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rated:
After I moved out of my primary residence, I had it fumigated, then turned it into a rental property.

For rental depreciation purposes, fumigation should be considered a repair right?  (instead of an improvement).

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kfpanda said:   After I moved out of my primary residence, I had it fumigated, then turned it into a rental property.

For rental depreciation purposes, fumigation should be considered a repair right?  (instead of an improvement).

  Repair.

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I'm looking for a 30yr fixed mortgage for a rental property that was purchased with cash 3 months ago. It seems all the banks require a 6 month, anyone have a solution for this?

edit: 6month

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Another question, Do you provide a washer/dryer? I also put the yard maintenance on the tenant but at a courtesy I leave an old mower at the property, is this a good or bad idea?

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homeguard said:   Another question, Do you provide a washer/dryer? I also put the yard maintenance on the tenant but at a courtesy I leave an old mower at the property, is this a good or bad idea?
  Not a good idea. Too much liability, especially if it's "old."

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homeguard said:   I'm looking for a 30yr fixed mortgage for a rental property that was purchased with cash 3 months ago. It seems all the banks require a 3 month, anyone have a solution for this?
  Did you make a typo? You'd have to use a commercial mortage to around seasoning period. I'm surprised you found a bank willing to do 3 months, mine is 12 months. So I limit myself to properties that require $2k in repairs including appliances.

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vadeltachi said:   
homeguard said:   Another question, Do you provide a washer/dryer? I also put the yard maintenance on the tenant but at a courtesy I leave an old mower at the property, is this a good or bad idea?
  Not a good idea. Too much liability, especially if it's "old."

  Washer dryer is ok. Definiately don't leave a mower. Don't even leave a new one. 

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homeguard said:   Another question, Do you provide a washer/dryer? I also put the yard maintenance on the tenant but at a courtesy I leave an old mower at the property, is this a good or bad idea?
  I find it cheaper to supply all appliances including washer and dryer than to repair the Sheetrock, doors and paint that they usually destroy bringing said items in especially up and down stairs.  It's also a good selling point.

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I started reading this forum a few years ago and it is where I first started to learn about real estate investing. There is so much good info here. I now have 10 units and looking to purchase 6 more this year. If you look at my old posts, you will see all the questions I asked.

I have started a blog now that talks about what I have learned during my time investing and real estate and other thoughts on life and investing in general. You can check it out at www.themadrealworld.com 

Subscribe to get all my articles delivered to you by email.  I have a lot mote good articles planned.

rated:
rufflesinc said:   
homeguard said:   I'm looking for a 30yr fixed mortgage for a rental property that was purchased with cash 3 months ago. It seems all the banks require a 3 month, anyone have a solution for this?
  Did you make a typo? You'd have to use a commercial mortage to around seasoning period. I'm surprised you found a bank willing to do 3 months, mine is 12 months. So I limit myself to properties that require $2k in repairs including appliances.

  Yup it was a typo, banks around here require 6 months

rated:
Just wondering what type of insurance everyone is using. In reading past posts, I've been seeing a lot of umbrella policies, which I understand is extra insurance added to your primary home owners. I've also read about Landlord policies. Which of the 3 do most of you have?
1. An Umbrella Policy on top of a standard homeowners policy
2. An Umbrella Policy added to a Landlord policy
3. Just a Landlord Policy

Or did I miss the mark altogether? Thanks in advance!

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waikikisneakie said:   Just wondering what type of insurance everyone is using. In reading past posts, I've been seeing a lot of umbrella policies, which I understand is extra insurance added to your primary home owners. I've also read about Landlord policies. Which of the 3 do most of you have?
1. An Umbrella Policy on top of a standard homeowners policy
2. An Umbrella Policy added to a Landlord policy
3. Just a Landlord Policy

Or did I miss the mark altogether? Thanks in advance!

