All Forum Posts by: Henry Clark

OP.  Yes this is possible.

Go check with your original lender on the first property if you had one.  Just because you and they would have history together and on the same property. 

If not, then find a bank with a Commercial Loan officer.  Tell them you want to do a Commercial Loan using Cross Collateralization with the first property.  Do some homework beforehand. Balloon terms 3/5/7 years. Loan Amortization- 15/20/25. Downpayment %- 10%/25%/30%/40%. Interest rate- prime plus? If the loan amount you are looking for is small relative to the value of the first and the second property combined, they are very well secured on a LTV%; ask for a 1% point lower rate.

If you don't want to Cross Collateralize, do you have any CD's or MM you can transfer to this bank as collateral.  You will still earn on them.  Should get a lower interest rate on your loan since these are liquid assets.  The bank will put a hold on them, so you can't just draw them out, so don't plan to need them for a while.

This will cost you an appraisal on both properties to be performed by that lender.  Some lenders will not accept appraisals that were ordered by another lender or are beyond xx months old.

 State up front you're a Coach in your post, then the obvious answer is yes from your perspective.  Kind of like asking if people like cars pro/con; then finding out later you're a car salesperson; versus Truck/Motorcyle/Mass transit.

Read back through my comment and yours, we said the same thing.  Especially your response to @Maria McNally.  I just choose a different moment before they seek out a Coach or program.

I always tell the people I'm helping to do a Deal Analysis in 1 hour and don't seek perfection. Then go back for 4 hours, then 8 hours then 2 days.  I never give the system or the prepped documents.  Make them build them, so they own them.  There is too much to learn at once.  I want them to see the total picture and then keep whittling down to where they get close to say a 5% error rate.  They won't learn those items until they actually do deals. 

So, what is your Coaching program called or your podcast series?   

I would recommend the person do at least 5 deal analysis before considering this question.  They can post on BP for input.

1. If they don't have the energy to do 5 deal analysis, then they will want their hands held by the coach all the way thru and that won't work. They shouldn't get into REI.

2.  If they have done the 5 deal analysis.  This will help them narrow down the type of coach they need.  They will be able to tell where they feel comfortable or not.  Then go find a coach.

Red leg partridge hunting in Spain. I'm really good with a rifle but one of our group with early onset???? With hand shakes still out shot me. This would be a great REI investment. They had 25,000 acres though. So would have to be cheap land.

 Since this post is about the California fires.  This location is really dry.   I explained how they could triple their water source from their land.  Hopefully I can go back and see if they put any of the measures in place.   California with both its terrain and rainfall can easily increase their water storage by a factor of 10.  Very inexpensive to do.  

@Chris Magistrado

Any of my comments aren’t for or against Europe investing.   Just more balls to juggle. 

You still have to consider US tax laws overseas.  Which is good and bad.  You can still do a 1031 exchange foreign to foreign asset.  Not foreign to US.  Can still use the $250k primary residence deduction per spouse on capital gains.  Bad- if your income tax is lower over there you still have to pay up to the US rate.  

Scaling-  your question is both country and even town specific.  In Italy your second house or even a duplex section the income is taxed higher.  Zoning- certain towns are starting to restrict Airbnb type rental units.  Even the banking is town or region specific for the same bank.  A national bank will work in concert with the local town to determine financing. 

You also will really have to look at your market.  As @Mike Lambert mentioned the Southern Italy market where you are at is a totally different market than the rest of Europe and even within Italy.  Prices are far lower there “relatively” speaking due to low demand.  Great for personal residence but not for scaling.  I would want to chase the tourist crowds.   Even high density local population areas I would not want since most don’t make that much money.  

I would pick a market area you like and start doing a bunch of deep dive deal analysis, but from a rental and not a life style standpoint.  We are doing a lot of traveling now and have found many areas we would buy a primary, but without doing the numbers not sure we would scale there.   Silema, Malta; Lucca, Italy; Taormina area, Sicily; Palermo, Sicily; Amalfi coast; Cinque Terra; Pontedore;  San Sebastián, Spain; etc.  Although we would buy a primary at any of those; have to run the numbers to see if rentals are worth it.  

Taxes are another item on your deal analysis.  We invest in Belize.  Zero capital gain tax, next to zero income tax, property Tax is super small.   Say $100 on a $500,000 property.  They fund their government thru Tariffs.  

Uruguay which I’m in the middle of checking out has a 11 year income tax waiver.  

Problem with both of the above as a U.S. citizen you still have to pay taxes on your overseas income.  

Basically you have to check everything out.  

Just do your numbers and control the deal to make money.  

The article is off because it is comparing two different types of buyers.  

Homebuyers will always pay more than a REIT type investor. They get a higher return since they are covering housing cost, have the $250k per spouse primary residence deduction in gains, is a savings account, higher leverage position, lower interest rate possible, will pay more premium for location, etc.

House might be overpriced for REITs but not for home owners.  

Update.   My brother and wife on the right.  With my son on the left, who is stationed in Sicily with the Navy.  Had Xmas in Malta.  They bought their house near Lucca, Italy.  Have the extra cash to really enjoy getting to know Europe.  He kept cash and investments on the side should he decide to get back in, 5 years from now when they come back.  

