All Forum Posts by: Eric H.

@Roy N.

I'm sure your success and experience is something to aspire to. You are correct that there are various ways in which one may mitigate risk, insurance being one tool. 

I will restate to emphesize the facts... With a cost of 1.2% we are litteraly talking about stepping over a dollar to pick up an eighth of a dime (relatively speaking). Perhaps there is a more cost effective hedge I haven't considered, it wouldn't be the 1st time I've not known something. In this conversation however I have yet to hear an alternative hedge strategy aside from "it probably won't happen".

$5200 monthly cash flow with the risk losing 25% 50% 75% or 100% of that income from a covered loss or $5133 monthly cash flow without that risk. Choosing not to have fair rental coverage is not a decision I can understand.

 Again, I have made no claim that an exclusion would relieve you of absolute liability, but rather that it MIGHT prevent the type of punitive awards that are generally associated with NEGLIGENCE.

@Tim Shin  I missed that these houses were free and clear, thanks. Still Texas property taxes may be a consideration unless offset by depreciation.

If you have a loss that renders your property uninhabitable, you will not only loose the cash flow... You will also still be responsible for the debt service. If that is a situation you are comfortable with fair rent is your option. 

Wear and tear is the least of your issues. You have absolute liability over your real property, which means that if someone is hurt you will be liable for their damages, not having a business practice exclusion in your lease may be presented as negligence in court, with you being a sophisticated landlord/investor/business owner and your renter aswell as the injured daycare student being portaied as victims of your negligence. 

If you own the property in your name and not in a well administrated LLC with a business liability policy in place now would be a good time to consult your lawyer about making that happen and possibly offering a lower rent payment for extending the lease agreement, with the new agreement having the needed prohibitions.

Regardless of zoning and/or proper license a cease and desist letter may work, or at least may offer a level of protection from claims of your negligence. Personal liability and personal umbrella policies may not pay for your negligence and court awarded penalties are always higher in cases of negligence of a sophisticated party.

None of the above is legal advice I am a general lines insurance trainer consult your lawyer and a local state commercial insurance professional.

Good luck

I cannot say if you should move your rental to a legal entity or not, but I can say that a legal entity if properly administrated can offer you additional personal liability protections. 

If you keep the rental in your own name you will need to change to a landlord policy you will also need a professional review of your primary policy and if you don't have a personal umbrella policy you'll need one of those too.

sounds simple enough. Are you very familiar enough with the area to know where you want to buy? Stone Oak, Westover Hills, Schertz or are you open to B and C neighborhoods as well?

Welcome @Andrew Hunt what are you interested in buying? There's a meet up tomorrow at Luby's I'll be in attendance, hope to see you there.