All Forum Posts by: John Dahl

Hi John!

Congrats on the Purchase! I've been looking in the Syracuse area myself, we'll have to talk more soon. Also that’s a very good question you’ve got there. 

As a fellow investor and a former insurance agent (many moons ago when I was young and foolish lol) I can shed some light on the subject. Without the details such as square footage etc I can't give a dollar amount but here's what I do know. One thing they consider when insurance companies calculate the cost to rebuild is also everything that will go into the preparation before hand, ie; demolition costs, soil decontamination, permits, planning etc. So that inflates the bill more than most people realize. Then for the actual build the cost will be inflated as their costs will be a little padded VS if you contracted it out yourself for a new build. Long story short if you have a few minutes, call some builders and ask what their price per square foot is for a similar build, then figure out your square footage. From there add the "approximate" additional costs for demo and prep, landscaping etc, and you would have your answer pretty quick. Most people are completely surprised at how high it is btw. Hope this helped and good luck on the new purchase!

Cheers

I would think yours is at least option # 2 and possibly heading towards #3. 

For the price of the premiums  (and all other things being equal) I would definitely dump #1 like a bad date, go straight to #2, and take a good hard look at  #3. The truth it's only a $16 month difference ($192/yr). 

Cheers

My (educated) 2cents 

#2 gives you much more coverage for just a tiny bit more per month, but I'm sure you already noticed that.....

Investors, like insurance companies are all over the place.  If you are using financing you want to talk to your mortgage person about requirements of the lender, if any.  If not, you get to choose.  That said, different insurance companies have different rules regarding replacement costs.  Some allow you to insure for what you want, some have a minimum, some require replacement cost some use variables of 1.5 or 2x your investment etc....like you said all over the map.

Not an insurance advisor and this is highly personal.  I remember a client of ours who never had insurance on their homes, refused to get it.  Another client had a house burn, 100% loss.  I shared that story with all of our other management clients and the who refused for years decided to get it.  A month after they got it, one of their homes burned - 100% loss.  Needless to say they were grateful.

Point is, insurance is a cost that directly goes to your feelings on risk/reward.  You don't mind risk, get less.  You hate risk, get more.  Also a good question to think about is if the house burned to the ground and you had a 100% loss what would you do?  Rebuild it?  If so, you need to make sure you have replacement costs figured in.  If you would clean up the mess and walk away then you need far less. 

Most of our clients have over what they have into it but most would just sell the land and walk. 

Are there any new builds in the area that are a similar size?  You could look at those prices and remove the cost of the land.  Are the deductibles and limits the same for each quote?  For the difference between quotes 1 and 2, I'd go with #2.  As for 2 vs 3, that goes back to the question of sales price.

@Patrick Bavaro Is it within the R2R process that you have to refinance this deal for it to legally be rented through annual leases? Obviously with the second home mortgage, you would have to occupy the property, or have it available for occupancy (vacant) for over half the year to stay in compliance with the loan you're getting on the property. The lender is aware of the intentions, yes, but they're not the ones required to enforce the compliance, they're only required to provide you all the rules that come with that mortgage type, which you acknowledge at closing.

Those terms sound great at first glance, but I always assumed this was a non-conventional loan. Unless I'm missing something, it looks like you're suggesting this is a Freddie Mac loan. In that case, it would be considered mortgage fraud to rent the property annually, or even have a full-time property manager in place per those loan guidelines