All Forum Posts by: Taylor Stow

I’d add:

- check out if the land is buildable.  Some lots are so narrow that you can’t practically fit a building on them; this requires looking at local zoning codes. Is the land on a slope?  Is it marshland or in a river’s flood plain? (If it’s not buildable, could it be something else?)

- learn if your investment will require you to pay the taxes on the property in the future, and account for that in your underwriting.

- In Louisiana, investors bid on a percentage of ownership in the property, where the percentage of ownership given for paying the tax debt starts at 100% and is then bid down.  The first investor willing to accept 1% ownership can get the property, but is that percentage of ownership in that property worth what you paid for it, especially considering what you have to do to confirm ownership?

Great post @Will Sifert

What's the size of the project dollar-wise (ballpark) and scope?  That will determine what sort of contractor is the best fit for the job.  Also, is the property residential, commercial, or somewhere in between?

@Nick Ysidron  Property insurance in Louisiana is way up for everyone, and we are just now starting to see its impact for real estate investors.  And its not just small rental property owners, there are big multifamily deals that are falling apart at the last minute because the insurance costs are too high and the deal doesn't pencil.  

That said, as you shop for insurance for your property, make sure your insurance broker is up to date with all of the available options.  

Insurance Companies Writing Policies in Louisiana 

The state legislature recently passed incentive money for insurers to come write policies in Louisiana, and the insurance companies responded.  Here's a list of the insurers that received incentive money that should be writing new policies: 

• Allied Trust Insurance Company 
• Applied Underwriters
• Cajun Underwriters Reciprocal Exchange (CURE)
• Constitution Insurance Company
• Elevate Reciprocal Exchange 
• Gulf States Insurance Company 
• SafePoint Insurance Company 
• SafePort Insurance Company 
• SureChoice Underwriters Reciprocal Exchange (SURE)

You can check out more info about the incentive program at the Department of Insurance's website: https://www.ldi.la.gov/news/pr...

Risky Insurance Companies

@Ryan Letzeiser makes a good point about watching out for the solvency of insurance companies.  As your shopping for insurance, you'll want to determine if the insurer you're considering is "admitted" in Louisiana such that it is covered by the Louisiana Insurance Guaranty Association ("LIGA").  If an admitted insurer becomes insolvent, LIGA should cover all or most of a claim amount.  On the other hand, if you go with an unauthorized insurer, you won't get that LIGA protection.  For more, see: https://www.laiga.org/history/... 

@Allen Lopez Sorry to hear about this hassle, especially when part of the point of buying a new home is to avoid the headaches that come from an old one. But it does sound like you’ll have decent bargaining power in this situation. I agree with your instinct to get an attorney, but for the sake of discussion, here are a couple of issues I would consider:

Breach of Contract Claim?

In simple terms, if the builder is refusing to build the home in accordance with your agreement, you may have a breach of contract claim against the builder. See La. C.C. Art. 1983 (“Contracts must be performed in good faith.”) https://www.legis.la.gov/legis/Law.aspx?p=y&d=109236 It’s important to review the contract and the communications with a lawyer to determine how best to proceed, including what claims you might or might not have at this point, but here are few initial issues your lawyer will probably help you analyze:

• Fixed-Price vs Cost-Plus Contract
  Is your contract a fixed-price or a cost-plus contract? In a fixed-price contract, the builder agrees to build you a home for a set price, subject to exceptions and conditions. Home buyers generally prefer these types of contracts because they provide certainty on price. In a cost-plus contract, you pay the builder for all the costs of materials, labor, and/or subs, plus a certain amount to cover the builder’s overhead and profit. There are other variations on pricing that may come into play, so a full review of the contract is important.
  
  
• Material Escalation Clause
  Many builders are insisting that their contracts contain material escalation clauses since the pandemic, when the cost of lumber soared. Additionally, builders are worried about the risk that inflation poses in the future. That said, simply having to buy more materials because of a mistake on a jobsite is not what is usually contemplated by a material escalation clause, so check the contract.
  
  
• Insurance, Indemnity, and Subs
  Your builder may or may not be the company/entity that poured the foundation. If a subcontractor did the work, it may be necessary to determine what insurance each party has and whether they have any agreements amongst themselves about who pays for mistakes.
  
  
• Delay Damages
  If the contractor unreasonably delays the construction process and/or misses a deadline set in the construction contract, consider whether you are incurring additional damages because of this delay. For example, are you renting a home that you otherwise wouldn’t have to rent if your new home was ready?

Next Steps

Every claim is different so it’s best to consult with an attorney to assess the strength of your position. When you do so, be sure to provide the lawyer with 1) the contract, 2) any change orders or other changes you made to the contract, and 3) copies of all communications with the builder. The lawyer will inevitably ask you for more documents, but this will be a good start. Lastly, you may want to contact a lawyer sooner rather than later to avoid letting your rights expire or even an argument by the builder that you were the cause of any delay.

Consider 

(1) What the cost would be if you hired an unrelated attorney to do the functions you want your sister do? 

(2) What duties would your sister have going forward after the purchase and lease up?  How much would it cost for an unrelated lawyer to do those jobs?

(3) What would be the cost to hire a property manager instead of you doing the work yourself?

 @Damon Aniton you're correct that under the new rules, only one STR or BnB is allowed per square block by right. But keep in mind:

1) The application period under the new rules opens July 1, 2023, and it’s only open for a limited period.

2) If two or more apply in one square block, and more than one application is complete and approvable, then the City will get out a bingo hopper and hold a lottery to determine who gets the one permit.  

3) The lottery losers can apply for an exception in a process that involves input by neighbors and City approval, and the number of exceptions per square block is limited to 2.

4) Operators who live onsite will be required for STRs in residential areas. Consider whether another renter on a property would be willing to become the operator or whether it’s better to be an onsite owner operator.

There's more detail on the City's STR website about other requirements to get an residential STR license.

The City's argument is not without precedent.  Last week, a federal court essentially agreed with an argument made by Walnut Township in Ohio that its regulation, which did not specifically mention STRs, probably in fact prohibited STRs.  The Court rejected the plaintiffs' argument that "silence should be interpreted as permission."  That was because the zoning resolution at issue was written to state the permissible uses in a particular zoning district, and STRs were not one of those permissible uses. Purple Munky Property Co. LLC v. Walnut Township, No. 23-cv-854 (S.D. Ohio, E.D) (April 24, 2023) (link). Again, the answer is going to come down to the specific, local regulations. You should check with a attorney who is familiar with the local STR regulations to see if there's a way for you to legally operate an STR.

AirBnb requires that guests are made aware of any lease / contract requirement before they book.  I would check out this article and consider what updates you may want to make to your listing: https://www.airbnb.com/help/ar...

Is this an auction for full ownership?  Can the former owner come back, redeem, and get the property back?

Do you have a link to the Courts’ Reasons for Judgment?  It would be interesting to see whether the Las Vegas court is considering the same commerce clause issues the Fifth Circuit ruled on for New Orleans.