All Forum Posts by: Jordan Roberts

Ya I agree about the insurance industry. I understand taxes A LOT more than I do insurance for some reason. It almost seems unreasonably complicated honestly and this goes for any genre of insurance. Ya my insurance policy has "Hazard" as being the most expensive premium and "Liability" underneath that.

Also I got a response from my agent this is what she said...... "This is a standard DP3 policy, the Commercial General liability will cover the residential property." I really appreciate you helping me out btw, it's helped me get a better grasp of the structure of it all.

 Interesting. Well I will clarify it with them tomorrow. I just emailed them and gave them a couple "audit" questions to see if they would/would not cover us in those scenarios. If it does cover us then there's no issue with having it imo.

 Ya I'm just as confused as you are. Perhaps my agent used the wrong terminology. When I re-read my policies I have, it uses the term "General Liability", however my agent used the term "Commercial General Liability", so perhaps she used the wrong term on accident? 

So what does GCL do differently compared to an umbrella policy? My insurance agent stated that they do not offer umbrella policies, however these people mainly deal with rental property investors. So there's no reason they wouldn't be aware it's for rental properties. 

Also, I do have landlord insurance. We pay a hazard premium every year that includes things like "destruction from weather, loss of rents, etc." However, I also pay additional liability premiums that I found out today is a GCL and not an umbrella policy. That's why I freaked out, because I've always been advised to have an "umbrella policy", when it sounds like most people are referring to a GCL instead and it's optional to add an umbrella policy over that. 

So from the way you described it to me, it sounds like there's 3 layers of insurance.

Layer 1: Landlord/Rental property insurance w/ minor medical coverage 

Layer 2: GCL with $1mil+ coverage

Layer 3: Umbrella Policy with another $1mil+ coverage

So to get to the umbrella policy they have to eat through roughly $1mil+minor medical coverage from landlord insurance + GCL. 

Am I understanding this correctly? Sorry for my dumb questions lol

Ok thanks a lot for the info. I have 3 SFH long term rentals. It's probably my fault for misinterpreting originally, however when I first got the insurance I was under the impression it was a $1mil liability/$2mil aggregate umbrella policy on top of my landlord insurance. Today, I went to confirm with my insurance provider on a quote and they stated it's not an umbrella, but a GCL. So I freaked (never hearing the term GCL before) out.

Conveniently, it seems most conversations about umbrella policies don't mention GCL's underneath them. So really it seems like I should be good. If I got another $1mil umbrella policy over the top it would be way too much coverage it seems. Or would you still recommend an umbrella policy?

What does the $2mil aggregate insurance refer to in that policy? I'm confused why they are separated. 

Hello,

Insurance has always been difficult for me to understand and I feel like it's all a scam anyway (since they always find ways out of covering stuff). Can someone explain to me the difference between having a $1mil+ Umbrella policy and having a $1mil+ General Commercial Liability policy? I need it explained like a 10 year old, not like someone who has worked in insurance before. 

If I have a $1mil General Liability policy with $2mil aggregate, do I even need an umbrella policy?

Thank you in advance!

Ahh ya I see what you're saying. It would all just be guessing at this point in time. But I could also see it being like the child tax credit where they just put money in your pocket. But, typically people use that credit to off-set any liabilities they have, even though they don't have to. 

This strategy I outlined wouldn't be worth it if it was just a $15k tax deduction obviously. So I will really have to nail down my strategy revolving around an actual credit. I'm curious what little nuances would be attached to this bill once it comes up. 

 We rent the place we live and have never bought a primary residence. We just stack rentals. So I know we will qualify as long as they make the credit available for anyone, which I don't see why they wouldn't. If they do place restrictions I would imagine it would be for households making under $200k or something like that, similar to stimulus check restrictions. 

And ya I agree, I think housing prices will skyrocket so I want to formulate this strategy ahead of time before the feeding frenzy begins.

One of my next plans would be to talk with my CPA about what the likelihood of us actually seeing $15k come back into our pockets would be. Based on our taxes, that $15k could wipe out everything we paid all year and we could see a massive refund. Or since it's a credit, does it just ignore whatever tax implications we have and it just goes straight into our pockets. I definitely won't pursue this idea until I can get a clear picture with my CPA about the realistic-ness of seeing that $15k. 

Ok, so this may be a long lead up, but I'm explaining the whole strategy here. I posted yesterday another topic asking about how cool banks are with letting your primary house sit vacant for 1 year, then using it as a rental after 1 year. The general consensus was that as long as I actually leave it empty they shouldn't care too much. *WARNING* I'm not trying to commit fraud by sneaking a tenant in, that's not what this post is about. So save your anger. I'm encouraged financially by Joe Biden's tax credit to leave the house empty for 1 year. I'll show you why below..... and how we all can potentially make money off of it and get a better interest rate on the mortgage as well!

