All Forum Posts by: Carl Dowdy

I’ve got a bunch of rentals in Golden etc. If you want to learn but you’re also up for hard manual labor (I plan to put you to work while we chat - market rate or better pay) you’re welcome to hit me up. Good luck! 

@Jason Bott thanks for the PM.  I'll follow up shortly. 

@Kenneth Garrett that's good to hear about State Farm.  I've got one rental with them now so I'll reach out to that agent too. 

I'm curious what options you've found for reasonable insurance premiums when title to a rental is held by an LLC - and you want that LLC to have a few million in liability coverage. If I keep title in my name I'll continue paying $1,400/year in insurance, but if I move title to an LLC, I'll need to pay over $4,000/year for comparable coverage.

Currently I hold title to the duplex in question in my name and have a standard dwelling fire policy with Travelers with a $500k liability limit (and $550k coverage on the building). Cost is only $1,400/year. Since title is held in my name, my umbrella provides excess coverage. If I move title to an LLC, Travelers will let me add the LLC as an additional insured, but I cannot make it the first named insured. Problem is, my umbrella policy with Auto Owners won't cover the LLC either way, so my equity in the duplex would be exposed above a $500k judgment (yes I would be covered personally, but my equity in this property would be at risk). My objective is for the LLC as owner of the duplex to have at least $2MM to $3MM in liability insurance.

I found an umbrella carrier, Hudson Specialty Insurance, that offers $2MM in liability coverage for an LLC at $1,075/year, but the LLC has to be the first named insured on the underlying policy. A dwelling fire policy with Auto Owners naming the LLC as the first named insured is $3k/year, versus my current policy at $1,400/year.

I also explored going the commercial route, but the CGL and commercial property policy was quoted at $4,277/year with $1MM liability.  The $2MM commercial umbrella would be an additional $550/year.  Again, making this option quite expensive at nearly $5k/year

Ideally I could find an umbrella carrier that would write a policy covering an LLC when the underlying policy only names the LLC as an additional insured. Anyone have any leads there? Any other approaches or brokers/carries you're happy with?

Thanks for the help! 

@Jordan Deeney a hard money loan would likely be secured by the property, so it would not be eligible for the delayed financing exception I mentioned. If you can find an individual to loan you the money on a personal guarantee or secured by a different property, that would be an example of funds you could combine with a HELOC and avoid seasoning requirements.

I should also add that just because Fannie Mae says something can be done, that doesn’t necessarily mean a lender will do it. Check with the conventional lender first to make sure that you are structuring the deal to their requirements.  

The 6 month seasoning period required for most conventional mortgages does not apply if the original purchase was made with cash or an unsecured loan (loan not secured by subject property). This could be money you borrowed from a HELOC, a rich uncle, a securities based line of credit, etc. I routinely used this delayed financing exception and it works great, but be prepared to educate your lender about. Search for "Fannie Mae Delayed Financing Exception" on Google and you can learn more. Good luck!

As @Wayne Brooks correctly states, the maximum number of conventional mortgages a borrower can currently have is 10.  Not many lenders which actually go to 10 conventional and those that do will likely have caps on the maximum aggregate loan amount, geographic proximity of properties, etc. It’s not easy to get underwritten for 10 conventional mortgages, but it’s possible. 

An auto loan will not count as 1 of 10. It will factor into your DTI. Search for this publication online to find a discussion of the calculation of the number of loans a borrower has.

B2-2-03: Multiple Financed Properties for the Same Borrower (10/31/2017)

 As you would assume, most cities in the Denver area allow only 3 to 4 unrelated occupants. You can push to 6 legally in certain unincorporated areas around Denver. Even more in R3 if you’re brave. 

Did I mention I filled the house with a group of six 19 yr old strippers? Contractor productivity was at an all time low for the duration of their lease, though response time was unparalleled. 

I recently rented to a group of strippers that had an affinity for wet wipes.  Plumber had to fish them out a couple times, and then he would tend to linger.  My lease now graphically provides:

Obligations of Tenant to Maintain the Property. Tenants shall, at their sole expense, cause themselves and all other persons at the Property to, and be responsible for any damage and/or repair resulting from their failure to: 

...

g.  Use in a reasonable manner all appliances, electrical, plumbing, HVAC, and other components of the Property (examples include: cleaning the lint tray in the dryer before each use to mitigate fire danger; only flushing feces, urine, and toilet paper down the toilet drain to prevent sewer back up; etc.);

@Jonathan Dickerson Your question of why your insurance company is involved at all is a good one.  You don't own or control the common area property so why should you get sued, right?  Hopefully that's the argument your insurance company makes, either through an adjuster or legal counsel they retain to represent you.  The problem is that if you don't kick this to your insurance company now and allow them to make that argument, they might claim later that you failed to give them notice of the claim.  While you could legally refuse to provide the attorney with your insurance company's information and tell him to go sue someone else because you don't own/control the property, and it may very well work, if you don't have the blessing of your insurance company to say just that, you run the substantial risk that if you do get sued, the insurance company will have grounds to deny coverage.  Can you get sued on this? Of course.  For better or worse, our legal system allows anyone to sue anyone for anything.  I had a slip and fall case once where it was a meteorological impossibility for any snow/ice to have formed and the only witness to the slip and fall later admitted he was paid to fabricate his story. Will you get out quickly on a motion to dismiss?  That's the question for your lawyer. 

I'll also add that under Colorado law you don't need to own the property to be held liable under premises liability law, but rather the definition of "landowner" under Colorado law is a broad one which includes not only the titled owner, but also anyone who exercises a sufficient degree of control over the circumstances existing or activities taking place on real property where the accident occurred.  In practice, this means in Colorado it's common for not only the titled owner to get sued but also the property manager and in the case of a slip and fall on snow, the snow removal company.  

If this goes anywhere your insurance company will get you an attorney.  If you feel the need to retain one directly that you're paying for, message me and I can refer someone.  I don't do this anymore. :)