  There is no standard formula. For one, each person's exposure is unique and needs to be covered in the most comprehensive and cost efficient way. All insurance companies have different rules about what they will and won't cover, how they do so, how many properties they will cover with standard policies -- and those policies can vary wildly in price. States' regulatory environments also determine what can be offered and whether it can be accommodated under a residential (habitational) or business/commercial policy.  Also, property type and location will determine what coverage you need. Flood insurance, for example, is not needed in many places nor is building coverage if you own a condo, co-op and some townhouses. Liability is always your greatest exposure. So, for example, if you have a net worth of $300,000, most basic HO or LL policies will cover that for you. As your net worth increases (from all sources), an umbrella policy is often the most cost-effective way to insure the liability exposure. In one case, I know of a LL who has a $4 million umbrella policy at an annual cost of $250 through Erie. While owning properties in closely held business entities can sometimes provide exposure shielding the bookkeeping, accounting, tax reporting, estate planning, and management efforts can be much more burdensome than beneficial. As always, seek competent counsel familiar with local law and customs.  

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Wow vadeltachi, thanks for the great response! I have a much better understanding now.

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waikikisneakie said:   Wow vadeltachi, thanks for the great response! I have a much better understanding now.
  2nded, you give great advice.

To follow up, given the wide variety of coverages and rates available, should I be shopping my policies annually?

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I have liability on each property as well as an umbrella policy for $2million. It costs me around $200 a year and covers all the properties. From what I've been told this provides as much safety as the headache of holding properties in multiple LLCs. My city also requires annual inspections of each property, so I feel like that's extra security having on file that each property is kept up to code year after year. Were something to ever happen it would have to be because of my gross negligence I think to endure a lawsuit that would wipe out my umbrella policy.

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waikikisneakie said:   Just wondering what type of insurance everyone is using. In reading past posts, I've been seeing a lot of umbrella policies, which I understand is extra insurance added to your primary home owners. I've also read about Landlord policies. Which of the 3 do most of you have?
1. An Umbrella Policy on top of a standard homeowners policy
2. An Umbrella Policy added to a Landlord policy
3. Just a Landlord Policy

Or did I miss the mark altogether? Thanks in advance!

  
A couple of extra comments (based on my experience with State Farm, but I think these are general definitions):
(A) If you own in and live in a property, you have to get a homeowner's policy (unless you self-insure)
(B) If you own and rent out a property that somebody else lives in, you have to get landlord policy (also sometimes known as a "rental property" policy)
(C) In order to have an umbrella policy, you typically have to have at least one of the above (depends on the insurance co.)

So if you have any sort of rental property, you have to get a landlord policy (although the name of this policy may vary) - you can't get a homeowner's policy for a place you don't actually live in.  You can get umbrella on top of that.

So if own a rental property, you could do (B), or (B+C).  If you own a rental property and also live in a house that you own, you'd have (B+A) or (B+A+C).

I have (B+C), and then, since I live with extended family, I also have "Renter's" (different from "Rental Property") insurance, and car insurance, which lowers the premium on everything.

If you're willing to spend a couple hours on the phone, you can probably do all of this pricing stuff on your own.

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Thanks dpa789kd and aznshadoboy77. Once again FW has come through for me.

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JohnPaulB said:   
waikikisneakie said:   Wow vadeltachi, thanks for the great response! I have a much better understanding now.
  2nded, you give great advice.

To follow up, given the wide variety of coverages and rates available, should I be shopping my policies annually?

  You are both (all) welcome. It never hurts to shop around in the insurance market, There are all kinds of discounts, bundled offers, and affiliated prices that are not widely marketed. Many credit unions offer better insurance pricing, and the market can be hard or soft depending on how much insurers have paid out from year to year. And, if nothing else, bump up your deductibles to the highest level you can tolerate and self insure that amount. There is a huge difference in price from a $500 to $5000 dollar deductible. Keep in mind that 95 percent of policy holders never have a claim.

