All Forum Posts by: Kevin Romines

With my company you can write the policies as landlord policies on personal lines, however the policy would have to be written in a individuals name not the entity as the primary insured. You can list the entity on the dec. pages and you can also list the entity as an additional insured. If a claim were to be made, the check would be made out to the individual and possibly the entity as well?

Underwriting doesn't have any problem writing the policy in the individuals name with the entity added to the dec. and as an additional insured so long as that individual is also a managing member of the LLC.

Each company has their own rules, so you would have to check company by company. But this is how we do it, I just did 2 of these last week.

The basics to it is that the federal government which is the actual insurer of flood insurance. Yes can get it through many standard carriers, but its always administered and funded by the US government. Congress decided the program was not financially sustainable with the current subsidized rates, so they made changes. They made a distinction between primary / secondary / non-primary or rental property. They decided that the secondary and non-primary properties will no longer receive the subsidy and so therefore rates will increase by 25% per year until they reach full premium rates.

This is what you have started to experience. The only thing you can do is review the dwelling and contents coverage on the policy, also review the deductible that you have chosen and possibly make some changes to those areas to help reduce your premium. I would be careful about reducing coverage to much as this could put you in a position to not have enough money to rebuild.

Other than that, it is a cost of doing business and should be factored in to your rental rates where and if you can?

Farmers has no limits on numbers of properties owned and they can be run as personal lines or commercial with blanket liability. Some companies have restrictions on breeds of dogs, Farmers doesn't, but if the dog has a bite claim history then the policy won’t be bound or an exclusion written. This might be an issue for your tenants and thereby an issue for you?

The dwelling reconstruction costs, the fire rating or how far you are from a fire hydrant and responding paid station are some of the biggest factors that help determine premium. Shop around and make sure it’s not all about price. It’s got to be about coverage 1st, a quality agent and price are next in line.

Just my 2 cents.

I'm in the risk mitigation business just as the title company is in part. I wouldn't like the position your thinking of putting yourself in. Even if the seller indemnifies you and the transaction, you are still the guy on title to the property. If there are claims, they come after you. It takes your time and money up front to defend yourself only to turn and chase the seller? This seller will have the same issue no matter who the buyer is, therefore it will have to be resolved one way or another. Its doubtful other buyers would seriously pursue this deal, or even your deal after the value add?

I would do what @Don Konipol suggested and have the seller pursue a quiet title in court. I would also have the property tied up while they are doing this so that no one else could slip in the back door on the deal.

Don't leave loose ends that can bite you, unless you like to vacation in Vegas, then in that case, roll them dice?

The type of policy (personal lines or commercial) in part depends on how you hold title? If you hold it in your personal name, then you can go either way. If you hold it an entity, you most likely will need to have a commercial policy. I would also consider an umbrella policy.

A good agent will ask many questions but one of the critical things they will do is find out how much you have in assets. At a minimum, this is the same amount you will need, or more in liability coverage. The nice thing is liability coverage is fairly in expensive, so having much more than you have in assets is a good thing. Keep in mind the insurance policy will not only potentially pay any liability claims, but it also pays your legal defense. The cost of legal defense is outside your limits, so it doesn't eat into your limits. Legal defense can be very costly, so don't scrimp on liability coverage.

I'm not saying this model will work for everybody, but its an approach I'm working with due to my background. I'm actually using this to wholesale and maybe even retail some properties to be rehabbed.

Find homes that need to be rehabbed that you can get a huge discount on. Once these are done, they can be flipped for the cash or held for a great cash flow property. Because of my background as a lender, I still have many key contacts in that world. I have both hard money lenders and private lenders that will do 100% of the purchase and rehab if the total costs are low enough compared to a conservative ARV. If they cant do 100% they can get close depending on the house and details.

Once the rehab is complete, then refinance it into a Fannie / Freddie conventional loan with no MI due to the equity you have built in to the project. This property should cash flow very well if you did your homework correctly. Who knows, if you get good at this, you might be able to retire even earlier than 10 years? I personally am on the same path, although I'm wholesaling some of these for immediate cash as well.

I would find a few good wholesalers in your area and work with them to lock up good properties.

Insurance could also be an issue with the home in its current state of completion. You could possibly get a course of construction policy. Check with your agent?

Here is the industry standard:

ARV minus 70-75% minus cost to rehab minus wholesale profit = max. offer price, so start lower.

ARV 150,000

X.75%

= - 37,500

= 112,500

-20,000 Estimated Rehab

= 92,500

If wholesaling, Minus wholesale fee? 10,000?

= 82,500 Max. offer price

Starting offer - 70,000

Roll it out to rehabber at $95,500, make difference between accepted offer price and 92,500?

Once a 1st mortgage is done, no 1st mortgage can ever dictate that you cannot have a 2nd mortgage behind them. This is a non-issue. The only time they can dictate that is at the time of closing on the 1st mortgage. After that, no one has the ability to say no at that point, except the potential 2nd mortgage lender.