All Forum Posts by: Thomas Richter

We're inviting investors to participate in the dirt-up development of a valuable parcel in a Bakersfield, CA. The 40 acres subject property is under contract at an extraordinarily low price, surrounded by already-under-way developments, as well as completed housing and schooling. This is a single-property LLC opportunity for accredited investors (RELP) with pref accrual to limited partners. Please reach out through a PM if you're interested to find out more.

Thank guys. We own the asset, and that sort of info was exactly what I'm looking for. 

Looking for commercial broker commission samples for a 40,000sqf industrial 10-yr lease at $5/sqf in MI or TN to compare. High-end low-end range is fine, or real world experiences. 

thx

-pt

I've found Citizen Business Bank to be by far the best bank for an escrow account of the type required by law for property management companies. 

I'm wondering how PM companies in California are dealing with the trust account requirements for rents. It seems that there are very few banks which actually offer these types of accounts, particularly very few large banks. And those who do, don't like the used as checking accounts. This means that rent deposits in cash are sometimes not allowed, creating the need to have a "collection" checking account which serves as a funnel to the trust account, which obviously creates a whole new set of paperwork and compliance issues. 

Which banks are people using and what does the actual process look like?

I've talked to epremium and a few other providers (Assurant, Leaselock), but calling it in insurance is a bit of a misnomer. There is renter's insurance and then there is security deposit replacement or alternative. Those things are not insurances since no insurer is covering the risk. In fact, the landlord would cover the risk just like with a security deposit. The one-time non-refundable fee the tenants pay go into a "bucket" from which claims are paid out. But once the bucket is empty....

So far I've failed to see the point in it for landlords...

I've been looking into this over the last week, and here's what I've come up with. 

There are several kinds of products, but you've got to be real careful, because each provider does it slightly differently. There are variations on all of the below.

Renter's Insurance covers the renter's PERSONAL property as well as liability if the renter is found liable for damage to someone or something (but only related to the five major perils in terms of your property).

Some renter's insurances cover damage to the unit but it is extremely limited. It has to be accidental, and derive from one of the major perils: fire, water, smoke, etc.  Things like vandalism, negligence... none of that is included. Some providers go a bit further and cover pets, cigarette burns, bed bugs etc  But the stuff we really want to be covered for as landlords, vandalism, destruction etc no one will cover. 

A surety bond replaces (or augments) the security deposit. IT IS NOT INSURANCE. The renter pays a non-refundable fee of around 10% of the security deposit. This fee goes into a aggregate bucket made up of all the fees your units "produce" (this is why you need usually 100+ [for some providers 1,000+] units to make this work). The providers take a cut from those premiums as well. You then use funds from this bucket to repair damages left by a tenant. If damages go beyond the amount guaranteed by the bond (in other words what would have been the security deposit), the provider will/can start collections. However, the collections agency will take a 60% cut from what they collect (and they usually don't collect more than 10-30%). In other words, the provider carries zero risk, it's all on you. If you have 1,000+ units this might make sense, but you may as well administrate it yourself.

Anything that is called a security deposit insurance is - inmho - a misnomer. It is pretty much always a surety bond. There is a new company out of NY that seems to be doing it as an insurance, but they are a startup and they only serve NY. 

Some people claim that you can make a claim against your property insurance and tell them that the tenant has renter's insurance; and that then your insurance will go after the renter's insurance. But I'm not sure if that is not an urban myth. 

Conclusion: willful, negligent damages by a tenant (punched holes in walls, broken windows, graffiti etc) is is not covered. 

@ Levi T. I can't seem to find that sort of policy on Great American website. Any leads?

You guys have to be real careful differentiating between Landlord liability insurance and renter liability insurance. It seems to be used interchangeably here. And who is asking to be named as what. The scenario is not one-size-fits-all. 

As a PM Company you'd want to be named as Additionally Insured on the Landlord's Liability Insurance and on the Renter's Insurance. But as the Landlord you would want to be named as Interested Party on a renter's insurance, so you can sue the tenant for damages on your property (if you are insured on the same policy, you can't file a claim against yourself). 

This was a while ago, but here is the outcome: 

I named the IRA, the beneficiary, and the custodian as defendant parties. The custodian prepared a declaration which stated that they are not liable. The beneficiary showed up to the trial.

The judge thought that she would probably agree with the custodian's declaration. I agreed with her and explained why there were three defendants. 

The judge then declared that she had to take the "standing" issue under consideration; in other words, she didn't know either whether it should be the IRA or the beneficiary (who is the self-director, but doesn't hold signature power) should be the correct defendant, or whether the IRA could even be sued at all (even though the IRA can hold title).

We argued the merits of the case which was pretty clear-cut in my favor.

After about two month we received the judge's written verdict which stated that the beneficiary had accepted responsibility by 

a) signing the contract (which he shouldn't have since he didn't have signing power - that should have been the custodian)

b) showing up to trial and arguing his case

c) counter-suing me for damages

The judge showed that there was no question as to who was entitled to the deposit; we had not removed any contingencies and the escrow company was court-ordered to release the deposit to me. The judge also awarded me $1,000 civil fine as per the purchase agreement (withholding of deposit without reasonable good-faith cause). 

The defendant promptly paid.

Needless to say this leaves the question about IRA property-ownership and whom to sue open.