All Forum Posts by: Michael Norris

You have a hard way to go on this and will need an attorney if you want to pursue it.

I am NOT an attorney and this is not legal advice.

The first thing that comes to mind is...you were not the owner at the time of loss (aka no insurable interest) so the insurance carrier for the unit owner above will probably deny your claim just for that and if they are feeling generous tell you to have the previous owner file a claim.

Since you bought it at auction I'm guessing the previous owner is a bank.

Banks can and do file claims on behalf of the owner when foreclosing. It's a long shot but your attorney may be able to find out if the bank filed a claim and if any payment was made to them for the damages.

Sorry to be downer - good luck!

(I am not an attorney nor giving legal advice consult an attorney for a legitimate opinion of law).

As the person hiring the laborer you need Workers Comp to pay for an injury and lost wages if that worker is injured on the job. I can't speak for your state but in Ohio as I understand it unless the employer is negligent (like knowingly removing a safety guard off a piece of equipment) the employee is not supposed to be able to sue for compensation beyond what Work Comp pays.

How to avoid that is... see my copy paste below in italics.

 (see @Eamonn McElroy post above) If the laborer isn't the owner or employee of a company you hire then it looks like they are your Employee which means you need at a minimum Workers Comp, payroll and associated taxes to comply with the law - Bummer right?  

Now you understand why the legitimate contractors charge an "arm and a leg" because they have to pay up for Work Comp, General Liability, Payroll Taxes, Bonds and Registration Fees for each city they work in along with every other fee and tax the government takes from  business owners.

To answer your question on getting "basic insurance for property management" - See my perfect world scenario below

Other than doing things the "right" way you could try hiring day laborers through a temp agency who would maintain the Work Comp and Payroll Taxes. If you have your regular people a Temp Agency may be willing to put them on their books and charge you the normal fee on top of the paid wage.

In a perfect world everyone you hire would give you a written quote on company letter head spelling out the scope of work, estimated cost, obtain the materials on your behalf, bring all their own equipment to the job site, show that they are registered and bonded in the municipality where the work is being done, and pull the permits. They would also have their own General Liability and Workers Comp policy in place.

The contractor would also provide you with an updated Certificate of Insurance naming you as "Additional Insured".

Short answer - everyone is doing it wrong and it's all fun and games until someone gets hurt or on fire. 

You could type up a release for them to sign which may give you a little protection but if someone you hire gets seriously injured, paralyzed, or dies and they are a day labor type person or doing side work from their employer you will probably get sued by their family anyway.

My favorite one I've seen is the wife suing for the husband not being able to perform his...ahem..."husbandly duties". Yes that is a real thing you can be sued for.

In a perfect world everyone you hire would give you a written quote on company letter head spelling out the scope of work, estimated cost, obtain the materials on your behalf, bring all their own equipment to the job site, show that they are registered and bonded in the municipality where the work is being done, and pull the permits. They would also have their own General Liability and Workers Comp policy in place.

The contractor would also provide you with an updated Certificate of Insurance naming you as "Additional Insured".

You don't have any of that in place?

Join the club - I'd guess 90% of the investors I insure don't follow some or all of the above processes above and it's a legitimate exposure to you the property owner that is not inexpensively insured on your end of things. Those day laborers can be insured but you'd need to set up your own GL and Work Comp policy, payroll, etc. The other way would be to hire them through a temp agency but I'd guess many of them won't cooperate with because it's no longer cash under the table, background checks, etc.  

Ask the people you know around town if they do any of the things I spelled out?

 Just ask your agent for a policy on a condo rented to others.

Behind the scenes it should be an HO-6 policy but the company and agent will probably call it something else that is particular to that carrier.

 Just ask your agent for a policy on a condo rented to others.

Behind the scenes it should be an HO-6 policy but the company and agent will probably call it something else that is particular to that carrier.

@James Free If you don’t trust insurance companies (who will be on the hook to pay for the damages of something occurs) then ask a couple local contractors to give an estimate to scrape a half burned house off its foundation and rebuild it.

Demo expense can be $12k to $60k.

Then hire an architect and get permits. Re-frame, plumb, and wire it. Roof, doors & windows. Insulate and drywall. Flooring, trim and paint. Bathrooms and kitchen, HVAC.

You won’t get the volume pricing on materials new home builders get so factor in Home Depot retail pricing on everything too.

A half burned down house will cost more to repair than building a brand new house from scratch.

@Asury Johnson It’s tax time - write off the damages and send him a 1099 and let him explain it to the IRS

Your best chance to save on the flood policy is if the current owner already has an older flood policy in place. If they have a grand fathered policy with the old / lower rates you may be to assume their policy and the lower rate versus getting a new one.

If the current owner does not have a flood policy ask why? Then use this to negotiate an even lower acquisition price.

The second best way to save has a lower probability of success - you can have a survey done and if the surveyor determines your true elevation is above the determined flood plain then you may become exempt from a flood insurance requirement. (It's very unlikely you will win this but it does happen occasionally)

Some states have private flood insurance offered (think name brand companies) however most states you will be buying the policy from the NFIP which is run by Uncle Sam. Not all agents know how to get the best possible rate on an NFIP quote so you may try getting a quote from another agent who is more experienced with NFIP.

Last ditch - If you pay cash (no financing or plans to re-fi in the future) then you can own the property without flood insurance - aka self insure. Just beware you may have issues selling the property in the future for the exact same reason you are thinking about not buying it now.

Do you live in the one side you already own?

 If so you could do a homeowners policy (acknowledging the other unit on the application) and maybe save some money that way? Not all companies will do that and honestly some agents may not even know it's possible but many companies will allow coverage to be set up this way so don't quit at the first agent who says no to this idea.

Or you could get one landlord policy to cover both units then buy a renters policy for the unit you live in to cover your personal property in the unit you live in and your personal liability at that location.

If your agent can't help look up Matt Dudash in Allentown, PA he helps my Ohio clients who need insurance in PA.

Google "REIA + San Francisco"

You could also look on Meetup.com there are usually REIA and other Real Estate groups posting meetings on there.