All Forum Posts by: Michael Norris

 Foremost inspected the exterior of your properties and if you didn't hear anything they passed inspection. 

Trying to read between the lines it sounds like you have a regular owner occupied homeowners policy in place on a rental property. 

IF that is the case full stop - yes you are paying for something called insurance but if you have a claim the company has the right to pretty much deny coverage for having the wrong type of policy.

Landlord policies are higher cost but for a reason - there is a different and increased level of risk when the house is not owner occupied.

Talk with your agent and get all the details sorted out. 

 Where do they want to write policies?

For the most part they don't want to write new business at all and they are all combing thru their books trying to non-renew anything they think may be an issue. Some tech companies have entered the chat and are selling "aerial imagery" to insurance carriers that they are using to re-underwrite existing policy holders. If there are roof issues, trees over hanging the roof, debris in the yard or whatever client's are getting non-renewal notices.

The vast majority of insurance carriers are unprofitable or have just now started to return to profitability from several bad years. Pre-covid I could get a roof replaced for about $200 per square / post-covid it's closer to $400 to $450 per square if not more. Take that and multiply it by every part of a property that can be damaged and you see why the insurance companies are losing so much money.

To put it in perspective if the mortgage industry was losing money like this no one would be able to get a mortgage - period end of story. Lending would cease over night and government bailouts would commence.

In my area of NE Ohio we are considered disaster free and generally we do not have any of the catastrophic issues that other parts of the country do... welp until last week when three tornados rampaged across three counties ripping down trees, power lines, roofs, siding, and putting over 500k people without power for a week - some still don't have power nor will they until all the trees are removed from the power lines. 

So much for the good news about returning to profitability and loosening underwriting requirements this year.

So many reasons - like you found the "deal" on some limited stock item and don't order enough to allow for the usual waste and breakage (tile) and the crew runs out of material and you can't find a match. You'll open a box of tile sometimes and the bottom 1/4 of the box is shattered or they cut weird and sometimes break going thru the saw. 10% is the minimum over allowance on tile material but depending on the actual product sometimes 20% extra is needed. 

Or if it's an available product and they run short everyone is on pause while someone runs out on an emergency basis to buy more of whatever and you have a crew sitting around doing nothing. 

The listed shipping date on whatever is more like a suggestion from the el-cheapo online supplier and it takes way longer to show up or sometimes doesn't show up at all. It happens even from big suppliers. Or something that takes a long time to show up and then comes in damaged the day before the crew is set to install it. (Those warehouse forklift guys love to stab and smash the boxes the big expensive vanity's come in and then give you a hard time returning the item once delivered). We always open up the boxes on those when we pick them up and about 30% of the time they are damaged in some way. 

When you rehab there is always some can of worms that pops up when you open the walls - the more you squeeze out of the contractor on a line by line basis the more they will up charge when that water line no one knew was there is discovered in some wall it shouldn't be in or the electricians on the original build decided to run the entire houses circuits for the ground floor and second story thru some ugly soffit in the kitchen that looks like it's there for no reason. 

Permit inspections - in some cities it's a smooth process others it's a nightmare. For something as simple as a deck the permit approval takes a MONTH then they want to inspect the hole for the footers, then they want a separate inspection once the footer is poured and the window to get those inspections done is from 1-3pm and maybe the guy shows up in that time window, maybe he came early and you missed him and need to reschedule, or maybe it's 3:30 when he shows up in a terrible mood and fails you for some ridiculous reason, or maybe they tell you at 3:45 when you call in to see where the inspector is that he won't make it that day and you've wasted 4 hours waiting on some city employee to show up... there is no way to price that into a quote.

A more experienced contractor will have better pricing from local suppliers they use and trust than you will ever get as an out of state investor - they spent years earning those discounts and trust the product supplied. 

If you are happy with the work and it's on budget - who cares how they get to the number.

Interest rates and insurance premiums are breaking some deals.