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aznshadoboy77 said:   
waikikisneakie said:   Just wondering what type of insurance everyone is using. In reading past posts, I've been seeing a lot of umbrella policies, which I understand is extra insurance added to your primary home owners. I've also read about Landlord policies. Which of the 3 do most of you have?
1. An Umbrella Policy on top of a standard homeowners policy
2. An Umbrella Policy added to a Landlord policy
3. Just a Landlord Policy

Or did I miss the mark altogether? Thanks in advance!

  
A couple of extra comments (based on my experience with State Farm, but I think these are general definitions):
(A) If you own in and live in a property, you have to get a homeowner's policy (unless you self-insure)
(B) If you own and rent out a property that somebody else lives in, you have to get landlord policy (also sometimes known as a "rental property" policy)
(C) In order to have an umbrella policy, you typically have to have at least one of the above (depends on the insurance co.)

So if you have any sort of rental property, you have to get a landlord policy (although the name of this policy may vary) - you can't get a homeowner's policy for a place you don't actually live in.  You can get umbrella on top of that.

So if own a rental property, you could do (B), or (B+C).  If you own a rental property and also live in a house that you own, you'd have (B+A) or (B+A+C).

I have (B+C), and then, since I live with extended family, I also have "Renter's" (different from "Rental Property") insurance, and car insurance, which lowers the premium on everything.

If you're willing to spend a couple hours on the phone, you can probably do all of this pricing stuff on your own.

  Just make sure your insurance broker understands the ownership of each property and only insures what's yours and your liability exposure. For example, if you live in a condo you want insurance for your personal property and liability, but not the building. if you own and rent a single-family house, you have to insure everything but the land. I can't tell you how many times I have seen single-family house coverage written on a rental condo. That mistake costs you, the landlord, your money and boosts the broker's commission. I also require all of my tenants obtain their own liability insurance and list me as an additional insured with subrogation rights to my carrier. Whether they insure their stuff is their business, but I always advise them to do so, and the requirement is included in the lease as a special signed addendum.

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I am stuck on 5 loans. Called many banks. In NJ. Any options?
 

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pcamuto said:   I am stuck on 5 loans. Called many banks. In NJ. Any options?
  What?

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pcamuto said:   I am stuck on 5 loans. Called many banks. In NJ. Any options?
  I cashed out a 401k, actually it was a 401k that was rolled over to an IRA.  I figured I would make more money in RE than stock market.  YMMV.  The penalty was about the same as interest on a loan, or course I wrote it off.

If you company offers it, you could also take out a loan on your 401k.

rated:
drew2money said:   
pcamuto said:   I am stuck on 5 loans. Called many banks. In NJ. Any options?
  I cashed out a 401k, actually it was a 401k that was rolled over to an IRA.  I figured I would make more money in RE than stock market.  YMMV.  The penalty was about the same as interest on a loan, or course I wrote it off.

If you company offers it, you could also take out a loan on your 401k.

  Not saying that's a bad idea, but it's certainly not for everyone. Diversifying investments is rarely a bad thing

rated:
dobby10 said:   
pcamuto said:   I am stuck on 5 loans. Called many banks. In NJ. Any options?
  What?

  30 year fixed conventional loans have a limit. Some banks don't go over 4. Others go up to 10.

rated:
Have you tried small community banks and credit unions?

rated:
drew2money said:   
pcamuto said:   I am stuck on 5 loans. Called many banks. In NJ. Any options?
  I cashed out a 401k, actually it was a 401k that was rolled over to an IRA.  I figured I would make more money in RE than stock market.  YMMV.  The penalty was about the same as interest on a loan, or course I wrote it off.

If you company offers it, you could also take out a loan on your 401k.

yeah, a hard money loan. plus you have to pay regular income tax on it. you must have been out of options and had something really good in your pocket. 

rated:
Found out something interesting from my mortgage officer. Apparently if you have too many mortgages (count, not DTI), you can't cashout refi, just refi to lower rate.

