All Forum Posts by: Jeff Brenot

@Jason Bott - so some insurance carriers won't provide a discount for a DP1 even though it does not cover water damage? Do you think water damage coverage is a necessity or will a DP1 suffice for a rental property? The increased premiums are killing my cash flow so trying to figure out some ways to reduce costs. 

@Jason Bott thanks for the suggestion. I'll find out which software they are using and review the report. Have you heard of other lenders requiring insurance for 80% of the rebuild cost? 

Each unit is ~1800 sq. ft. so ~3600 total. 

How can they charge the same for a DP1 and DP3? My understanding that a DP1 is less comprehensive and doesn't cover items like water damage. Is this correct? 

Hi Steve & Others, 

I appreciate you starting a conversation on this topic. I am currently in contract to purchase a duplex for $225k in the Ohio City area of Cleveland (very up and coming neighborhood) purely for rental purposes. It has been completed renovated (i.e. new HVAC, plumbing, electrical, kitchen counters, etc.). Since I live in Austin, I have hired a property management company. 

I'm in the process of evaluating different property insurance policies as well and wanted to get everyone's input on a few items:

1. My mortgage broker is requiring coverage for 80% of the "re-build" cost so instead of insuring up to the loan amount ($225k), I now have to insure for $343k. This raises my insurance cost by $600+ per year! I think this is ridiculous because it is more than the loan amount and less than it would cost to rebuild if the house was completely destroyed. Has anyone encountered this situation with a lender?

2. I was initially set on getting DP3 insurance mostly because of the water damage coverage. However, the policy requiring 80% of rebuild cost is eating into my cashflow by $50/month so I'm considering going with a DP1 policy. I was concerned about bursting pipes during the winters, but it is a duplex in a highly desirable area so there will most likely be at least one unit occupied. This would mean they are using the water and have the heat on. Am I wrong for assuming this?

Please let me know your thoughts. 

Here is the latest quote, seems much higher than what others have posted on BP. 

DP3 

$340k 

Liability= $500k

Medical payments= $1000

Deductible= $2,500

Total for policy= $2,129

Thanks everyone, my thoughts were confirmed. It's definitely not make or break, but trying to think of anything I can do to help bring more value to the property. I appreciate the feedback. 

Hello BP, 

I am currently in contract to purchase my first property, and I'm super excited/nervous at the same time. It is a 4-plex in Austin, TX and I plan to occupy one of the units. 

The back yard is great- each unit has a deck and it over looks a large wooded lot and creek. However, there is an electrical pole with a transformer (see pic) in the back yard and it's eye sore. 

I was wondering if anyone has ever gotten the electrical company to move it or put the lines underground. This is most likely a very daunting and expensive battle since they technically have an easement. However, maybe someone has said it was a health hazard or something. 

I'm only living in the property temporarily, but definitely think I could charge slightly higher rent if it was not there. 

Additionally, besides being an eye sore, there has to be some type of magnetism, electrical current, etc. coming from that thing. 

@Kris Wong property taxes are brutal here! I have factored in the taxes at market value, but I can see why some people that have lived in their homes for a while can no longer afford them. 

Have you ever fought the assessment yourself or hired a company to fight it for you? 

@Greg H. Thank you very much, this is very helpful. 

Yeah I am concerned that the property taxes could almost double! My understanding is that I will be able to homestead one of the units if I am living in it. However, I've already factored in the taxes if they were raised to market value for the entire property it will still cash flow once I give the property a face lift. However, my profits will be significantly eaten up with the increased taxes. 

My plan is (if I get the property) is to rehab after giving notice to one of the tenants then move in. I will definitely be able to raise the rates, but will have to be a bit of a process. I am also considering fixing up one unit and using it as a short term rental. 

Please let me know If anyone knows how often Travis County, TX assesses properties for taxes or if there is anything else I should be aware of. The property tax issue I originally posted is what makes me most nervous. Especially since this will be my first purchase. Thank you!

Hello BP, 

I am evaluating a 4-plex in the Austin, TX area. The last tax assessment was for $395k in 2015 (~$9k taxes based on 2.2% tax rate). However, in the meantime, a similar property to the one I am evaluating sold for $665k after rehab. The list price for the property I am evaluating is ~$625k. I am super nervous that the taxes will skyrocket. I have run the numbers at $9k property tax and cash flow is very good. However, if the county increases taxes to based on the recent comps, they could be upwards of $14k annually which would eat into cash flow significantly. 

I do plan to be an owner occupant and could potentially homestead it down the road. However, is there anything I can do to prevent the taxes from skyrocketing if I purchase for anywhere close to $625k? Are property taxes usually increased gradually or can they jump up significantly all at once? I would appreciate any additional information I should be aware of. Thank you! 

Thanks @David Terbeek and @Ryan Arth for the helpful information. 

Do you have any property management companies and/or real estate agents in the Cleveland area you would recommend?