All Forum Posts by: Chris V.

I am hunting for insurance for my first two duplexes!

After reading several forums posts and BP blog posts, I see that the main two methods people talk about are the Actual Cash Value and the Replacement Cost.

I'm a USAA member, and I have all of my insurance with them. They only support Replacement Cost policies. They quoted $200K for the dwelling coverage, and I can manually lower it to $153K (as low as it will go).

My questions are:

1. Should I just go with the Replacement Cost policy? If so, would you say save $9.50/month by lowering the dwelling coverage to $153,000 or maybe look for dwelling coverage that's even lower somewhere else?
2. Should I look more into the Actual Cash Value policy with another company? Any tips here?

Here are the details. Thanks for any help!

Property Information

• Purchased for $68,000 (maybe worth $72K)
• 1790 sqft duplex built in 1972
• Both units are 2 bed / 1 bath
• Exterior: mostly brick veneer with a bit of vinyl siding
• Flooring: tile in bathrooms, cheap laminate everywhere else
• Walls: 1970's wood pannel throughout, but mostly tiled walls in bathroom
• Roof: shingle (not sure of the type), inspection said the roof is on the "second half of its life"
• Foundation: crawl-space

Insurance Quote (if I lower the dwelling coverage)

• Calculated Rebuild Cost: $201,000
• Dwelling Coverage: $153,000 (I lowered it as much as possible)
• Personal Belongings: $2,500
• Other Structures: $15,300 (can't change)
• Personal Liability (each occurrence): $300,000
• Medical Payments to Others: $5,000
• Deductible: Other Covered Perils / Wind and Hail: $2,500 / $2,500
• Annual Premium: $472.55
  

Insurance Quote (if I don't lower the dwelling coverage)

• Calculated Rebuild Cost: $201,000
• Dwelling Coverage: $201,000 (didn't lower it here)
• Personal Belongings: $2,500
• Other Structures: $15,300 (can't change)
• Personal Liability (each occurrence): $300,000
• Medical Payments to Others: $5,000
• Deductible: Other Covered Perils / Wind and Hail: $2,500 / $2,500
• Annual Premium: $587.36

@Sean Williams How did this work out? Can you share the numbers? I hope everything worked out fine!! 

@Mike Conner I am hunting for rental property insurance, and I have most of my insurance with USAA. They told me that they would only get involved if I decided to replace/rebuild the house. They indicated that if I chose not to rebuild, they would not just cut me a check to pay off my mortgage. I'll check with other providers, but just wanted to see if you knew of one or two that allowed for paying off the loan and moving on.

They also mentioned that some towns/cities will fine owners for lots left vacant. So I'll have to look into that.

@Jim Costa  @Aaron Montague @Christopher J Lemmon

Thank you kindly for your detailed responses. I made a low enough offer that the owner did not counter, simply saying "I don't think it's going to work for us this time, Chris."

I'm not too worried about it. I wasn't 100% sold on it, and of the folks I've asked, about 50% said go for it, and 50% said walk away. 

@Jim Costa, man our property taxes are KILLER. I don't understand it. How do people make money here?!

Trash is $97 every two months for that duplex, according to the owner.

I do want to manage my own properties at first so that I can learn what it takes and know if a PM is BS'ng me in the future. And maybe I'll be good at it, and keep doing it. However, I'll probably include PM fees in my calculations so that I have the ability to disappear without having it hurt too bad.

I'm thinking I'm going to have to find a good real estate agent in the area who knows our area and knows where good rents can be made. Trying to do this myself is just not working...I don't think. We've driven like 50 neighborhoods in our area, and there are barely any MFHs, maybe a hand full.

I can't get over the detailed advice you guys have given me. I sincerely appreciate it. Let me know if you have computer questions for me! :)

absolutely @David Cornett 

I'm finding it difficult to get started on my own with no network. Let's connect.

@Aaron Montague yeah I'm starting to lean that way on this one.  I offered him $63K, plus he pays $4500 closing costs, plus he evicts the tenant on the right side and allow a full walk-through on that side. I am thinking I won't hear back from him.

I think I'm having trouble understanding where people find acceptable cash flow + CoC . Said differently, I am not seeing the key factors that will directly cause cash flow to be $150+ while also providing at least 10% CoC return.

What I've figured out is that the less cash that comes out of your pocket, the better your CoC return is. Also, the more you finance (which leads to lower cash out of pocket), the worse your cashflow is because your mortgage payment is higher.

So the correlation I see is: the higher the CoC, the lower the Cashflow.

I'd love to live in a 4 plex, but my wife isn't having it. =\ Thanks a lot everyone! Take care

Aaron Montague thanks for the feedback man!! So I found out more details. My rate is looking like it will be 4.875% on a 70,000 purchase, 25% down. Utilities, owner says the tenants pay electric, water/sewer, but the owner pays for trash pickup so I need to verify the cost by calling the local company. I do wish the month-month tenant was gone, because he apparently just doesn't follow the rules, even though he's been there 2 years. I am now factoring in 8% vacancy and 10% PM.

Joshua D. Cool thanks for the feedback on your deal. I will come back and post what I ended up with.

Stephanie Potter wow very insightful response. Thank you! That makes a ton of sense. I'm an inquisitive sponge so no lecture is too great. Thanks a bunch for the explanation!