can get your own actual quotes

this should get u started....

feel free to private message me if u want to discuss further.

best.

Brooklyn R

Thanks! This is veryhelpful! I definitely need Insurance leads in NY for carriers that will underwrite a residential property with a daycare! (how can there not be right? There must be 5,000 daycares in NY! And its such an important service to the community and to parents!)

Anyway, were finding it very difficult to convince an insurance co. to take this at a reasonable price.....

Please pass along any NY landlord insurance leads you have that will accept a daycare! (I'm thinking maybe I should post a formal request for leads in the marketplace???)

Hello Bigger Pockets Real Estate Aficionados... Got a nice juicy one for you here... Hoping someone with better knowledge/experience than me will be able to help out and advise...

SCENARIO

We just recently acquired a fully-rented residential triplex in New York where one of the tenants operates a small "Family-Group" Daycare center out of her apartment. She also lives there, in one of the bedrooms which she shares with her child. She appears to be duly licensed for childcare but has NO Business Liability Insurance (or even Renters Insurance). (Crazy right?)

We currently have 'residential' insurance on the property but we're not sure that they would carry the policy if they knew about the daycare. (They never asked so we didn't tell). We're concerned that if they find out they will cancel their coverage. If we were to get proper coverage including the daycare, fully-disclosed, it will cost double at least! (An extra $2,000!) Not only that, but g-d forbid if there is a calamity tomorrow they could very conceivably try to not honor any coverage due to the daycare.

The tenant's lease was amended to allow her to operate a daycare but also explicitly forbids any activity which is likely to increase Insurance premiums and so is a little contradictory. Her lease is also up in approx 60 days from today.

Here's what were thinking (please pipe-in if you agree/disagree) : In order for this scenario to be fully kosher :

1.) The tenant would have to Immediately Procure Business Liability (and ideally renter's) Insurance and add our LLC which owns the property as the additional named insured

2.) We would need to immediately cancel our current 'improper' insurance and procure a new policy where the daycare is fully disclosed, even if it costs us a lot more $$$. (Read: $2,000 +++)

HERE's THE PROBLEM:

We're worried that the tenant will not be able to afford all of these new costs.

The Liability Insurance will likely cost her minimum $1,500 out-of-pocket and then we of course would not wish to "eat" the additional insurance cost so will have to pass this cost along and bump up her rent by at least approx $150 - 200 per month.

She may not be able to swallow it. We would then be forced with the ugly, distasteful and unfortunate dilemma of kicking out (or at least trying to) a very nice single-mother & child (who happen to be not-horrible tenants) during winter-cold February PLUS inconveniencing all the mothers who bring their 3 month olds to that particular daycare.

This is not a pretty situation.

If it comes down to an 'eviction' it could get ugly (it's one thing to evict a drug-dealer but another altogether to evict a single mom&child with daycare babies...!) and of course, we could be out several months of rent + legal fees while we wait...

Ideally, the previous owner would never have agreed to allow a daycare into his building, but that's not the situation we're in right now...

Do we have the right to immediately demand that she procure Liability Insurance and add our LLC as Named-Insured? Do we have the right - either legal or moral right - to ask her to pay increased rent since our insurance will double?

How should we handle this? Shall we just wait until lease renewal before dealing with this? Any ideas? Tips? Advice? ALL FEEDBACK WELCOME! Any other alternate options we didn't even think ok?

ALL COMMENTS NEGATIVE, POSITIVE or otherwise are invited. PLEASE, DON'T HOLD BACK....

Thanks!

Jay aka "Brooklyn"

Above was @Elisha Keller

Well, yes, I do i'd say.

The 60 unit apt I am only a silent investor in so, for me, it represents merely a return on capital that I am satisfied with. I dont have to do any "work" for that one.

The 3 family I only just very recently aquired and so i dont have enough experience with it yet to tell you how i feel about it. I will be happy to update you in 6-9 months to let you know how much work it is or isn't.

The advantages, for me, is that it represents an increased income stream sourcing from one single investment…. It's more efficient to paint 3 units at once in one place than to paint 3 units separately in different locations.

The disavantages, the way I see it, is that it means more work in terms of finding quality renters, maintenance & upkeep, extra liability, etc…

Did I miss anything?

@Elisha Keller

Nice one Elisha! Big fan of Philly FreedomTown! Just re-watched Rocky III last night for the first time in a looooong time. Felt good.

Thanks for the kind words.

Feel free to ping me whenever you like and I'll help anyway I can if I think I know the answer, or admit that I don't if I dont!

Thanks all. You've made me go hmmmmmmm....

Do you think i'm missing any points to be concerned about?

Sometimes I worry about the things I don't even know that I don't know.... (To quote Donald Rumsfeld, who I'm sure quoted someone else..)

sounds ok to me. if the math works, ill buy "turnkey" properties all day!

just seems like you have to really make sure that

a. youre not getting swindled

b. the properties will really rent as fast/easily as we hope at the right price or higher

c. the tenants don't destroy the property

d. the property manager is honest reliable and capable

seems to me that if the above all lineup, then all is good....

but these are a lot of big IFs, no?

is it really possible to successfully own & manage property from hundreds or thousands of miles away?

J

Thanks Everyone! You guys are AWESOME! This BP website is a really great tool, I can already tell. Thank you all so much for chiming in with your advice. I pledge to read every possible applicable thing here that I can.

Question: What is meant when you say a "Turnkey" purchase?

Thanks Pete

Completely agree & I understand the power of leverage ... just that at that time, since I was just beginning in Real Estate I wanted to take it slow ... I didn't know whether or not I would be able to easily find renters in a timely manner, how much would be involved in maintaining the properties, how much work it would take to be a landlord or how much of an investment in terms of both time & money would be required...

I'm still a little trepidatious about this but am increasingly more willing. I actually found out that I enjoy doing the hands-on work to fix-up houses, although mainly I've only performed small fixes here & there. Any large scale rehabs requires hiring a contractor which in NY is fraught with its own perils.

Not only do contractors frequently over-charge (and under deliver), one other obstacle I discovered was that in Brooklyn (which has exploded over the last 10 years) usually the prices are so high that the math with a mortgage and reasonable downpayment (IE: as little as possible) doesnt work... The rents don't cover the mortgage payments...

How did you get over that?