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Real Estate Investor Blog
Boise area real estate and rental management blog
Cover Your Assets

Unlike stocks, real estate is an insurable investment.  In June, Renae Goodwin of Payne West Insurnce shared some solid advice with the AVID Investors Club, when it comes to covering your assets:

 

Make sure the name on the insurance policy matches the name on title.  Failire to do this is the #1 mistake made by most people who have properties owned by an LLC, Trust, or other entities.  Reminder - the insured name must match what's on title.  It's a sad day when a claim is filed only to find out it will not be paid out ecause the names don't match.

 

Air BnBs and short term rentals:  It's important to have "Proper" insurance, which can be costly, or add a less-costly endorsement for short-term rentals or home sharing (which only some insurance companies will provide).  This would apply to someone who is renting rooms.  We recommend speaking to your insurance carrier if you have a short term rental.

 

Add personal prioperty insurance for furnished rentals.  Some policies do not include things like appliances or other personal belongings.  Check with your provider to make sure you have these items covered.

 

Replacement costs are rising.  Re-build costs could be double what you'd think, especially if you have $150/sf in mind.  It's a good practice to review your policy annually or at leaast every couple of years to make sure you have the right coverage!  Ask about "Enhanced replacement cost" that provides coverage above your limit if you carry at least the amount of coverage that's recommended.

 

Liability is infinite, where propety loss is infinite.  Loss of poperty may be limited to its replacement value, however there is no limit to an attorney can put on a piece of paper when suing all parties who were near an incident, like a dog bite.

 

Consider Umbrella Insurance.  At this time, an umbrella insurance policy is the least costly, and well worth checking it out!  Just remember, one million dollars is the new one hundred thousand, so be sure you are covering your net worth.

 

Renters Insurance.  Require renters to carry renters insurance.  This protects both the landlord/investor and your renter/tenant.  Renters insurance ensures their personal belonging are covered should something happen within the rental, theft, or damage in another way.  The Landlord's property insurance does not cover tenant's personal items.

 

Relationships are key.  Just like with real estate, having a solid relationship with your insurance agent is vitaal.  You want a partner who has your back and is looking out for your best interests.  If you have to file a claim, it's great to know your insruance agent will go to bat for you!

 

Two and you're out.  In today's world if you file two claims, you run the risk of being released from your insurance company or at the very least, driving your premium up.  One way to avoid the temptation of filing unnecessaary claimes is to have a high deductible.

 

Contact your insurance representative to make sure you're covered.  If you don't know your agent's name, call Renae Goddwin at Payne West.  Spending a little bit of time to ensure you haave the right coverage is worh it!

 

Your Boise Investment Properties Team with Swope Investment Properties 

 

Stacy McBain, Associate Broker, Swope Investment Properties

Tony A Drost, Associate Broker, Swope Investment Properties

Leslie Halvorson, Licensed Realtor and Transaction Coordinator

 

 

 

 

 

 

 

 

 

 

 

 

Boise's Fourplex Market is Strong

The Ada County, which includes Idaho cities of Boise, Meridian, Eagle, Kuna, and Star, fourplex capitalization rates have increased.  Since October of 2021, Ada County fourplex cap rates have slowly, but steadily, increased by 43 basis points, which pushed cap rates out of the 3's and into the 4's.  July's traialing 6-month average cap rate was 4.25%.  As cap rates increased, we typically see falling prices, but the Boise area multi-famiy rents, for now, continue to support values.  The current Gross Rent Multiplier is 205.  You can use GRM to get a quick ballpark value by taking the gross monthly rents times the GRM.  If rents are $1,450 per unit per month, the calculation would be ($1,450*4)*205=$1,189,000.

 

Although rising interest rates have some investors sitting back and watching, the low inventory is keeping the absorption levels at about a month in supply.  Some might strategize that the time to buy is precisely when other investors are on the sidelines, waiting.

