All Forum Posts by: Kevin Romines

The BRRRR method is a great method. Ask yourself, how many could you realistically do in a year if you had 100% purchase and rehab money? At that point the only hold back would be the crew that you had available to get the rehabs done?

The next issue is the take out financing. Most people want a Fannie / Freddie loan on the other side of the rehab? The max. number of financed properties is typically 10 with the most flexible lenders. If you need 30-40 to replace income, then your going to have to consider other types of financing? Maybe at that point you could group all your properties in to 1 or more entities such an LLC and obtain commercial financing and switch to commercial insurance policies. Its very do-able, but will require some work putting it all together. But by doing so, most residential lenders will now allow you to finance another 10 properties. I say most, some wont as they will still consider them financed properties because you have to personally guarantee the commercial loan and it may or may not show on your credit report?

So if your able to get to that point, then your really back to the 1st issue I mentioned and that is financing the purchase and rehab, preferably getting 100% financing.

My model is based on this very concept and providing wholesaled homes at great discount that need to be rehabbed and packaging that with the lenders that will do that, especially if you know what questions to ask the lenders and how to structure the deals.

Based on all that, you now have a full game plan that is repeatable and workable to get you to the point to replace the income with passive income and then officially retire in comfort, maybe even sooner than you thought.

Then you can consider opening a Self Directed Roth 401K, because once you have had it opened for 5 years and you are at or beyond the age of 59 1/2 all monies coming out of that Roth are 100% tax free. Why not start putting some of your properties in the 401K and build a really nice income from the rentals all tax free, now that's planning for your future!!!

The 1st question is how are you going to hold these properties? In your personal name or in an entity. Then are these properties residential or commercial in nature? This will tell you if your going to take out a landlord type policy (personal lines) or if your going to need a commercial policy?

Both policies have loss of rents or use coverage. Loss of use means that a covered event, such as a fire has taken place and as part of the claim, they will pay your loss of rents due the property being uninhabitable until it is repaired.

also some companies will not allow you to write a policy on personal line if its owned by an entity. Most people want to write the policy as personal lines because it tends to be less expensive? The commercial policy has coverages on it that most personal lines policy doesn't, so sit down with a quality agent and discuss the differences. Do not go low on liability coverage, get as much as you can. Keep in mind, that liability coverage is what protects all your personal or corporate assets, don't leave yourself exposed there. Follow it up with a decent sized umbrella policy.

I do these policies through Foremost, disclaimer - Owned by Farmers. I like to go with them on a vacant policy because they will allow for the rehab (their main concern is with the shell of the home being sealed up) and they have a minimum earned premium of $250.00 so you only pay for as long as you need it and then roll it in to a standard landlord policy. I set all my rehabbers up on a monthly or quarterly so they never end up paying more than the $250.00 unless the rehab is going to take longer?

As @David Sisson has mentioned, insurance policies are specific to the type of business that you do. They don't cross over or allow coverage if you go outside what the policy is designed for. That said, one of the more expensive and restricted policies you can get is that of a general contractor. In reality they are not that expensive when you consider the risks associated, but they are not covered by all insurance carriers. They tend to be more specialized coverages and carriers.

I would create specific list of roles and responsibilities for each partner in the deal. All partners need to provide the proper licenses, bonds and insurance policies. I would also have the other partner listed as an additional insured and vise versa on all policies. This will protect the additional insured as it protects the primary policy holder.

As mentioned above, require a renters policy with 500K to 1,000,000 in liability coverage. You also need to carry as much liability coverage as you can get on the landlord policy and then follow that up with a very robust umbrella policy? How much in assets do you have to lose? How much is a life worth? These are very serious questions and not the kind of questions to be guessing if you have them covered correctly after a claim has been started?

I agree with the comments on here that you should require all tenants to have renters insurance. If I were you I would also be added as an additional insured on the policy, this will protect you as it protects them on liability claims. I would also require to be a certificate holder, this will notify you should the policy ever lapse or terminate for any reason. You also need to set the minimum liability requirements that they must have. Make sure there is enough to cover a sizable liability claim, liability coverage is cheap overall.

Keep in mind the average renters policy is 8-24.00 a month depending primarily on how much in contents they are covering. The renters policy is the 1st policy that will be hit in the event of a liability claim by a tenants guests or other people coming on the property. Your landlord policy is the 2nd policy in line. This can eliminate or reduce the chances of a claim against your policy and help keep your rates stable and less likely of being cancelled or non-renewed.

All apartment complexes in our metro areas require them, there is a reason. You should too. 

You will also want to pay attention to the insurance issue. That is, you are planning on rehabbing thereby putting money into the deal. In order to insure the structure as the primary insured, you will need to have an insurable interest. That means that your the owner of record or that through a contract, you have the right and or obligation to insured the structure.

Why is this important, well, you are putting money into this deal through a option fee possibly and certainly through the rehab. You don't want to leave yourself exposed in the event a claim needs to be made after you have put money into the deal and your not the primary insured on the deal. You would be risking the money you have into the deal and giving control to the seller?

As @Bill Gulley had said above, your best bet might be to get seller financing and being recorded on to title as the owner. This will allow you to insure the property as the owner and as the primary insured. The seller would be your lien holder or mortgagee.

Insurance doesn't get involved with pulling permit records. Insurance is really about covering the structure that is there even if that structure has unpermitted additions. Now all insurance companies have conditions of improvements requirements. Some companies are tougher on what some people would think is nit picky items. Most are about the same. Typically an inspection of the property will be done by their inspection dept. after the policy has been started. They will look at all things on the exterior and make sure it complies with their own guidelines. If it doesn't, they may give a certain amount of time to comply or they may do a cancellation, but they cant cancel before a 30-45 notice by law.

If your unsure how that process works, just have an open honest discussion with the agent about how their company works in that area and also tell them about any areas of concern. I know for my company, we typically will not bind coverage before I or any other agent goes out to get pictures.

You must 1st look to see what the rules and requirements of your own insurance policy allows? For any tenants that will have dogs in your park, I would make sure they have a minimum amount of liability insurance with no exclusions for dogs, you set that amount and requirement based on what your insurance company says. You should also be listed as an additional insured / certificate holder.

When you are listed as the additional insured, this protects you as it protects them, and as a certificate holder, you will be notified if or when the policy lapses or terminates for any reason.

I would suggest they have 1,000,000 in liability coverage as a minimum. By doing this, their policy is 1st in line in the event of a claim and yours is second in line. Some policies have dangerous breeds exclusions or that company just wont insure the person. My company doesn't have a dangerous breed exclusion, we just ask if there have ever been any claims do to dog bite and if so, we wont insure that person or would need to do an exclusion.

@Jon Holdman mentioned difficulty with a subject 2 and an insurance claim. The 1st rule with insurance is that you must have an insurable interest in the item or property that you are insuring. That means you are the owner of the item / property or you have some contractual interest or responsibility in that item / property. If you do a subject 2, as the buyer, you will be recorded to title as the owner of record. With that, you now have an insurable interest and therefore the policy can be in that person or entities name.

As far as a claim, there should be no issues if you can prove you are the owner because your on title or have a contractual interest in the property and therefore an insurable interest. My company even has an endorsement that can be added to home policies or landlord policies that just states the property was bought via contract. It's really just an identifier that alerts the parties involved that this property was bought via a contract. Even if you didn't put this on the policy and there was a claim, so long as there was an insurable interest, there will be no issues.

The agent should know up front or be asking if the property was bought on contract, just as they would ask if you have a lienholder and list them on the policy as a mortgagee. Your contract should also have a section in it that deals with the insurance and what should take place in the event of a partial or total loss / claim.