All Forum Posts by: Account Closed

Where in St. Louis are looking to buy? If its in the city or one of the more urban areas there are programs at places like Justine Peterson that will provide you with better than standard market terms.  Also, most banks are required to provide a certain amount of loans in "underserved areas" and have a hard time meeting that quota. An apartment rental loan is much safer than a small business loan so they would probably be likely to help if its a solid location. I would also recommend putting together a short presentation on why you like the area and think the investment will be profitable. This should include a pro-forma budget showing how you plan to pay the costs (maintenance, debt service, landscaping, insurance, etc.) with the rental income. This simple illustration can go a long way in building credibility and trust. 

Success with rental properties or rehabbing projects  is all based on your knowledge of the market (i.e. what you can get in rental income per month and what the demand is in the area vs. your loan payments). Studying rental statistics in the area will be much more valuable than seminars or training from self proclaimed real-estate "gurus". 

 Yes there is a big difference between builders risk and vacant property coverage. 

Vacant Property Coverage offers bare bones protection and can be effective for older buildings sitting idle or when very small self performed renovations are taking place. Fire, explosion, lightning, windstorm and hail damage are generally the only causes of loss covered. . The $ you get in the event of a loss is generally  replacement cost - depreciation which could be very tricky when the value is constantly changing due to a rehab. Because theft is not covered a robber taking the copper wiring or HVAC unit would not be covered. Vacant Property Coverage does not protect materials, tools, equipment, temporary structures, etc. used in the remodeling process before they become attached the house. 

Each contractor is responsible for their own stolen materials and for paying to fix damage to the building or other contractors property if caused by their negligence. For example, if a carpentry contractor falls off a ladder and into the uninstalled HVAC unit that carpentry contractor must rely on his insurance to pay.  This type of situation could lead to infighting between contractors and even contractors quitting. This could significantly delay the project being finished. Soft costs like mortgage, insurance, legal fees, taxes, etc. are all being spent during this delay.  

Builders Risk Coverage provides all perils coverage for all current property, materials, equipment, temporary structures, landscaping, etc, that are going to become a permanent part of the project regardless of if it is owned by the owner or one of the contractors.  You also have the option to build in coverage for soft costs during the increased construction time. A builders risk policy provides the assurance that property damage will be taken care of in a timely manner at the cost it takes to replace. This security is the reason many lenders require a builders risk policy. 

The cost will be somewhere between .2% or .3% multiplied by the final property value. This cost can be paid by the owner or the GC. Many builders risk policies require payment of the entire annual premium regardless of then the construction finishes. Vacant property coverage only affects the owner whereas builders risk is relied on by everyone so canceling isn't practical. This time frame starts as soon as any materials are brought on site and generally covers 60-90 days after completion to allow for checklist items to be finished and covered.