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rufflesinc said:   Found out something interesting from my mortgage officer. Apparently if you have too many mortgages (count, not DTI), you can't cashout refi, just refi to lower rate.
  Yes, I ran into that issue as well, AFTER paying for an appraisal.  Made the loan company reimburse me.   That is why I've been creative using my 401k and such.

rated:
is there a website that I can look up reviews of property management companies? Thanks.

rated:
So I am an attorney, but I don't do transactional stuff so I know very little (nothing) about this, plus I do litigation, so all I ever see is when stuff like this goes sideways, so I think it makes me overly skiddish. Here is our situation:

Wife and I owned outright a duplex in the city of St. Louis. The market for this kind of property in STL collapsed and just will not recover. About 3 years ago we transferred it to an LLC and were renting it out. After a number of issues (and a job relocation out of town) we decided to basically sell it for whatever we could get. The best "deal" was a contractor that had done some work on the property agreed to rent the whole thing from us for a reduced rate for 2 years and then buy it for an agreed upon price that had us only losing like 20-30K on the house in the end (he's renting it out and maintaining it, etc.). The agreed upon date for closing is about 1 year away.

The contractor contacted us to say that he is trying to figure out a way to keep his costs down and deposit requirements down with his bank and wants to do the transaction as a "refinance" with the bank and to do that, they are requiring a "seasoning" period where he's had his name on the title for 12 months before he can "refinance." We asked him to see if it would count if we just sold him the LLC (since all it owns is a bank account and the house) then he'd own the LLC that has owned the house for ~4 years at that point. They said that that would not work.

So, basically, he's asking to turn this into an owner-financed mortgage as far as I can tell. I don't think this is completely insane, but wanted to see what you guys thought and figure out what all I would need to do to get this right. My biggest concern is that basically, this house is a sizeable chunk of our assets and has just been an albatross of horrors for me and my wife and I just want, more than anything in this world, to not own this house anymore. The only real dangers I see in this are (1) obviously if he stops paying, then a foreclosure is much more difficult than an "eviction"; and (2) If I don't get the mortgage and lien correct, then the house becomes a recoverable asset in a lawsuit. I think I can probably get the paperwork right to not worry too much about #2 (but don't really know how to do this) and I'm willing to take the risk of #1 to be done with this thing. 

So, what am I missing? And what has been your experience with doing a transaction like this?

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corporateclaw said:   So I am an attorney, but I don't do transactional stuff so I know very little (nothing) about this, plus I do litigation, so all I ever see is when stuff like this goes sideways, so I think it makes me overly skiddish. Here is our situation:

Wife and I owned outright a duplex in the city of St. Louis. The market for this kind of property in STL collapsed and just will not recover. About 3 years ago we transferred it to an LLC and were renting it out. After a number of issues (and a job relocation out of town) we decided to basically sell it for whatever we could get. The best "deal" was a contractor that had done some work on the property agreed to rent the whole thing from us for a reduced rate for 2 years and then buy it for an agreed upon price that had us only losing like 20-30K on the house in the end (he's renting it out and maintaining it, etc.). The agreed upon date for closing is about 1 year away.

The contractor contacted us to say that he is trying to figure out a way to keep his costs down and deposit requirements down with his bank and wants to do the transaction as a "refinance" with the bank and to do that, they are requiring a "seasoning" period where he's had his name on the title for 12 months before he can "refinance." We asked him to see if it would count if we just sold him the LLC (since all it owns is a bank account and the house) then he'd own the LLC that has owned the house for ~4 years at that point. They said that that would not work.

So, basically, he's asking to turn this into an owner-financed mortgage as far as I can tell. I don't think this is completely insane, but wanted to see what you guys thought and figure out what all I would need to do to get this right. My biggest concern is that basically, this house is a sizeable chunk of our assets and has just been an albatross of horrors for me and my wife and I just want, more than anything in this world, to not own this house anymore. The only real dangers I see in this are (1) obviously if he stops paying, then a foreclosure is much more difficult than an "eviction"; and (2) If I don't get the mortgage and lien correct, then the house becomes a recoverable asset in a lawsuit. I think I can probably get the paperwork right to not worry too much about #2 (but don't really know how to do this) and I'm willing to take the risk of #1 to be done with this thing. 