 

The aaverage days-on-market are just under 18 days and the average fourplex in the Boise area is slling for over $900,000., with newer buildings selling for higher.

 

Your Boise Investment Properties Team with Swope Investment Properties

 

Tony A Drost, Associate Broker, Swope Investment Properties

Stacy McBain, Associate Broker, Swope Investment Properties

Leslie Halvorson, Licensed Realtor and Transaction Coordinator

A Candid Conversation - How's the market?

The market has been variable. I have a sense that we're going to see a correction. I don't think it will crash. I wouldn't mind if it simply flattened out. How many years in a row can double digit appreciation be sustained?

 

People seem to be sensing a market shift, which has started stimulating more seller phone calls than buyer calls right now.

 

Increasing Interest Rates - The drastic, and unpredictable changes in interest rates should affect the market, at least temporarily. And they will affect payments, cash flow and buying power.

 

Should you buy now? Nobody knows the future. If the right property comes along that makes sense today, and you're in the market, and you can afford it, I would not be inclined to wait because we don't know what is going to happen. With interest rates climbing, it's possible your PITI payment would go up, even if the purchase price went down. (PITI: Principal, Interest, Taxes, Insurance)

 

If I was a buyer right now, and the right property came along, I would buy. In fact I am a buyer right now.  Stacy and I just closed on a property last month and I have 3 more that that close this fall.

 

On Selling - I look at the performance for investment properties. If I have doubled or tripled my money, I consider that good performance. It's hard to complain about that. Sure I'd have to figure out what to do with my money. I don't mind sitting on cashed out funds should the market change, so it's available to reinvest if the market drops. Both Stacy and I sold properties last year because they doubled and tripled our money.

 

You have to look at your own situation. It has been a Sellers market for a while. That's a good time to look at what would be harder to sell in a down market, and to cash out the equity you've earned. So if you have had a challenging property, I’d probably cash out. So far, it's still the market to sell any more challenging properties...maybe. That could change.

 

Market changes often take some time to happen and then more time to change again. If you have a property you might consider selling in the next couple years, this could be the time to do it. You have to look at your whole strategy.

 

What NOT to do - We can learn a lot from how to lose money: buy today, then give up and sell if values tank.  Our advice- always structure a deal, with the right down payment, so that you can wait out any downturns in the market. If it's a rental property, you ideally will be cash flowing as you wait.

 

Change is eminent - no market lasts forever, and we've had quite a long run of a Seller's market. Values, rents and vacancy go up and down, and are influenced by the laws of supply and demand.

 

Instead of promoting buying or selling, I like to ask my clients about their economic outlook and their real estate goals, and try to present ideas that support that.

 

What would we do? (What do we do)
-Consider your overall plan, needs and goals
-Buy if it's a good property that you want or need, and if you can afford it -Structure your down payment so that you can afford to hold your purchase -Hold onto it in markets that favor Buyers
-Buy investment properties if the current market softens
-Sell in markets that favor Sellers or in balanced markets

 

Your Boise Investment Properties Team with Swope Investment Properties

Stacy McBain, Associate Broker

Tony A Drost, Associate Broker

Leslie Halvorson, Realtor

 

 

Boise Assessed Property Values Continue to Rise

The 2022 property tax assessments will be headed out to all Ada County (Boise, Meridian, Kuna, Eagle, and Star) real estate owners soon and as real estaate values have continued to increase and so will your assessments.

 

For investment properties we expect to see an increase in assess value by about 30%. The assessors have seen an approximately 20% increase in rents and cap rates right around 5%. Remember this is always calculated as of January 1st, because we have seen those cap rates continue to be compressed since then.

 

Single family homes will see increases in the 30-35% range and this is for all areas of town. Of course there are always going to be outliers in there, so yours may be a little higher or lower than these numbers. The biggest increases are going to be in bare land, which will see increases in the 40-60% range.

 

If you feel your assessment is too high, please feel free to call your friendly Swope agent and we can help you take a look and make a decisions if you should appeal or not.

