All Forum Posts by: Doug Danoff

Thanks for your response, @Jason Bott.  I have spoken with several of the companies that provide this insurance.  They seem like great options.  Many of them have come from advice provided on the biggerpockets forums.  I think some of these options are perfect for flips, albeit expensive. 

The question I'm asking here is more about what amount of coverage flippers usually try to obtain.  My premium depends on the amount of money I think I need to cover a catastrophic event.  In the worst case, fire resulting in total loss for example, I would need to rebuild the house, but that should not cost the sum-total of purchase plus renovation since the land has value.  All of the policies I've looked at exclude contractor tools with the expectation that they carry their own coverage.

The other insurance question is liability coverage.  I was wondering how flippers typically handle this.  The premium for this are based on the limits to coverage...  normal range seems to be 500K - 1M.

Also curious what folks do about deductibles.  It seems to me that a higher deductible (i.e. $5000) makes the most sense, but I'd love to know the calculus made by pros on this.

Hi All,

I've found a flip in the Boston suburbs.  First one.  So many things to work through!

I was curious how experienced flippers calculate the insurance they take out on their rehabs.  The combo of vacant and builders risk coverage cost was a mild shock.  

For argument's sake, if I'm acquiring the house on a small plot of land for $300K and I expect the rehab to cost $200K, how would you ensure this?  The full 500K?  Something less?  This kind of coverage seems to be about $500/month based on my initial round of quoting.  Seems nuts, but absorbing a total loss in the event of a disaster would not be an option for me.

The house would be vacant for the 6 month rehab.  I also need liability since I don't yet have an GL under my company.

Many thanks!

Anthony, this is the tip I was hoping for.  I'll check it out and post a reply of what I find. Thank you!

@Russell Brazil, Very useful insight.  To clarify, there should be money for the broker with me.  e.g. the commissions I earn on any deal I participate in (purchase and sale commissions).  Also, as I said, I would pay my costs and in addition some (monthly?) fee.  In addition to this, as I said, I would be willing to contribute work/time to the broker's business, but I don't aspire to be a full-time agent.

Even so, your response as well as Charlie's, reveal some things that were not obvious to me before...  this type of arrangement is unusual at best.  

Although the licensure experience was very valuable, and worth the time and money, the BIG win for me was independence in finding deals.  Working with an agent is great for me, but I'm finding that I need to make a lot of very low offers, and I believe it's too much wasted time for a normal agent.  I'll chalk this misunderstanding up as a learning experience.  

There is a lot of discussion around the pros/cons of investors getting their license.  I would have sworn that I have seen that brokers exist who support this type of arrangement, but I don't recall where I saw this.  The biggest disappointment I have about this is with J Scott's advice in Bigger Pockets'  The Book on Flipping Houses.  There is an inspiring section in there titled "Becoming your own agent"...  that doesn't mention this challenge at all.  Feels like a big miss to me.

Thanks for your response, @Charlie MacPherson.  I'm totally prepared to pay commission splits, I figured that was assumed.  I don't know what the normal desk fees amount to, but like I said, I'm prepared to pay my way and then some.

Hi All,

I recently got my Massachusetts RE salesperson license on my quest to become more efficient with my new flipping adventure. I need a broker to officially work under. My primary objectives are to get full access to MLS, book my own viewings, and save a bit on commissions (in that order). I'm not interested in becoming a full time agent, but would be willing to take on some of that traditional work if that's what it took to get started.

I've reached out to a few brokers in the area, and none seem to be remotely interested in supporting this. I'd of course pay whatever fees would be required for MLS access. I'm also prepared to pay more (within reason).

Are there brokers in the area that offer something like this?  How do other folks in my position handle this?  Dying to know!

- Doug

Hello Emmett,

As I said to David, I'm more focused on flips than buy and hold, but I'd love to hear more about what you're finding.  Keep me in your list of potential buyers in the area! 

- Doug

Hello David!

Thanks for your response.  Lynn, Everett and Revere are on my radar, but secondarily.  For a few important reasons, I've honed in on finding flips as the as my primary focus...  hence the single family town focus.  I do want to slowly increase my passive holdings, but finding flips is taking all my time at the moment.  Certainly keep me in your list of possible buyers though.  I'm prepared to move fairly quickly on a good deal.

- Doug

Thank you @Tanya F., that was meaningful to hear.

And thank you to @Luka Milicevicit is sobering to hear the general reaction about perception of value.  One note, the expensive part of geothermal is digging a 400 ft hole in the ground, that's tried and true technology.  The best way to drive that cost down is volume.  The rest of the job is actually pretty straight forward.  Regarding tesla's solar roof, yes it is 5X an asphalt roof, but only about 1/3 more than a slate roof, which is a better comparison.  If installing a high end roof, I think it would be foolish to not consider a Tesla roof (when it's actually ready).

And @Jason D., I agree with you.  It looks like the only way to make it happen is to erode profit.  Attracting a well informed buyer and closing faster would be the upside.  I wonder if there is a way to get those opposing forces to meet in the middle.  If we did, I wonder if that might start enabling appraisers to factor stuff like this into their valuations.

So glad I came across this community...  :).

@Brian Adzadi, @Ann Bellamy, @Charlie MacPherson,

Thank you for your valuable thoughts.  

The insight from Charlie that appraisers don't factor in solar panels was especially valuable.  This seems like a wrong position for appraisers to take to me.  It is a valuable system in a house that saves & earns significant money for the owner.  I imagine appraisers take a similar position on geothermal, but if anybody knows for sure, I'd love to hear.

I do understand that the vast majority of buyers don't yet understand the value of tools like these or the cost/benefit of factoring decisions like this into a purchase.  But before this post congeals into a defacto BP opinion, I thought I'd clarify a bit.

ARV's in some of the areas I'm looking at seem to be between $600K and $800K. Several of the source properties need new heating and a new central AC including duct work. So there's already a significant baseline investment here.

Let's say you could get a geothermal system installed for $50K, but the cost for new heat and central AC was something like $15K.  The difference being $35K.  I pick a geothermal as opposed to the mini-split Charlie mentioned because you would not need to augment the system with oil or gas since they have the power to heat at sub zero temperatures.  Adding $35K to a 30 year mortgage might be an additional $175 P&I per month, but would free you from oil and gas bills all year as well as maintenance of heating and AC systems.  Total annual mortgage cost would be $2100, but savings should be significantly more than that, even more when you factor in mortgage tax credits.

I'm sure you're saying, "well you just replaced your oil/gas bill with an electricity bill"...  but that's where solar comes in.  The right house can completely offset this with solar panels.  So for an additional (say) $175 / month P&I amount, you get all the electricity you need and possibly more you can sell.  So no electric bill either.  So for a total of a monthly $350 additional mortgage payment, you eliminate: Oil payments, Gas payments, Electricity bills, Furnace maintenance, AC Maintenance, Chimneys sweeping, oil tanks, plumbing maintenance, etc.  I believe most households do better than break even.  Oh, also, once it's paid off, you continue to get all that stuff for free.

I don't expect average buyers to get this, and I wouldn't consider it in markets where there is no hope.  I do think there is a growing population of people who are ready to take a second look at their carbon footprint, and if you can demonstrate the financial benefits I laid out above, I suspect they might take a 3rd look.  

For this to make sense though, there are some important complexities I'm not yet equipped to navigate such as how the tax credits transfer to new owners, whether appraisers would factor this into the value to preserve mortgage integrity, whether installers have better pricing for investors, etc.  

I would love for this conversation to continue!  Questions and concerns are invited!