All Forum Posts by: Account Closed

@Steve Iacobbo I wrote a blog post recently that outlines your general liability policy options and common challenges faced.

@Michael Badin is the expert here and is correct that insuring the home will not be a problem assuming the roof is in working order. However, in our market adjusters are being much more picky in paying for an entirely new roof if it can be repaired for much less. I would assume if insurance paid out enough to replace the entire roof it probably needs to be replaced. I would be interested to see what you think from an adjusters point of view on this. 

@Bill Gulley You seem to be missing the initial comment I have made on EVERY post. that LLCS ARE NOT A GOOD WAY TO PROTECT AGAINST LIABILITY EXPOSURES IN MOST CASES.  I have actually written an entire blog post on how this is a common misconception and listed a number of your arguments almost verbatim. 

You write the same amount of policies regardless of whether a property is in an LLC, a trust, someones personal name etc. So even if I were advocating for the formation of LLCs. WHICH AGAIN I AM NOT. I have no vested interested either way. 

I have also posted many times about the importance of only using an insurance broker from your geographic area and for that reason would not even accept the business of the person who asked the initial question if it was offered to me. You really should do a bit more research before you question the moral character and business practices of someone you have never met. 

Of course someone has to own the legal entity but ownership in an LLC is not the same as ownership of IBM stock or a Rolex watch particularly if you are a passive investing member in that LLC. Please refer back to my original post where I mention that for someone who OWNS 100+ PROPERTIES THE SEPARATE LLC STRUCTURE MAY MAKE SENSE. 

I am on your side in this argument so you seem to be taking your frustrations out on the wrong person. 

I can't believe it took me this long to find this thread. I try and spend as much time outside the office as possible networking with local investors and real estate professionals and would love to get a group together to share ideas and learn the different perspectives everyone has on the STL market.

There are builders risk policies designed for rehabs and all standard market policies cover theft of materials and vandalism. Vacant policies do not cover theft of materials or equipment already inside the house.BR also replaces materials used in construction at replacement cost. In my area an annual BR policy (including liability) is cheaper than a vacant policy for six months. I would recommend Checking out US Assures remodelers program. US Assure is part of Zurich which is one of the largest and most reputable insurance companies out there. REIGuard is not an insurance company. They are a wholesale broker for non admitted insurance companies that are not regulated by your states insurance laws and can exclude coverages traditional carriers cannot. It is actually against the law for an agent to use a non admitted carrier unless the risk is denied by a standard carrier first.

If you reread my initial post I stated that LLCs are not a good way to protect against liability exposures in most cases.

However, since you felt the need to correct my information I will return the favor. An LLC is not personal property but a separate legal entity and if you file in a favorable state claims can not be attached to anything but voluntary distributions.

Additionally, most large investors are passive investors with no role in the management of the company. Passive investors can not be held personally liable for the actions of an LLC limiting exposure to the investment in that LLC.

@David Dachtera Not to beat a dead horse but Here is your exact quote. "In fact, one of my group leaders is approaching $1 Million a year in residual income." 

I think most reasonable people believe that a strong middle class is important to a well functioning society. However, I am not really sure what @Jon Q. original post was trying to accomplish and find items 2 and 3 particularly odd. 

I should start by clarifying that the average annual return of the S&P 500 over the past 50 years is around 9% and the first ETF to hit the market SPY has returned 397% since its inception in 1993. The fees for this ETF are .08% which is pretty standard for all ETFs. 

Investing a large portion of you assets in one investment whether it be a real estate deal or a company can produce a much higher reward but comes with a much higher risk. The chances of the S&P 500 dropping to 0 is almost non existent while real estate developments go bankrupt everyday. 

My second clarification is that the SEC does not regulate private investment AT ALL. The accredited investor rule applies only to non registered securities. The SEC defines a security as a contract in which an investor expects a return based solely on the efforts of a third party. Anyone of any income level can invest in any business or property of their choosing as long as they play an active role in that investment. 

There is substantial risk of fraud when an investor relies solely on the unregulated statements of an unrelated third party. People of all income levels are susceptible to the fraud. Someone with millions of dollars in the bank can sustain a total loss on one investment without it materially changing their life for the worst. Someone without additional resources can be financially devastated by that same loss negatively effecting their entire family. 

Globalization and technological advances have had a terrible impact on our middle class and restoring the middle class should be high on everyone's list of priorities. However, this restoration is going to come from job training programs and access to higher education and not from encouraging people to risk their life savings on high risk unregulated investments. Increasing the capital gains tax and using that money to help fund these programs and lower taxes on the middle class is something I support and can agree with Jon on.

@Account Closed is absolutely correct that an LLC does not protect you from being sued personally because of your negligence in the management or ownership of the property. If you only have one rental property an LLC offers essentially no additional liability protection.

Landlords with multiple properties can gain some liability protection from separating each property into an LLC. In the event your negligence leads to a lawsuit you can always be personally sued along with the LLC owning that property. However, other non related LLCs can not be held liable for the actions of another LLC. So while your personal assets and the assets in the LLC related to the claim can be taken in a suit all of the assets in other LLCs should remain untouched.

Determining whether protection is worth the extra cost of the LLC formation is a business decision each investor has to make for themselves. The LLC structure may not make sense for someone with 1-2 properties but may be beneficial to someone with 100+. Once you reach a certain number of properties your lender will likely want assurance that his investment can not be jeopardized by an unrelated investment. The same goes for partners you may invest with for some projects but not others.

@David Dachtera I suppose there is always a certain amount of competition. However, brokers that compete based on risk management and adding value through services have significantly less competition. In fact, my bosses largest five accounts have not shopped their insurance for over 20 years. 

I can not argue with the fact that an industry with no competition definitely beats a career in insurance. While im skeptical there is a way to earn millions in profits without any competition I am sure that no industry remains that way for long and competition is right around the corner.