All Forum Posts by: JD Martin

Personally, I don't like inheriting tenants. My experience is that the landlord is renting to the tenants at below-market rates, and the tenants aren't the greatest anyway, and the landlord is just tired of it all and therefore decides to just sell out - otherwise, there's relatively few situations that would inspire someone to cut loose a profitable, low-effort investment unless they were really hard up for cash or were aged and ready to turn in for the night. 

Anyway, when their lease is up you have them sign a new lease or send them packing when the lease is up. You have to honor the existing lease, it goes with the house like the plumbing. 

 I think this is a great point that has more or less been missed in this thread, which is if one respects the idea of free markets, then you must respect the right of other individuals/businesses deciding they don't want to do business with you. It may absolutely be the case that the profit margin lies within the property insurance, and no one wants to work for free so they've decided they won't bother with anyone unwilling to pay. As landlords, we make the same decisions all the time, so why be upset with another business, person or industry who has made the same determination? If selling liability insurance as a stand-alone product was profitable, someone would fill that market niche (and maybe someone already does) - I am guessing that in order to make any money in that niche, the product would have to sell for far more money, meaning that a company can offer liability AND property insurance for essentially the same price, with the liability being the "loss leader" in the equation. 

In the construction industry, this happens all the time. Contractors will price mobilization at $1 and pipe at $40/foot, wherein mobilization may cost far more than that but the retail per-foot price of pipe is $30. At the end of the day, all of the bids end up fairly close together, it's just where some contractors prefer to make their money. 

Even better, submit it to your insurance as part of the remediation. I had the same issue years ago and my insurance covered the extra electricity.

Wow, that is a fantastic job, very impressive for anyone, let alone a first timer; you have great taste!

I replace locks when I take a unit. I also do a walkthrough less than 1 hour before closing, usually 30 minutes before closing. Anything not right since inspection, no closing or money to make it right. Almost everything you listed should have been caught on inspection other than only getting one key at closing, unless there was an earthquake between walkthrough and closing.

 Two questions:

1. Since you'd rather not pay insurance, why not just pay off the mortgage for your primary residence and drop the insurance? The $2700 annual savings is probably more than the annual mortgage payments, not to mention the interest you're paying.

2. Do you carry malpractice insurance? 

Yes, it was meant to be an illustration, using small, simple numbers for simplicity, not an absolute:

Let's say I spend $200 extra dollars on insurance for comprehensive insurance (this is assuming we agree that spending money on liability is a good idea) for a unit, and that unit rents for $500 per month, or $6,000 per year. Let's further assume this income falls in a 25% tax bracket, and leave out all other income and deductions. 

$6,000 income, $200 insurance deductions, x 25% taxation = $1,450 tax owed, $4,350 in my pocket (the rent minus the $200 for the insurance above and beyond)

$6,000 income, no insurance, x 25% taxation = $1,500 tax owed, $4,500 in my pocket. 

So I end up with an extra $150 in my pocket, per unit. With 10 units, that's $1500 per year, or $15,000 in ten years. Using that figure, I can't replace one of my units for $15,000, and even one major mishap might eat up most of that figure - say a flooded room, or a tree limb falling. I've owned my present house 21 years and I have had to have 2 major claims during that time. If you go to 100 units, that's $15,000 per year, or $150k per 10 years - definitely not chump change, but your chances of having some claims goes up considerably with that many units. And I've used real simple figures - in actuality, the difference between what I pay for just liability and the added extra benefit for structure coverage isn't that high - it varies but I believe it's somewhat less than $100 per unit. I don't own 100 units, and the little extra money lets me sleep at night. 

I am not saying you are right or wrong. I recognize the title was designed to get people to respond, which is has. If I were contemplating a move such as yours, I would ask myself this: what is is that I know that the overwhelming majority of business people far more successful than myself do not know that has me convinced this is a proper course of action? I know a fairly large number of people far more wealthier than I, and I know for a fact at least some of them are insured in various ways. You don't "know" that you are going to get cancer, but you probably buy health insurance anyway. 

I must be missing something here. My tenants pay the cost of insurance, as it is built-in to the rents that I charge. I suppose one could argue that I am missing out on a few hundred dollars of extra profit per unit, per year, but not only is the cost of insurance a deduction from profits, if I were to skip it altogether it would be an extra few hundred dollars that I would be taxed upon; in essence, my insurance is "free" once the tax advantages are factored into the equation. 

Self-insurance is a risky factor, but if your units are low-cost enough and you have enough cash reserves then comprehensive replacement might not make sense to you. What kind of automobile insurance do you carry - liability only? I own all of my vehicles, all of which are nice and relatively new, and though I could afford to write a check to replace one of them if myself or my wife foolishly totaled one, I'd rather have the insurance company do it - thus, I insure the vehicles for $1,000 on collision, wherein the extra few dollars I throw at the policy makes good sense if I ever need to use it. I prefer the philosophy of a few dollars of sunk cost within the protection of a herd to that of the rugged individualist. 

As for legal layering protection, great lawyers & law firms can peel through it like an onion. 

Lastly, no one can convince you that you're crazy. The kind of insurance you buy is going to be a reflection of your personal values and philosophy of life. The odds are good that you would never need to replace a unit, just like the odds are good that you'll live to a ripe old age - if they weren't, insurance companies would be bankrupted, as they depend on the odds. Nevertheless, if you are on the wrong side of the odds, it only takes a single episode to absolve you of your wealth, whether you're talking about liability, property, health, or whatever. I consider insurance just another cost of doing business, and not an area I'm willing to take my chances with, especially when my tenants pay that cost of business for me. 

Nice find! Very clean looking house, really, it doesn't appear from the surface you'll have a whole lot of time tied up in that one. 

It may not be wrong at the panel, it may just be wrong from the point of take off from another fixture. Most outlets are wired together on groups of runs. You can kill the main power and look inside the panel if you want to see if it goes all the way back to the panel. As far as it being a problem, wire is wire. I would get some black and white electrical tape and flag each wire for someone else's future use at a minimum, the same way you flag neutral wires being used as hot in light switches. I would reverse them at the outlet so that neutral feeds the correct prong, because someone without a properly grounded item could get shocked later.