The GOAL of this thread is for you to poke holes in my strategy and tell me WHY this couldn't work. I'm already aware of one potential problem brought up in the other thread and that is....

- Vacancy Insurance - I am unsure of what the actual premiums would be for this, so I will have to call and get a quote since I was told this is usually higher premiums than rental insurance.

**Strategy**- I found a quick house on Zillow in the area I invest just to use it as a real life example. My numbers used are going to be from real experience as an investor in the same area so I'm familiar with quotes and taxes because that's what my other houses are getting. I'm also not saying this house is particularly a good deal. It's just one that cash flows after it gets rented.

House - 3B/2B 1,500 Sqft.

Purchase - $124,000 (negotiable obviously)

20% Down payment @ $24,900

(Future) Rent - $1,050

Monthly Mortgage payment ~ $522

Taxes (0.4% rate since it's a primary residence), Insurance premium roughly $550/yr (overestimated here)

Joe Biden as my tenant will be giving me a $15k tax CREDIT the following year. So that means he will be paying me roughly $1,250 in rent to leave my property EMPTY, afterward I am free to use it as an actual rental. We can assume a 0% repair and vacancy rate. I would pay my property manager in the area though just to stop by a couple times per month to make sure there's no squatters. I would pay her roughly $50/mo, which is a good deal since she's not managing any tenants or dealing with anybody. Just opening the door, looking around and leaving.

So, my NOI would be $1,200/mo. $1,200 - $522 = $678/mo cash flow for the first year.

Now, there are 2 ways to look at this. Either in cash flow for the first year OR reduced cost basis in the property permanently. Which is how I would analyze it. So I would take my year's cash-flow which would be ($8,136) and put it back into my pocket. So by the time the house gets used as a proper rental, I actually have $8,136 more than I put into the property. So going forward my actual cost basis would be $24,900 - $8,136 = $16,764 + closing costs/rehab which is how I would analyze this property going forward permanently.

Now let me know how this wouldn't work.

Ok, so this may be a long lead up, but I'm explaining the whole strategy here. I posted yesterday another topic asking about how cool banks are with letting your primary house sit vacant for 1 year, then using it as a rental after 1 year. The general consensus was that as long as I actually leave it empty they shouldn't care too much. *WARNING* I'm not trying to commit fraud by sneaking a tenant in, that's not what this post is about. So save your anger. I'm encouraged financially by Joe Biden's tax credit to leave the house empty for 1 year. I'll show you why below..... and how we all can potentially make money off of it and get a better interest rate on the mortgage as well! 

The GOAL of this thread is for you to poke holes in my strategy and tell me WHY this couldn't work. I'm already aware of one potential problem brought up in the other thread and that is....

- Vacancy Insurance - I am unsure of what the actual premiums would be for this, so I will have to call and get a quote since I was told this is usually higher premiums than rental insurance. 

**Strategy**- I found a quick house on Zillow in the area I invest just to use it as a real life example. My numbers used are going to be from real experience as an investor in the same area so I'm familiar with quotes and taxes because that's what my other houses are getting. I'm also not saying this house is particularly a good deal. It's just one that cash flows after it gets rented. 

House - 3B/2B 1,500 Sqft.

Purchase - $124,000 (negotiable obviously) 

20% Down payment @ $24,900

(Future) Rent - $1,050

Monthly Mortgage payment ~ $522 

Taxes (0.4% rate since it's a primary residence), Insurance premium roughly $550/yr (overestimated here)

Joe Biden as my tenant will be giving me a $15k tax CREDIT the following year. So that means he will be paying me roughly $1,250 in rent to leave my property EMPTY, afterward I am free to use it as an actual rental. We can assume a 0% repair and vacancy rate. I would pay my property manager in the area though just to stop by a couple times per month to make sure there's no squatters. I would pay her roughly $50/mo, which is a good deal since she's not managing any tenants or dealing with anybody. Just opening the door, looking around and leaving. 

So, my NOI would be $1,200/mo. $1,200 - $522 = $678/mo cash flow for the first year.

Now, there are 2 ways to look at this. Either in cash flow for the first year OR reduced cost basis in the property permanently. Which is how I would analyze it. So I would take my year's cash-flow which would be ($8,136) and put it back into my pocket. So by the time the house gets used as a proper rental, I actually have $8,136 more than I put into the property. So going forward my actual cost basis would be $24,900 - $8,136 = $16,764 + closing costs/rehab which is how I would analyze this property going forward permanently. 

Now let me know how this wouldn't work.