All Forum Posts by: David Ounanian

When it comes to your home, the right insurance policy can make all the difference. Here’s a quick guide to help you choose between Basic and Comprehensive Coverage and understand your options for Cash Value vs. Replacement Cost policies.

Basic vs. Comprehensive Coverage

• Basic Coverage: Covers specific risks like fire, theft, and certain weather damage. This is a more affordable option but only protects against named events.
• Comprehensive Coverage: Often called “all-risk” coverage, this protects against most unexpected events, except exclusions like flooding or earthquakes, which usually require separate policies. It’s a top choice for those wanting broader protection.

Cash Value vs. Replacement Cost Policies

• Cash Value: Reimburses the current, depreciated value of an item. For instance, if hail damages your roof, you’d receive payment based on the roof’s current value, considering its age.
• Replacement Cost: Covers the full cost of a new item. In the case of a damaged roof, replacement cost insurance would pay for a new roof, regardless of its age.

The right combination of coverage and policy type can safeguard your home and investments from costly surprises.

Seller Financing - Hype vs Reality

Seller financing has become a hot trending topic in the online real estate education market showing us that we can buy properties and even build empires while putting zero down to acquire those assets!

As someone who both invests in properties using seller financing and brokers 100's of investment deals for other investors every year I thought I would share some real world experience that we are seeing in today's market without all of the click bait hype.

Sound good?

First of all there is no doubt that seller financing is a very powerful strategy for acquiring assets with little to no money down and avoiding all the hassles of bank financing.

I think the big misunderstanding is that there are a lot of these deals available in the marketplace and they would be relatively easy for a real estate agent to help you find them.

Right now in my local market (St Louis MO) it's currently a seller's market with low inventory and rising prices. This makes it even more difficult to find seller financing opportunities.

You have to think about it from the seller's perspective. Why would they entertain the idea of financing the buyer's purchase of the property?

Here are some reasons:

Traditional offers are coming in at a lower price than they desire

They have too much debt on the property

They want to avoid a large tax hit upon selling

They still want to collect some income on the property and just not be responsible for owing it

When a seller decides to finance the buyer of the property they are also going to take on a significant amount of risk. What if the buyer stops making payments? They will have to go through a lengthy foreclosure process. It's usually not as fast as evicting a tenant in our state.

But what if the seller doesn't own the property free and clear and still has a non-assumable mortgage (most common) on the property? They could fall behind on their own mortgage payments and creditors would come after their assets, not the new property owner's.

There tends to be more motivation for seller's to consider owning financing in a buyer's market where prices are falling. Usually the seller has a price in mind and the market is not bringing a traditional offer high enough for them to sell. Seller financing is a way the seller can still get the sales price they are looking for if that's the most important factor in the sale for them.

It's also helpful for investors to develop personal relationships with the sellers of these properties, hence why it can be difficult for an agent to convince a seller to trust that their buyer will make good on the seller financing payments. The buyer needs to develop a certain level of trust with the seller.

I hope this has been helpful information to help you in setting your expectations around seller financing. If this is an avenue you are wanting to pursue I would encourage you to start reaching out to sellers directly and I would be happy to help you discuss a marketing strategy. Feel free to book a call with me below.

Kind regards,

Labor shortages and increasing material costs are increasing construction costs for fix-and-flip investors. To manage these rises, you can adopt a few key strategies to control expenses and maintain profitability:

Accurate Budgeting and Contingency Planning: Start by creating a detailed budget, accounting for current labor and material prices. Include a contingency fund of 10-20% to cover unexpected costs, as price fluctuations are common.

Negotiate with Contractors: Build relationships with reliable contractors and negotiate bulk rates for ongoing projects. By consistently offering work, you may be able to secure lower labor costs.

Source Alternative Materials: Explore alternative or lower-cost materials that still maintain quality. Consider materials that are easier to install or have lower shipping costs to reduce overall expenses.

Buy in Bulk: For investors handling multiple projects, purchasing materials in bulk or sourcing from wholesale suppliers can save money. You can also consider buying materials during off-season sales.

