All Forum Posts by: Dan Perrott

I am looking at a couple of SFHs that have fireplaces.  I was wondering what people's  experiences and issues with a fireplace in a rental unit.  I am not sure if it is a good idea.  Are there issues with insurance?  Are there special lease arrangements made?

The properties are solid potentials but putting a wood burning fireplace in the hands of a renter seems a little risky.

Any input or experience stories would be appreciated.

Today I was to close on refinancing 2 of my duplex properties.  No problem - everything was approved and appraisals came back over 10k higher than expected.  Then my banker called me this morning and said that we could not close today because not enough time had elapsed between the appraisal and the close.  She was stating that we had to wait 10 days after the appraisal was completed and certified before we could close.  This is a government regulation.  Needless to say, we rescheduled until this Monday.  No big deal but I never heard of this government regulation.  Has anyone heard of this and details about it?

@Matt J. 

 - I agree with Raj to start with a duplex if you can.  It will enable you to get into RE investing and have a no rent/low rent situation for you personally.   Good luck and welcome to BP.

With my experience with inspectors - if they cannot see the problem (i.e. inside the wall, under the floor, etc) then they do not inspect it.  sound like this issue may have been hidden.  As Jon said I am sure that they are waivered off for the issue.  Best of luck but I think you will need to fix the issue yourself.

I have always done a complete upgrade on each unit on the first opportunity.  Kitchens and Baths always seem to attract the best returns.  For these major upgrades, I expect to get the $ back over a few years.  I do this because the maintenance $ do go down with a quality rehab in place. 

For simple upgrades (for example, new flooring), I would expect it to be paid for in about 6 months or less.

Hope this helps. 

@Marie Skaggs Welcome to BP.  This site is a great wealth of information to help you with your RE investing startup.

My two cents is do your own review of the properties - don't rely on what the RE agent is telling you.  A little paint and carpeting may not be all that needs to be done.  Look at other properties away from these to get a comparison. 

Good luck! 

Here is the statement from the lease agreement found on BP.  Note that it identifies the tenant as being responsible for their insurance and if they do not purchase it, then they bear all the responsibility.  It is one way to protect your self as the land lord.

18. TENANT INSURANCE

No rights of storage are given by this agreement. LANDLORD will not be liable for any loss of Tenant’s property. TENANT hereby acknowledges this and agrees to make no such claims for any loses or damages against LANDLORD, his agents, or employees. TENANT agrees to purchase insurance at their own expense, sufficient to protect themselves and their property from fire, theft, burglary, breakage, electrical connections etc. They acknowledge that if they fail to procure such insurance it is their responsibility and they alone shall bear consequences.

The lease that I use has the following statement.  It covers all damages and loss regardless of cause - which does cover loss of use as well.

Insurance – Owners have obtained insurance to cover fire damage to the building itself and liability insurance to cover certain personal injuries occurring as a result of property defects or owner negligence. Owners’ insurance does not cover Tenants’ possessions or Tenants’ negligence. Tenants shall obtain a Tenants’ insurance policy to cover damage to or loss of their own possessions, as well as losses resulting from their negligence. Tenants agree to make no claim against the Owner for any loss or damage regardless of whatever cause of such loss. Tenants agree to show Owners evidence of such a policy within one month from the date of this Agreement. Initials verify that the Tenant understands this paragraph.

Hopefully the above examples will help. 

The information provided is not legal advice and I am not a lawyer.

I am looking on how I can protect the asset and myself personally from a lawsuit by the use of an LLC.

If I change the title over to an LLC but the loan is still in my name, I have read that I can be still held personally responsible especially if there is equity there. It can open the door into other personal assests outside the LLC.

I have also read that having high quality, high limit insurance can be enough.

I have also read that some people use an LLC as a pass through as a property management business. In other word - layering the LLCs.

I am planning to meet with a lawyer but I want to learn about what others are doing.  I need to educate myself first.

Any insight would be awesome.  Books to read? 

From my understanding - if you put the title in the LLC but not the loan, then you still have a traceable point back to you personally. This may enable a lawsuit to still name you personally since you have a personal interest in a property titled to the LLC. This is an issue that I have not been able to get a clear answer. I am not a lawyer and I am not giving legal advice but I have seen this "gap" documented before. Please - correct me if I am missing something - I am very interested in this issue as well as I am trying to figure out if an LLC is right for our REI business.

Make sure you talk to the previous couple of landlords.  Additionally do employment verification and income verification by calling their employers.  You need to make the calls because they could be worth thousands of $.  You will have to make a judgment on the risk that you are up against.  I personally give a person a second chance if they have at least 2 years of continuous employment and bills are being paid on time.  They must also prove that they have 2.5-3x rent as income.  Good luck.