All Forum Posts by: Sasha Fukuda

You want to owner occupy a multi family property, and do so with no money down and by borrowing from a hard money lender, and you want to do it in a hurry?!? That sounds like a recipe for a disaster. If you're doing this for the first time, why don't you try something easier? My first property was a multi family that already had good tenants, was in a good area, and looked like it was in fairly good condition. I put 20% down and had plenty of savings. If you're a first time homeowner, you could get a rural development or FHA loan where you put almost nothing down, but even if you could do that i would still recommend having reserves. You never know when you'll have an emergency $1,000 + expense. It's hard to tell how much you know, but make sure you've read Brandon Turner's books- the book on rental property investing and the book on managing tenants. Rental property investing is the combination of several areas of knowledge. There's the property manager stuff (buying in an area that can get good tenants, knowing how to vet them, etc), the contractors stuff (being able to assess the condition of things), and the realtor stuff (knowing when something's a good price). My opinion is to make the first one easy on yourself.

The problem i see with making it the tenant's responsibility to clean out the driveway is that it is a triplex with only one driveway. 

So, i have a triplex in a town half an hour from my house. I kept on the same person to plow the snow as had done it in the past. I never actually signed a written contract with him. Currently there's a layer of ice on the driveway that most of the other driveways around it don't have. Apparently it was due to a thin layer of snow that then froze. This has resulted in several problems for me.

1) I got an email from a tenant saying that the driveway needs to be salted and sanded. This is my first investment property and i don't live there, and this is something that i'd just never thought about due to my inexperience. I brought salt and sand to the property and fixed the problem. I also let all the tenants know that there's salt and sand in the shed, and that they can use it as needed. However, this situation makes me nervous. I'm not there most of the time to judge the quality of the snow plowing, or whether it needs snow plowing, or to salt and sand the driveway myself. Even if a tenant contacts me and says it needs plowing after a thin layer of snowfall, all i can do is talk to both them and the snow plow guy, listen to their explanations, and try to figure out who's right. Thus, I feel like i have limited control over whether the driveway is icy. Yet, according to the leases, i'm responsible for the driveway. If someone slipped and fell, i might be liable. This is especially a concern because some of my tenants are disabled and might be more prone to slipping and falling than able bodied people. Yet, i'm finding myself having to rely on the snowplow guy and the tenants salting and sanding their own driveway to ensure that it's safe. This seems very risky to me. 

2) One of my tenants is saying that the ice at the entrance of the driveway has damaged the exhaust system of his car and is demanding compensation for the cost of the repairs. There is an ice build up there. It is a bump going into or out of the driveway, but nothing i would have thought was anything more than a minor inconvenience. I go in and out of the driveway whenever i visit the property and i've never regarded it as a serious problem. How do i respond to this and is this even the sort of thing that i can prevent in the future?

Vanguard (and probably all the big investment companies) have a variety of funds. You can see the list here.

https://investor.vanguard.com/...

I have my money in the short term investment grade bond fund, although when i see how much money stocks and the long term bond funds recently made i wonder if that's a mistake. I have far more money than i can invest in real estate right now.

So, two years ago, I made hundreds of thousands of dollars in the crypto bubble and then lost most of it when the bubble popped. After that, i decided to take my ball and go home. I took what was left ($80,000) and put it into Vangaurd’s Short Term Investment Grade Bond Mutual Fund. The reason i chose a bond fund was that this was only supposed to be a temporary and safe holding place until i could get this money invested in real estate. Well, things didn’t turn out as planned.

It took me a year before i bought my first investment property, and another year has passed in which i’ve been unable to qualify for a loan. In the meantime, i’ve saved most of my low wage W2 income and all of my investment income. Now i have $125,000 sitting in my bond fund and high yield bank accounts, which is obviously not ideal and not what i’d anticipated two years ago when i started this fund.

What i want to know is, what do you think i should have done differently and what should i do differently going forward? During the past year, Vangaurd’s total stock market fund is up 30.8%, their long term investment grade bond fund is up 20.41%, and the short term investment grade fund that i have money in is up only 5.74%. I lost a lot of money by not putting it in the long term fund rather than the short term fund, and even more by not putting it in stocks.

Yet, i’m not sure that either of these things were really a mistake. I think my problems with loan qualification were largely unforeseeable and due to bad luck. Furthermore, I really want to invest in real estate, and if i’d put it in stocks and the stock market had dropped, i’d be kicking myself, while if i’d put it in bonds and the stock market had dropped, i’d be patting myself on the back. As far as short vs long term bonds go, the difference in SEC yield between the two is less than 1% right now, so I’m not sure that i could have anticipated that one would do so much better than the other, particularly within such a short time frame. Then again i don’t know much about bonds so i could be wrong.

Going forward, i think that having more money than i’m able to invest in real estate is going to continue to be a problem for me. Even if i buy a couple investment properties this year, i’m going to have to decide where to keep the rest of my excess money.

The annual premium was $1,570, and at 80% replacement cost insured up to $331k on the property I bought for $190k plus $1 million liability. They want to raise the amount insured to $426k, which would make the annual premium $1,800.

Ok, I remember now why i have insurance on 80% replacement cost. The insurance agent said that if i had 80% or more, I'd get the face value of that policy. So, if my property suffered damage equalling 75% of replacement cost, the insurance would pay the full amount. However, if i got less than 80% of replacement cost, any payout whatsoever would never be higher than that percentage. So if i got insurance equalling 75% of replacement cost, i could only collect 75% of any damage that occurred to my property. If i got insurance equalling 50% of replacement cost, i could never collect more than 50% of any damage that occurred to my property, etc. 

1) I can accept that i have to pre pay something, but i'm wondering if 14 months worth of insurance up front plus a monthly insurance escrow is typical?

2) The bank based their insurance requirements off the amount lended. However, the insurance agent said there was some state specific reason why i had to insure to at least 80% of the replacement value, although i don't remember what it was. I bought it for 190k and the appraisal came back at 205k.

So, i bought a triplex in Keene, NH in March of this year. This is my first property, so it's all very new to me. My insurance agent gave me a great quote on the house that was cheaper than all the competitors. I ended up prepaying for one year's worth of insurance, and my lender escrowed 2 months worth of insurance on top of that. I also put more money into escrow every month. Now, a couple months after i bought the property, I wonder if this is excessive. Why do they need 14 months of insurance plus a monthly escrow? I recently found out that a different lender (TD Bank) doesn't escrow for insurance at all, so now i'm really wondering if i made a mistake. 

In addition to that, my insurance agent recently sent me an email saying that after sending an inspector to my property, they've decided that their estimate of my house's replacement cost is really $527,000. Their previous quote was $413,000, which is over $100,000 less/ roughly 20% less. I'm wondering how they could be off by so much? Now they want me to sign a statement agreeing to the increase after i've already pre paid based on the $413k quote. I'd only have to pay $20 more a month, so the actual cost to me isn't that big of a deal. However, i can't help but feel as if i've been misled. I wonder if they deliberately underquoted me so that i'd choose their policy over their competitors? 

Do you think i'm overreacting to the new estimate? Would you sign the document if you were me? Is 14 months of insurance prepay/ escrow plus a monthly escrow reasonable to begin with?

Yes, there is. 

UpperValleyREIA