All Forum Posts by: Yangbin Tong

Wow! This one is nice too! So impressive. This makes me want to try Airbnb one day. 

That sucks, man. But the Baton Rouge rental market is in good shape as long as I can tell. Did your contract with the PM mention anything like this? I would imagine they will be willing to cover part of, if not the entire loss. This type of experience is so valuable to many of us. Please share with us how it goes. 

Quote from @Shaun R.:

General question... if a homeowner wanted to purchase another home as a personal residence and keep their current one as a rental, how does the mortgage approval process work for the second home? I assume since there is no renter yet, both mortgages have to fit into their DTI? What about the down payment for the second home? If it's known that they will live in the one with the new mortgage and rent the original home, do they need a larger down payment for the new home? Or can you get the same type of owner occupant financing as you would normally get?

Would it be better to move out of the current home and get a renter in place before trying to buy the second home?  

You're on the right track. Tbh, I did similar thing but failed to find a tenant first. It worked out okay since I refinanced the original mortgage when I moved out and got a good new rate. I also bought my new home at a relatively low interest rate. The mortgage companies deal with such situations a lot and they can run calculations for you real quick over the phone. And depending on your primary job's nature, getting a professional property manager may be a good idea. 

Quote from @Drew Sygit:

@Yangbin Tong 

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

 Thank you for sharing your experience and advice, sir! Appreciate your input! 

I would say go for it as well. However, like Reid pointed out, the Escrow is for property tax and insurance. So there's double counting of $315 expenses. Your maintenance is less than 0.5%, which is towards the low end. I would suggest 1%. Your vacancy is also low as pointed out by others. I would suggest you take advice from other seasoned investors and re-calculate your numbers. By paying less than $500 to keep a fourplex, it sounds a good deal to me. Another thing to research is the market value in this area for future rent increase. 

It's a great strategy to house hack and self-manage the property. However, when you move out in the future, you might need to add the property management cost. What's more, I suggest you start getting connected with local reliable qualified contractors or repair professionals, unless you have friends/time to fix every little things on your own. Remember, once you step into the REI, time is money. All seasoned investors say they wish have invested earlier. You have to weigh the cons and pros of self-management and property management in the near future.

I just became a landlord a couple of month ago, using buy and hold strategy. The original plan was to manage the property by myself. But after the first couple of months, I'm exhausted. Wasn't prepared for the flood of complaints and demands. The tenant had raised multiple issues but most of them turned out to be no issue. Still I spent time and money on the maintenance and repair professionals. I have a full-time job and young kids. It amazes me how so many people have managed their life, work and REI all together. Maybe I'm just not a good multitasking person. Please share your recommendations on property manager in the Greater Baton Rouge Area. Meanwhile, I would also like to learn from other people's experiences and advices. Any thoughts and comments are welcome. I appreciate your time!

Quote from @Cameron Moore:

I can speak to the issue of coverage. Ideally, when the LLC is formed then your agent/broker would either do a quick named insured change at no cost or add the LLC as an endrsed additional insured. Very straight forward and easy change.

Thank you for the answer, Cameron! I have an additional question. When we use the buy and hold method, the property owner doesn't have to go thru a broker. Are you referring to the insurance agent/broker? By adding the LLC as insured, I assume that would add the cost? I'm new too, if that question seems too simple to you guys. 

Thank you so much, guys! Wow that's a lot of wonderful advice and tips. I appreoctae everyone's input! 

So I did a few things. First, I looked up online and noticed that some financial advisors not recommend umbrella policy for people with less than $500,000 net asset. Well, I'm way below that level. Like I said in the beginning, I just started getting into rental business. The reason I was asking about umbrella policy is because of the BP webinars. So am I just overthinking this whole time? 

Then I called my auto insurance company for a quote of umbrella policy. Just like someone mentioned here, they checked my current coverage and told me the need to increase my liability coverage before initiating an umbrella policy. With these combined, the annual extra cost for me will be $1,300. That's actually not much. The question remains: do I need an umbrella policy? 

I also asked for a quote for $500,000 homeowner liability coverage for current house, and that's about $200 annual increase. The auto liability coverage of $250,000 will cause an increase of annual premium by $700. 

When I put together all the information and quotes, it seems reasonable to bump up my homeowner liability to $500,000 and auto liability to $250,000 or $300,000, without umbrella policy. Maybe even that is over insuring? 

What I also need suggestion is the liability for the rental property. Someone here said they do $500,000. Is that a good starting point or too much for a single family home? 

These questions must seem so easy for most of BP users, but they confuse me a lot. Even if I have listened to many webinars. Thank you again for your time to read and comment. 

Happy New Year to all!

Yangbin

Hello all, 

I'm new to rental business. We just used the buy and hold strategy to refinance our previous sfh and would like to rent it out asap. However, I'm not sure about how to get the umbrella insurance for this property. What are some good websites or articles to read? I'm aware of the LLC option but heard there're pros and cons both. I have asked a friend, a realtor who recently got into her first rental busines but she didn't seem to have an umbrella insurance. Isn't it a high risk if the tenant got injured and sued you? I have two little ones to raise and cannot afford that type of issues. What are your suggestions, BP friends? I'm from Greater Baton Rouge Area. Looking forward to getting to know others and potentially working together.

Thanks for reading. 

Yangbin

Originally posted by @Joe Hammel:

- The $5k-$10k properties are the properties that are the source of most of the Detroit Horror Stories

- A few home grown locals, may find success with these - yet to witness an low experience or non local be successful with these

- Have seen 100s of OOS and first time investors have lots of success with the $60-$110k properties

Metro Detroit has arguably some of the best investing in the nation. Price/rent ratios and such. Have tons of stories of buying $60-$110k properties renting for $1000-$1300/month and being amazing buy and holds.

 I don't know much about Detroit area, but that price/rent ratio is awesome compare to where I am at. Wish I knew someone up there.