All Forum Posts by: Sarah Msuya

@Jason C Thanks - thats very helpful! I am only into this for $113,000 aqnd realize its a very old house. I wouldn't be expecting to use insurance unless it was a complete disaster, e.g. the whole thing burned to the ground. Therefore, I was kind of thinking it might make more sense to pay lower premiums and just get the insurance required to satisfy the bank mortgage without going for for replacement coverage for $300-$400 more a year ... 

Usually I'm a good decision maker, but this one is tripping me up for some reason. I mainly don't understand how intense an insurance underwriter would be when determining market value minue depreciation in the event of a loss. 

@Tony Wilcox

Thank you for your response! Do you know how an insurance company would "depreciate" a house based on the ACV insurance model? For example, if the roof is past its expected life but still functional, would the insurance not pay anything for the roof?

@Josh Cousineau  

Thank you! I am doing room rentals for the time being. Do you have any insight on what people are typically paying for room rentals in a SFH? They are all very large rooms.

And/or do you have any resources that give estimates on room rentals? I've only found some for whole rentals and they're really only accurate for the smaller rentals e.g. studio, 1-2 bedroom ... 

@Ryan Thomas

Thank you for your response! Do you know how an insurance company would "depreciate" a house based on the ACV insurance model? For example, if the roof is past its expected life but still functional, would the insurance not pay anything for the roof? 

Hello everyone,

I am under contract on my first long term buy and hold rental. It is a 4BD/1.5BR SFH in Auburn Maine. I am paying $113,000 and will be replacing the roof on it this spring. Everything is currently functioning in the home but the furnace, roof, hot water heater etc. are beyond their expected life.

When I called Progressive, they were able to offer me coverage from two different underwriters and I'm torn on which to go with. 

1. Foremost insurance (Annual Cost: $986): $2500 deductible (will be changing to $1,000 per lender requirments); $180,000 functional replacement cost; $300,000 personal liability; $5,000 Sewer, drain, or mold mitigation ($250 deductible). The original quote with all the bells and whistles was $1,346. My primary home is worth twice this and insures for $614 - so the $1,346 was shocking. I took off everything I could and the $986 was as low as I could get the price. 

2. American Modern (Annual Cost: $677); Actual Cash value is market value minus land value; I took my purchase price of $113,000 subtracted the land value of $14,600 and came up with $98,400. $1,000 deductible; mold/remediaton - $5,000; personal liability $300,000; loss of rent - up to $9800. 

The main piece I am confused about it is what would I actually get if I went with option 2. If the house burned down then I would get $98,400 minus depreciation. Since houses in this area really don't depreciate, I believe they are talking about the individual components of the property, e.g. If the roof is over 20 years old then its worth $0 because its beyond its expected life? 

I would love some clarity on what a home built in 1867 with older but functional components could really get in the event that it was a total loss. Would my $98,400 have $10K taken off for the roof, $10K taken off for the old furnace, $2K taken off for the water heater etc... ? One insurance agent told me a cash value policy is useless while another said its a popular choice for investment properties. 

In the event of a total loss, I would really just be concerned with paying off the mortgage and moving on so the actual cash value sounds like it might be a good option if I could understand what I would realistically get considering the "market value minus depreciation" wording of this? 

Thank you!

Sarah M

@Kyle J. This is perfect - thank you so much!

@Cody Bradley Go to Credit Karma and look under the credit health section; they are as follows:

1. Payment history (high impact)

2. Credit Card Utilization (high impact)

3. Derogatory marks (high impact)

4. Age of credit history (medium impact)

5. Total accounts (low impact)

6. Hard inquiries (low impact)

Which areas are red for you?

Start with the red with the highest impact and work your way down. Credit score requirements are going up during this uncertain time. It will be important to get this up for traditional financing.

@Yonah Weiss I have a BS in Business but I don’t give the lion-share of the credit to my formal education in cultivating my understanding of some of the parts in the real estate machine.

I put myself through school and decided to go the cheapest route - community college while renting and working full time. At 19, a bank seemed like a solid place to start my career while going to school.

At 22, I became a customer service representative and that involved originating mortgage loans. While learning the underwriting guidelines, I realized that it was all a math puzzle. All I needed to do was make my numbers fit the banks criteria to be mortgage worthy.

I spent 9 months learning and taking steps to improve my credit score through lowering my credit utilization and then I just went for it.

There was so much I didn’t know but I figured the worst that would happen is I wouldn’t qualify for a house.

I bought and flipped that house due to unexpected life circumstances 2 years later. I then bought and rehabbed (and added bathroom) to my current residence which I’ve lived in for 4 years.

Through the years, I was promoted through the ranks up to my current position as store manager. Each position as well as my personal real estate purchases pushed me further and further to seeing real estate investing as a realistic pursuit that I’m capable of.

The last 10 years in banking has exposed me heavily to personal level lending, other investors, business partners who do commercial lending, realtors etc etc

@Ryan Kelly I completely agree from the research I’ve done so far. I’ve been looking into Huntsville AL and Laurel MS. Do you have any particular markets or states you’re focusing on there?

@John Farady thank you for your congratulations and great advice!