 

As always, if you are going to appeal your assessment it is best to get it in sooner than later. Do not wait! Your assessors name and phone number are on the bottom of the statement and you can contact them directly, or ask us and we would be happy help you. You can do an informal appeal prior to the 27th of June, but again, getting it in early gives you a better chance of avoiding a formal appeal. If you wait until just before the 27th you must do a formal appeal and go before the board to present your information. Please feel free to contact an agent here at Swope and we would be happy to assist you in any way we can!

 

Shane Brown, Realtor

Swope Investment Properties

Preparing for 3rd Party Professional Property Inspections

We have worked with Boise's AAD Inspection for almost 30 years now.  They do a great job with their inspections, regardless if the property is a single family or multi-family, such as apartments or a fourplex.  AAD also devotes a lot of time educating buyers, sellers, and their agents.  Recently AAD released an article about how a seller can prepare for a property inspection, which we have posted (with minor changes).

 

PREPARING FOR A HOME INSPECTION

 

The following suggestions can help facilitate the process of having your home professionally inspected – making it easier for all involved, including the occupants.


Attendance:


Please vacate the property during the inspection, if at all possible. This gives the inspector and buyers (together with their Realtor) a chance to speak freely without anyone else listening in on their conversations.


If it’s not reasonably possible to leave the property during the inspection, please avoid interacting with the property inspector as much as possible, unless the inspector has questions. (Please understand and accept that the people actually paying for the inspection and report would usually prefer to receive
the information and have time to digest it before other parties receive the same information.)


Please either remove pets from the property, or secure them within kennels.


Providing Access:


The following places or components should be made accessible without needing to use keys or needing to move personal property:


All attic accesses


     All crawlspace accesses


     All electrical panels and/or fuse boxes

 

     All shops, garages, additional living spaces, and outbuildings.

 


What to Expect:

 

     The inspector should be the ONLY person touching and/or operating components and systems on and in the property.

 

     No personal property will be touched (unless to gain access to items or places that need to be inspected.

 

     Any and all other people (such as buyers and/or their Realtors) will be asked to refrain from touching or operating any part of the property.

 

     The inspector will likely lift and/or temporarily move all loose rugs to inspect under them.

 

     The inspector will operate the heating and cooling systems, removing panel covers and air filters for inspection.

 

     The inspector will run both hot and cold water through all plumbing fixtures just long enough to verify that they are correctly connected. Subsequently, only a minimal flow of cold water will be run through every sink or vanity fixture and a full flow through only showerheads for up to a couple hours (but only while the inspector remains inside the dwelling to watch for possible leaks or overflows).


     The inspector will operate all light fixtures and switches.


     The inspector will operate all windows and window coverings.


     The inspector will operate all major kitchen appliances and exhaust fans that are physically attached to the property.


     The inspector may operate the sprinkler system (if that service is contracted by the sellers).


     The inspector will walk upon all roof surfaces if safe to do so without fear of personal injury or damage to the roofing materials.

 

     The inspector will enter and crawl through all physically accessible attics over living spaces and crawl spaces under the dwelling.


Additional Thoughts:


     The inspector is not at liberty to discuss any findings with the sellers, occupants, or their representatives. However, if any discoveries or issues needing immediate attention for the safety of the occupants or the continued integrity of the property are found, the occupants and/or the listing agent will be made immediately aware of them.


     If any particular item or system in or on the property is not working, should not be operated, or needs special care, please inform the inspector through notes left on the premises, or by other means.


     The sellers might not ever see the entire report. However, if any inspection issues are brought to the negotiating table, the seller has the right to receive exact copies of at least those portions of the inspection report that address those issues. (This part of the Purchase and Sale Agreement contract protects the sellers from inaccurate conveyance of inspection information.)

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208 794-6424

SWOPE INVESTMENT PROPERTIES

1161 W River St., Suite 160 Boise, Idaho 83702
PH: 208 794-6424 | Fax: 208-385-7240