Tight Project Management: Keep projects on schedule to avoid costly delays. Delays often increase labor costs, especially if contractors need to extend their work. Use project management software to track progress and ensure efficiency.

DIY Where Possible: For smaller or less specialized tasks, consider doing the work yourself if you have the skills. This can reduce labor costs, but be mindful of the time commitment.

Leverage Economies of Scale: If you're working on multiple flips or rehabs, bundling similar tasks or projects together can help reduce costs by hiring one contractor or vendor for multiple jobs.

Prioritize High-Impact Repairs: Focus on renovations that add the most value, such as kitchen or bathroom upgrades, while avoiding over-improving areas that won't significantly increase the property's resale value.

By combining these strategies, you can manage rising costs while maximizing your potential returns on fix-and-flip projects.


Kind regards,

When managing a rental property, here are some common maintenance expenses to be aware of. Some can be passed on to tenants, while others are usually the owner's responsibility:

1. Sewer Cabling/Drain Cleaning: When there's a blockage, usually paid by the owner unless the tenant caused it. Tenants can commonly cause this issue by flushing wipes or pouring bacon grease in the drain. You can ask the contractor if he can identify the cause and if so you can bill back the tenant if they are responsible.
2. Driveway Sealing: Done every 2-3 years, usually paid by the owner.
3. Annual HVAC Cleaning: Done yearly, usually the owner's cost, though tenants should be responsible for changing the filters. A good excuse for regularly inspecting your property is to tell the tenant you are coming by to change the furnace filter.
4. Gutter Cleaning: Twice a year, normally the tenants responsibility but often overlooked.
5. Power Washing: Once a year or as needed, typically the owner's cost unless caused by tenant dirt.
6. Lawn Care: Regular upkeep, normally the tenant's job on single family residences stated in the lease.
7. Snow Removal: As needed in winter, usually the tenant’s job in single-family homes, owner in multi-family.
8. Pest Control: Owner handles big problems such as termites etc; tenants keep the place clean to avoid pests.
9. Roof Maintenance/Repair: Done as needed, paid by the owner. Storm damage would commonly be covered by your homeowners insurance.
10. Appliance Maintenance/Replacement: When needed, usually the owner’s job unless the tenant misused the appliance.
11. Painting and Interior Maintenance: Every 3-5 years or between tenants, paid by the owner.
12. Utility Costs (Water, Gas, Electricity):- Paid monthly by the tenant unless included in rent. Passing Costs to Tenants:- Lease Agreements should clearly state tenant responsibilities.- State Local Laws: Follow rules on what tenants can be charged for.
- Preventive vs. Emergency Maintenance: Regular maintenance is on the owner, emergency repairs might be charged to tenants if they caused the problem.

By proactively managing these expenses and clearly communicating responsibilities to tenants, property owners can maintain their properties effectively while minimizing unexpected costs.

Thanks,

Here's how you can find good deals on properties that might need some work or are priced lower than usual:

Connect with People - Make friends with real estate agents, lawyers, and others who know about properties that need to be sold quickly or aren't in great shape.

Reach Out Directly - Send letters or use websites to contact property owners who might want to sell fast.

Look Around - Drive or walk around neighborhoods to find houses that look like they need fixing up. Sometimes you can talk directly to the owners.

Use the Internet - Websites can show you houses that are being sold because the owners couldn't pay their bills or are in other kinds of trouble.

Check Public Records - Look at official papers to see if a property owner is behind on taxes or other bills, which could mean they need to sell fast.

Study the Market - Learn about how much houses in that area usually sell for and how much you could sell it for after you fix it up.

Be Careful - Make sure you investigate the property fully to see if there are any legal problems or money owed on it.

By using these steps together, you can find properties that might be a good investment because they need work or are being sold at a lower price than usual.


Kind regards,

 Yes great feedback Carl!

A Series LLC is a helpful legal structure for real estate investors, allowing them to create separate "series" within one main LLC. Each series can own different properties, protecting each one from liabilities related to others. Key benefits include:

1. Asset protection ensures that issues in one series don’t affect others.
2. Cost efficiency makes it cheaper to set up and maintain than multiple LLCs.
3. Simplified administration makes it easier to manage under one main LLC.
4. Tax flexibility allows each series to be taxed separately or together.

