Real Estate Investing #14: reducing costs
December 12, 2016
I can’t make a decision on my property manager just yet, I need to run some projections on the potential costs and benefits, so I moved along to do quick research on the other list items.
This turned out to be a great idea.
Refinancing! or not.
I ran some initial numbers with Quicken Loans, they wanted to give me a 30-year-fixed loan with $4899 in closing costs and 2 points for a rate of 3.625. I’d save $238 monthly, but with the closing costs, it’d take 21 months to break even.
My current company offered me a 15 year loan, 4.25 / 4.38 with 2 discount points, and the monthly payment goes up by $247. Not the goal.
They also offered a 20 year loan, 4.375 / 4.25 points with 2 discount points, and the monthly payment goes up by $250. Also not the goal. These loan costs are before we calculate the other costs of refinancing: an appraisal running somewhere between $575-625, and closing costs.
Overall, it seems like it’s just not the time for refinancing.
New home warranty
My old home warranty company was bought out by American Home Shield who tried to increase the premiums by 20% at the time of renewal. Even if my profit margins weren’t quite slim, that wouldn’t be acceptable.
My property manager found me a second policy with First American Home Buyers Protection Corporation, at a lower rate than I was paying before, for just about the same coverage and lower call-out costs. Savings: $200 for the annual policy, and $10 off each call-out.
New property insurance
I’m usually all about automating bill-paying so I went for holding the property taxes and hazard insurance in escrow. Pay three bills in one, what’s not to love?
Here’s what – I didn’t see the bill, therefore I didn’t think about it much, therefore I didn’t put it on the list of bills to attack. It did catch my attention briefly when the bill went up bit at renewal time, then it slipped back off my plate shortly after.
No more!
In a burst of productivity, I have …
- gotten a quote from a new insurance company,
- started a new policy
- submitted a request to remove the property taxes from escrow,
- had the new company send a cancellation notice to my old insurance company to avoid having to tell them that I’m dumping them, but we’ll see if they make me talk to them anyway.
The new insurance agent was very responsive by email, exactly how I like doing business, which meant I wrapped the whole process from quote to finish in 9 days.
With any luck, I’ll come to a decision about the property manager soon and then I’ll have shelved a year’s worth of administrative maintenance stuff – woo!
The unfortunate thing is that this stuff always occurs to me at the end of the year. Because what better time is there for sorting out all your paperwork and paying big lump sums like insurance policies then at the end of a long year? The only good thing is that, for the rental at least, I keep all the expenses and income in a separate account so it doesn’t impact our personal finances.
It’s been nearly four years since I evaluated my property and auto insurance coverage. Based on what I found then, I doubt I could see any savings in doing a similar evaluation. I’ve been with the same insurance company for auto and contents (first renter’s insurance and then homeowners’s insurance) for so long that they give me really good rates based on my history and claim-free status. I should still make a note to check in a few month. My annual homeowner’s premium will be due in July next year so I should have it figured out by then.
In addition to auto and homeowner’s insurance I also have an umbrella policy through the same company. I have LTC insurance through another company. I’ve got a lot of insurance, but no life insurance since I have no dependents to worry about.
I’d be interested to see whether they give you the best possible rates when you check back!
Would you tell me about your LTC insurance? I keep getting bogged down before I can do that research.
We are working on combining my husband’s renters insurance coverage into my condo owners policy. We will do that once the postnuptial agreement is signed. We are using this opportunity to make sure we have enough coverage too. My engagement ring was expensive enough that we decided to insure it separately and now I feel like I can take it off and leave it at home if we go hiking or something without worrying completely about losing it.
Are you retaining the renters insurance or are you just increasing the value of the condo owners’ policy to cover his possessions?
I meant to get my ring insured but I’m not positive whether it’s actually worth the premiums.
We are combining the personal property coverage into the condo policy. For the jewelry policy – it cost a bit less than a cent per dollar of coverage for the year, at least at the dollar amount that we were covering. So a $1000 ring might cost $10 per year to insure with no deductible. I looked at an online jewelry insurance place and my insurance company. Make sure it’s not a rider though because if you ever make a claim, you would lose your claim free homeowners insurance discount.
Good luck with the property manager hunt. I think you just have to try until you find a good one. We had acceptable managers, but not a really great one. That’s why I’m doing it myself now. I guess I’m a control freak…
Thank you! If this were a local property, I might be tempted to do it myself but in a lot of ways I’m glad that I literally cannot. It costs me a not-insignificant amount per year but it’s still worth being able to have the rental in addition to the full time jobs, a dog, and a toddler.
Fingers crossed for a good new PM! (Surely at least one exists.)
We bought our car right at the turn of the year so annoyingly, our policy renews on the 30th – will be paying that in the next week or two. We have stuck with the same company for years because of our history – had a series of claims that would have made it a huge hassle even to go through the process of getting accurate quotes from other people, and now we’ve earned a tidy no claims bonus plus have the bundling discount. I have life/income insurance through my mortgage bank’s insurance arm (a requirement to hold 1 insurance product with them to get the loan deal I have) and that will renew in March – I need to check on the details of that carefully. Quite keen to ensure it covers redundancy as I’m more worried about that than disability. House insurance will also renew then but we won’t have done any renovations at that point so I won’t worry about reevaluating the covered amount until after that happens.
Thank you!
Oh I just hate the end of the year bills. We can handle it but it’s still really annoying. I didn’t know you specifically got a no-claims bonus, that’s neat.
We carry home, auto, disability and life insurance as independent policies (ie, not related to job benefits).
The last time we price-checked auto and home insurance was probably four years ago. I’ve thought about researching it, but we are very happy with our local agent and the service we get, and I’m afraid if we went with a big national company to save a few bucks we wouldn’t have someone who is as responsive. I’m not always looking for the cheapest price anymore – I think sticking with a mechanic or insurance agent or other service professional over the long haul can save money in its own way.
I’d been thinking about getting PiC an independent life insurance policy too, but his work subsidizes such a good amount of his policy there I’ve hesitated to commit more of our money.
Yes, if you have a good local agent or mechanic, they can really look out for you.