All Forum Posts by: Casey Adams

 Funnily Enough, the quote was from USAA. I just did not want to blast them because they are wonderful with my home and vehicle insurances haha.

I will take this into consideration though going forward, as their insurance is great!

Hello All,

I currently just closed on my first BRRRR/rental property today and I'm trying to get everything situated as quickly as possible to get rehab under way (I don't want to hold a balance on my HELOC for very long!). I need to find landlord insurance before the property management can start and the rehab can begin.

I got a quote from a insurance company I use for my own home in CA. The quote was $1400/year when I budgeted for $900-$950/year, which will definitely hurt my bottom line. Here is what I was quoted :

$240k structure coverage + 25% ($60k) (I imagine ARV to be ~$120k-$130k)
$2500 personal property
$24k Rental coverage (I'm expecting ~$1300/month so this may be high)
$300k liability insurance (Although it's $1 difference/month for $1m)
Sump/water pump coverage
Total = $117.72

This quote included the deductions for an alarm service and fire alarms equipped throughout (Do y'all usually equip your rentals with alarm systems?)

I did not pull the trigger but I am wondering the threshold of coverage I should look for as this is my first venture.
I appreciate your time and advice on this, as I'm a rookie starting my journey

Thank you everyone that helps and any advice is appreciated!

Casey

Hello Everyone!

I've seen previous posts that are a few years old when searching and just wanted to clarify what I should be plugging into these percentages. I've seen David Greene plug 5/5/5/8...but that seems pretty light for potential expenses. I've played with 10/10/10/10 and that has essentially killed any deal I've found no matter how good ARV is with current rates. However, if I'm not utilizing those percentages (5/5/5/8) it's getting really difficult to find little if any (mostly negative) cash flow on potential deals.

I know the high rates are making it rough and you want to marry the property and not the rate, but if I could get some advice on what fellow BRRRRers are using for their numbers I would appreciate it, if not for anything for a reality check for what I should expect.

I recently got approved for my HELOC and I'm about to take the dive so I'm trying to be as conservative as possible so when I find the right deal I can snatch it up.

Thank you everyone for your help and insight on this!

Casey

 Wow those are huge purchases. 

Thank you very much. Seems like I need to try to thread the needle as close as possible in order to succeed with cash flow on these concerning the cash out. 

You just clarified it for me. I was thinking you had to take max cash out for the new ARV regardless. That may have been where my numbers were flipping cheaper refi's so heavily.

Thank you so much for that. It was the greed that was getting me in the end haha.

I'll definintely keep that in mind. While I should have access to a decent amount of equity through my HELOC, I want to have my first few deals be within the means of my HELOC. Buying a property in cash, rehabing it, and leaving no cash in the deal while paying back my HELOC is going to be my initial goal in a C-Class initially I think. I honestly just think I want to show myself that I can do a somewhat successful deal for confidence purposes.

I'm somewhat wary using any funds from my HELOC for just a down payment on something that's in a B or A class. If the ARV doesn't shake out right or I'm too negative cash flow, I'm concerned about carrying a mortage + having separate HELOC payments to boot if I can't cash out enough to eliminate the down payment + rehab.

I have decent savings outside of the HELOC but i think I'm overly focused on cash flow because I want to build that cash flow to eventually purchase a bigger property for my portfolio that is out of the scope of my HELOC funds.

Thank you for the advice and information!

 Thank you for your input and perspective. I'm from SoCal myself...I just cant justify getting into the rental market here with how wild all of the costs have gotten. That's awesome you've built a portfolio throughout San Diego county.

Now that I've had another day to run more potential BRRRRs in the calculator, I've been able to make some more work in other areas than my initial examination. Although, with the BRRRRs I've looked into, my thought process was rehabing the property to get to the rent price of comps in the area while keeping my purchase+rehab+Monthly <= 75% ARV with some modicum of cash flow. I don't know that the rent itself would scale with the property unless I converted it into some sort of luxury option in the area? I'm not sure. Probably not something I would look into for my very first BRRRR.

I just honestly want to see if I can pull off positive cash flow and getting most, if not all, of my cash out of the deal after Refi.

Thank you again for the insight.

 I was looking in the Tulsa area primarily and to be fair I was being VERY conservative with my evaluations. I'd rather be surprised at more cash flow than by lack of it haha.

Thank you for your response!

That's what I'm starting to learn. I have a good enough W-2 where I can take a monthly hit in order to wait out the storm. I haven't had the HELOC released to me yet so I'm just doing as much preemptive market evaluation as possible.

I just can't decide if I want to go solely cash flow with little to no equity increase in the mid-west or if I want to bet on growth and equity + rent increase over time. I appreciate you taking the time to comment.

What a great community.