Practical Uses
- Property segregation ensures that each property is owned by a different series.
- Operational independence allows each series to maintain its own bank account and records.
- Risk management ensures that problems with one property do not affect others.
- Flexible transactions make it easier to sell, transfer, or refinance individual properties.

Considerations
- State variations mean that not all states recognize Series LLCs.
- Management complexity necessitates careful documentation and legal compliance.
- Lender familiarity issues arise as some lenders may not understand Series LLCs, thereby complicating financing.

A Series LLC offers a streamlined, protective, and flexible way to manage multiple real estate investments.


Thanks,

Ensuring that you do your homework before purchasing a property is extremely important for making an intelligent investment. Here's an easy guide:

1. Check the location - is it in a desirable area? Are there vacant or boarded up homes on the street? Is it relatively safe from crime? Check spotcrime.com

2. Check your numbers - what is the market value of the property using comparable sales? what will the property rent for? An experienced real estate agent can help you determine this information.

3. At this point, a good real estate agent can negotiate the selling terms of the property and get a contract in place. Standard contract contingencies may include an inspection period, financing contingency and appraisal contingency.

4. If the property is rented, examine the current lease documents, rent roll and rental payment history over the last 12 months. Ensure the tenant is in good standing and is not behind on payments.

5. Inspect the property - ensure the property condition is in line with the purchase price. Use an inspector to perform a building inspection that checks all of the components of the home including the electric, plumbing, foundation, windows, roof, hvac, water heater and other appliances.

6. If obtaining financing on the property the lender may require an appraisal - make sure the home appraises for the purchase price or higher.

7. Get a home insurance quote to make sure the property is insurable.

8. Perform a final walkthrough of the property prior to closing to ensure the condition of the property hasn't changed since it was inspected.

9. Close on the property with confidence.


Thanks,

Conducting due diligence on a property before making a purchase is crucial to ensure you're making an informed decision. A well experienced real estate agent can help you through this important process. Here's a comprehensive guide on how to conduct due diligence:

Property Inspection: Arrange a thorough inspection of the property by a qualified inspector. This includes examining the structural integrity, plumbing, electrical systems, roof condition, HVAC systems, and any other significant features.

Title Search: Hire a title company or attorney to perform a title search on the property. This will reveal any liens, easements, or restrictions that could affect your ownership rights. Zoning and Land Use: Check with local zoning authorities to verify the property's zoning classification and ensure it aligns with your intended use. Also, inquire about any planned developments or zoning changes in the area.

Legal and Regulatory Compliance: Ensure the property complies with all local building codes, permits, and regulations. Verify if there are any outstanding violations or issues that need to be addressed.

Financial Analysis: Review the property's financial records, including income statements, expense reports, tax assessments, and utility bills. Calculate the potential return on investment (ROI) and assess the property's financial viability.

Market Analysis: Evaluate the property's location and market trends. Research comparable properties in the area to gauge pricing, rental rates, vacancy rates, and demand.

Property Insurance: Obtain quotes for property insurance to understand the potential costs and coverage options.

Survey: Consider getting a property survey to confirm boundaries, easements, and encroachments.

Due Diligence Contingencies: Include due diligence contingencies in your purchase agreement to allow time for inspections, assessments, and resolution of any issues uncovered during the process.

Risk Assessment: Identify and assess potential risks associated with the property, such as market volatility, tenant turnover, maintenance costs, or regulatory changes.

Exit Strategy: Develop a contingency plan or exit strategy in case the investment doesn't meet your expectations or unforeseen circumstances arise.

By thoroughly conducting due diligence, you can minimize risks and make an informed decision about purchasing the property. Each step is crucial in understanding the property's condition, value, and potential for investment returns.



Thanks,

 Thanks for sharing David!   Yes likewise I have never owned in a rent control area.  I'm certain it would be difficult for a small business owner to stay profitable as expenses are always on the rise.  I assume the market would then be flooded with big corporate investors as landlords.  May or may not be good for the tenant base.