For your cash flow estimates you should double or triple your estimate for insurance and see if the deal still works for you. (On that type of deal it should but play it safe)
Even if the seller can show you a current policy and that is what they are paying now you as the new owner may not be able to secure that same rate even from the same insurance carrier. The insurance market is very tight right now especially on older buildings.

Many carriers who have policies on the books will not accept those same properties as "new business" or if they do the rates are 2x-10x what the current policy premium is. 

The best way to verify that is call the current agent for the policy and ask them what happens when you buy it - will the carrier still offer a policy? if so what do they think the rate change will be? Can you buy the LLC and assume the policy?

I see buyers getting surprised by this often when buying older buildings.

The more time you give an agent to quote the better the chances of getting a competitive rate - a lot of buyers start calling agents when they are going to close and want it NOW NOW NOW> you will pay more this way.

Give the insurance agent a week or two to shop the rate and get the agent accurate documentation proving the age of updates to the roof, electrical, plumbing, hvac, etc and good photos of the property to allow them to sell the property to underwriting.

A lot of people don't realize two sales are made for an insurance policy - one to underwriting and one to the person buying the policy. Right now in this market the first sale (underwriting) can be a LOT harder to make on older buildings than the second one (to you the buyer) lol. 

$5200 for a whole new electrical panel, outside meter, new supply line to the pole isn't out of line at all with the inclusion of the potential can of worms they could open up with the galvanized water line repair. 

(I'm not an electrician so I rely on others for this info) I'd ask the electrician to look at the appliances in your unit to make sure the electrical supplies from the new box to the unit will be safe. Modern appliances can pull a LOT of juice and now that you have more coming in the panel you don't want to have other electrical gremlins popping up. Also it's a good time to look around to see if the tenants have a bunch of stuff plugged into an extension cord somewhere in the house - new service, old wiring, and multiple devices on an extension cord pulling juice from knob and tube wiring is no bueno.

Do not call your insurance company about the repair!

Insurance is for catastrophes not maintenance - if there isn't a "sudden and accidental event" you can point to as the cause for needing the repair then insurance does not apply

Can we assume you have all galvanized pipes in the house?

If so... GROSS - you may have never seen the inside of a galvanized water pipe before so it's not your fault neccessarily.

Go meet the plumber when they pull that water line apart and look inside the pipe at the sludge that runs out of it and how packed with sediment and who knows what else inside that pipe. Your tenants and their kids are drinking that water - if you won't drink it neither should they.

I'm not trying to be up on a high horse - I didn't know how bad the were until I saw one being repaired... no stop rip all that stuff out.

Ask your accountant if there are any benefits in registering in one state vs another. 

Talk to your agent in Cali - you will need a short term (STR) renters policy on the condo as a base level policy which opens the door to getting an umbrella policy. Many if not all STR policies cover the dwelling itself but may exclude liability while you have guests because the Airbnb coverage is primary in that situation. Also you may have a different liability situation outside of an Airbnb guest where you wouldn't have coverage if only relying on the Airbnb policy. The insurance world was not ready for Turo, Airbnb, etc and is still adjusting.

Your condo master policy typically covers up to the studs or up to the drywall and almost 99% guarantee will not rebuild the inside of your unit if there is a major loss. 

Also a big one - on your condo STR policy make sure to get coverage assessments that may come down from the HOA board. Condo's frequently come up short on insurance claims and any unpaid amounts will get divvied up among the residents and you owe it - period. Having the assessment coverage on your condo policy is cheap and can save you some pain.

You should join the Greater Cleveland REIA and go to the investor classes - it's free for the cost of membership which is not very expensive at all. You'll get exposed to all sides of RE investing and also get to connect with many local investors. There are brand new people in the group and ones that own hundreds of doors.

Having ACV on roofs 10-15 years old is very close to being the new normal with many companies with others going to a percentage deductible for wind or hail damage