So, what am I missing? And what has been your experience with doing a transaction like this?

  Why not do a deed for contract (or land contract in some states)?  Keep the title in your / LLC name and there should be little risk to you or the LLC. You can opt not to record anything now, and can do so when your purchaser completes the transaction in, say, a year. You should be able to charge some points and a nice interest rate -- far better than any bank on the same asset. And, a foreclosure is not to be feared. Check MO to see whether judicial foreclosures are required, if need be. Otherwise, it's just a matter of either you or the trustee following the rules and recovering the asset in a month or two. The borrower may have some redemption rights, perhaps as set forth in your contract or by law, but that's all the more reason for him to perform.  At worst, you will have earned some interest, some points and will end up with the property if the borrower defaults. Just protect yourself, contractually, against any subordinate liens or judgments the contractor may cause to be liened against the property. Another option is to shop around for bank / CU lenders who are not so particular, 

rated:
vadeltachi said:   
 
  Why not do a deed for contract (or land contract in some states)?  Keep the title in your / LLC name and there should be little risk to you or the LLC. You can opt not to record anything now, and can do so when your purchaser completes the transaction in, say, a year. You should be able to charge some points and a nice interest rate -- far better than any bank on the same asset. And, a foreclosure is not to be feared. Check MO to see whether judicial foreclosures are required, if need be. Otherwise, it's just a matter of either you or the trustee following the rules and recovering the asset in a month or two. The borrower may have some redemption rights, perhaps as set forth in your contract or by law, but that's all the more reason for him to perform.  At worst, you will have earned some interest, some points and will end up with the property if the borrower defaults. Just protect yourself, contractually, against any subordinate liens or judgments the contractor may cause to be liened against the property. Another option is to shop around for bank / CU lenders who are not so particular, 

  
Thank you, you do provide a lot of really helpful and thoughtful advice in this thread. Now that you mention it, I think we actually did do it as a land contract (whatever it is called in MO). My wife handled a lot of it and I'm not super familiar with the terms. I will probably need to double check. 

I think that that does not get around the problem of a "refinance" with his bank needing his name on the title. In the end I think this is just a ploy on the buyer's end to save some money at our expense, but it sounds like you are saying that some banks/CU might not require this. That is good. I called a guy at PNC bank that has been very helpful for me in the past and he's got a commerical guy calling me back later. We'll see what they say.

rated:
Yeah, I was going to say... you already have a contract for deed, provided your outlined deal is in writing. OP, what prices are we talking about here, for down payment etc... Your buyer should already be profiting from the rent he gets. I assume he rents the property in his name. Shouldn't he have saved for this over the course... I would not assist him further. BTW, you'd likely have to legally foreclose on him at this point. Your buyer has "equitable title" in the property, you cant simply evict etc... though he may not be thinking this way and its for him to argue before a court, but could happen. Hell he is even renting it out as if owner.
I am going through similar situation and by next year my buyer will likely be turning over property to me. In meantime it is listed for sale. I know you dont want it back... your buyer was ready, willing, but not able, to finalize deal.

rated:
JaxFL said:   Yeah, I was going to say... you already have a contract for deed, provided your outlined deal is in writing. OP, what prices are we talking about here, for down payment etc... Your buyer should already be profiting from the rent he gets. I assume he rents the property in his name. Shouldn't he have saved for this over the course... I would not assist him further. BTW, you'd likely have to legally foreclose on him at this point. Your buyer has "equitable title" in the property, you cant simply evict etc... though he may not be thinking this way and its for him to argue before a court, but could happen. Hell he is even renting it out as if owner.
I am going through similar situation and by next year my buyer will likely be turning over property to me. In meantime it is listed for sale. I know you dont want it back... your buyer was ready, willing, but not able, to finalize deal.