Self storage is great from both an appreciation and a cash flow standpoint.  He took the new development appreciation approach.  

 Have the same question with my wife.  Actually, scared to give her a gun.  We are going with both the pepper pellet pistols (haven't looked at them yet) and definitely putting the large can of wasp spray cans around the house, that reach out to 20 feet.

Repost from a few years ago:

We had a flood several years ago.  Umbrella or General Liability did not come into play.  Again, this covers Liability and not property damage.  To curtail Liability, we locked the facility up as it was flooding.  Flooded to about 5 feet in 30 minutes.  12 feet in about 2 hours.  Kept people out.  Due to this water being behind levees the water stayed up for 4 months.  Kept people out.  When I let people back in, had a detailed plan as people salvaged thru.  To keep their piles cleared out of the roadway so people didn't get hurt.  If someone had gotten hurt and sued for $1mm then these coverages would have kicked in.

Having been thru the claim process on a total loss. The following are the key items I would recommend investors pay attention to:

A.  Personal Property coverage- furniture, lawnmowers, signage, etc.  Make sure you have enough coverage.  You could be overinsured on the building and lose money on not enough Personal property coverage.

B.  Lost Income- normally 18 to 24 months.  Make sure you have this covered.  Since you will go from say 100% occupancy down to zero if a total loss.

C.  Clean-up costs- make sure you have sufficient coverage.

D.  Have an Insurance adjuster rep work for you in settling the claim with the insurer.

E.  Understand Replacement cost versus original building costs.  Most properties today will probably cost twice as much as 5 years ago due to inflation.  Also, if this is a regional flood, Fire, Tornado or Hurricane issue; replacement costs will be even higher.

F.  Make sure your Insurer is industry specific and not just your personal insurance.  The policy below would be twice as high if we used our Personal insurer since they don't have the experience mods for Self-Storage.

G.  Deductibles- make sure your deductibles are as high as possible.  This will help to reduce the premiums.

Self Storage – “Company” Liability/Property insurance.

Below is a summary of our Storage insurance for one location for your information. This location is in a 1mm population metro area, 230 units, and cost is about $1,800,000 all in.

Limits of Insurance: Coverage:

Liability and Medical Expenses

$2,000,000/$4,000,000 Occurrence/Aggregate Comprehensive Business Liability

$2,000,000 Any One Person Personal & Advertising Injury

$4,000,000 Aggregate Products Completed Operations Aggregate

$2,000,000 Any One Fire Fire Damage

$25,000 Occurrence Customers' Goods Legal Liability Deductible: $0

$25,000 Aggregate Sale and Disposal Liability Deductible: $1,000

$10,000 Any One Person Medical Payments $1,000,000 Occurrence Hired Non-Owned

$300,000 Each Employee Employee Benefits Liability

$25,000/$25,000 Per Claim/Aggregate Employment Practices Liability

Loc Class Desc Coverage Limit Ded Valuation Type 1 Self-Storage

Blanket Building & Business Personal Replacement Cost Property $2,100,000 $25,000

Earthquake Included

Sinkhole Included

Windstorm or Hail Included 5%

Business Income Actual Loss Sustained 24 Months

Pollution Clean-Up & Removal $100,000

Employee Dishonesty $15,000

Money & Securities - Inside $10,000

Money & Securities - Outside $5,000

Accounts Receivable $25,000

Electronic Data $20,000

Valuable Papers & Records $25,000

Fine Arts $10,000

Employee Personal Property $10,000

Limited Pollutant Removal $25,000/$100,000

Cosmetic Loss Limitation Included

Equipment Breakdown Protection Included

Premium, Fees, and Taxes: BOP Premium: $ 7,760.00

Optional Terrorism Premium: $ 31.00

Total Premium: $ 7,791.00

Key notes:

a. The above insurer specializes in Storage units. If you go with your traditional family insurance premiums will be about twice this, since they don’t specialize in this market.

b. Flood insurance was taken out from last year. I will have a separate topic on Flood damage.

c. We offer their Customer insurance and follow the state Lien/Auction laws.

d. Earthquake, is not offered if you are in a fault zone.

e. Hail insurance went significantly up. Talking with an adjuster, Companies were buying hailed properties, holding them for a year or two, switching Insurers, then making a claim, when another hail storm came through.

f. Business Income loss is 24 months. If you think about the time it takes you to clean up and repair. Then go through rent up phase, the 24 months is pushing it.

g. Between the “Replacement” cost $2,100,000 and the Pollution Clean up and removal $100,000; it looks like I am covered, with an all in cost of $1,800,000. If you back out the cost of land $1,800,000 less $200,000= $1,600,000.

Followup points:

1. I need to check if the “Replacement” cost covers clean up also. If a tornado was to hit our operation, the $100,000 would not cover removal.

2. I need to check if the $100,000 cleanup and removal is just for Pollution or does it cover material debris.

3. If you see any holes in coverage or other followup items, please comment. Also expand on any insurance shortfalls you have had through a claim process. Greatly appreciate that.

It could easily cost $300,000 in clean up, debris haul/disposal, security guard during cleanup, etc. Make sure your insured beyond just replacement costs. Also claim as much as possible. Your roofs might look good, but they might leak later. Will do a separate topic on going through a Flood.