  
Yeah, it's that weird situation where I agree I should probably not be helping him out further, and this is "on him" but he's not thinking of it that way (odd that he's so willing to bend to the random desires of the bank, but not use when we are "the bank"). I think it's just me clouding my judgment based on wanting this to go through and be done with it. I guess after I talk with the other bank and see what they think, I will have to decide if I'm going to take a stand or crumble (I just hate that it's usually crumble).

EDIT: and yeah, I don't know what prices we are talking about. I've asked a couple times and he has never responded to that. The fact that he has not responded to it makes me think it's pretty small.

EDIT2: I'm not entirely sure but we were operating in profitable territory in years where fixing things didn't get too out of hand and since he's a contractor and can do it himself, I'd be shocked if he's not making money. I think part of this is that somehow STL's market for this type of property has managed to continue to go down over the last year and maybe he's realizing that and freaking out a bit. Whereas we all thought it would go up a bit over these 2 years I think -- I mean, at least I did and figured that was part of the reason he was doing it.

rated:
corporateclaw said:   So I am an attorney, but I don't do transactional stuff so I know very little (nothing) about this, plus I do litigation, so all I ever see is when stuff like this goes sideways, so I think it makes me overly skiddish. Here is our situation:

Wife and I owned outright a duplex in the city of St. Louis. The market for this kind of property in STL collapsed and just will not recover. About 3 years ago we transferred it to an LLC and were renting it out. After a number of issues (and a job relocation out of town) we decided to basically sell it for whatever we could get. The best "deal" was a contractor that had done some work on the property agreed to rent the whole thing from us for a reduced rate for 2 years and then buy it for an agreed upon price that had us only losing like 20-30K on the house in the end (he's renting it out and maintaining it, etc.). The agreed upon date for closing is about 1 year away.

The contractor contacted us to say that he is trying to figure out a way to keep his costs down and deposit requirements down with his bank and wants to do the transaction as a "refinance" with the bank and to do that, they are requiring a "seasoning" period where he's had his name on the title for 12 months before he can "refinance." We asked him to see if it would count if we just sold him the LLC (since all it owns is a bank account and the house) then he'd own the LLC that has owned the house for ~4 years at that point. They said that that would not work.

So, basically, he's asking to turn this into an owner-financed mortgage as far as I can tell. I don't think this is completely insane, but wanted to see what you guys thought and figure out what all I would need to do to get this right. My biggest concern is that basically, this house is a sizeable chunk of our assets and has just been an albatross of horrors for me and my wife and I just want, more than anything in this world, to not own this house anymore. The only real dangers I see in this are (1) obviously if he stops paying, then a foreclosure is much more difficult than an "eviction"; and (2) If I don't get the mortgage and lien correct, then the house becomes a recoverable asset in a lawsuit. I think I can probably get the paperwork right to not worry too much about #2 (but don't really know how to do this) and I'm willing to take the risk of #1 to be done with this thing. 

So, what am I missing? And what has been your experience with doing a transaction like this?

  
I'm not really sure this even makes that much sense. The reason the costs of a refi are lower is because you don't have purchase price fees involved such as a re-issue on a title policy and no owner's coverage on title insurance. Plus there would be no deed recording fees, just the mortgage recording. As him to show you a GFE with the refi vs the purchase numbers. To get to the refi state, you'd have to pay those fees to begin with.  I don't think it's a big amount and if you're feeling nice, maybe you just offer to make up the difference or if it's just a few hundred, not even bother because what he's asking is somewhat of a big project for your end.

My other guess is that he's trying to do a cashout refi and you need to have one year seasoning before you can do it, otherwise they go by the purchase price. Sounds like he's trying to have his cake and eat it too. He's basically trying to stack the deck so that everything is in his favor and you want to dump the place so maybe it's in your interest to help him. 

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