Monday, October 28, 2013

Not covered for flood related damage to your home or business? Are you sure? Really?

A friend of mine in Lyons, CO took it on the chin recently when water poured in through his windows to fill his basement during the catastrophic flooding in Boulder County.  He called his insurance agent, and was told that he didn't have flood insurance.  Too bad for him.

But his agent asked him if he had a sump pump clause in his policy, and looked it up for him.  He did, and the agent told him that the company would send him a check right away.

"But I don't even have a sump pump," he replied.

"Doesn't matter.  You've been paying the premium, so we're sending you a check."

Sometimes it doesn't make sense.  Sometimes it seems even to be dumb.  But it happens.

Read the following well research and written article about insurance and the recent flooding.  Credit for the work is given at the end of the article, complete with contact information if you need it.

“No flood-insurance coverage? Don’t be so sure!” Despite what you may have been told, there may be insurance coverage available for the damage your property experienced from the recent rains that have devastated many parts of Colorado over the past weeks.
Many believe that if you do not have flood insurance you cannot recover from your insurance company. Some already may have been told in writing or over the phone that their insurance companies are denying them coverage for water-related damage. In Colorado, for many people and businesses, this simply should not be the case.
The truth is that each loss or claim is different and must be examined carefully and independently. Coverage depends on your policy and the facts surrounding how and why water entered your property.
It is true that many policies contain language that purports to exclude coverage for water damage or flooding. However, what constitutes water damage or flooding may depend on how the policy is specifically worded. Each policy must be carefully read and compared with the specific origin or path that the water took onto the covered property.
Insurance companies, especially in instances of mass claims, frequently do not have the time, capability or motivation to accurately make the fact specific determinations required for fair claims decisions. Sometimes, the company denial is wrong.
In one case, for example, the Colorado Supreme Court struck down an insurance company’s denial where a property experienced significant water damage from a heavy spring runoff. In that case, the insurance company denied coverage based on a clause that excluded coverage for “water damage” that resulted from “surface water.” The court determined that the spring runoff entered the property because the natural path of water was diverted because of manmade trenches. As a result, the court decided that the water damage did not fit the policy exclusion and awarded coverage to the policyholder.
Insurance denials can also frequently result from a misunderstanding or miscommunication as to the cause or source of the water damage. When reporting a water loss to an insurance company among hundreds of other claims, it is easy for the insurance company to assume that your damage is directly related to the floodwaters. But, water damage may be the result of a covered event such as the failure of plumbing components, such as sump pumps, drains or gutters.
Many policies cover this type of damage. So, it is imperative to either accurately report these facts to your carrier or, at the very least, inform the insurance company that you do not know the cause or source of the water and reserve your right to provide additional information as it becomes known. Frequently, experts are required to evaluate the damage and determine the actual source or sources of water intrusion.
Far too often, policy holders are too quick to report flood damage, not knowing that the insurance company may deny coverage before a full investigation can be completed.

Even if it is ultimately determined that there is no coverage under your own policy and the insurance company has properly denied coverage, there may be other sources of financial recovery. Water intrusion may be attributable to third parties such as adjacent property owners if their failure to maintain their property caused the water to flow onto your property. Sometimes, water damage can be the result of improper construction methods, which could implicate liability for the property builder or developer.
In instances of commercial or rental properties, the landlord may bear some responsibility for the damage experienced by its tenants and vice versa. Many people may find some monetary compensation from the Federal Emergency Management Agency, the state of Colorado, nonprofit groups or charities. It is important to explore all of the potential areas of recovery so that the rebuilding may begin.
With the enormous scope of damage that our communities have experienced and the daunting tasks ahead, it is vital to know that you are not alone. Calling on a third party such as an attorney, engineer, or an uninterested insurance professional can be an important step to determining your rights and the best first step to recovery.    
The source of this article is Boulder County Business Report, Oct. 11-24.2013.  Thanks very much to BCBR for the use of this article.  George V. Berg Jr. is managing and founding partner of the Berg Hill Greenleaf & Ruscitti LLP law firm in Boulder. He may be reached at 303-402-1600.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303-541-1920 office
303-859-4467 mobile

Wednesday, October 23, 2013

Proof: Solar Panels Add Value to your Home

The proof is in the study.  Solar energy adds value to your home.  But it's not all roses and good wine yet.  I've got good news and bad news.

When I was President of the Boulder Area REALTOR Association, one of my objectives was to encourage a greener practice opportunity for brokers who wanted to help out the environment a bit.  As part of that work, one of the things I did was to participate in the Governor's Energy Office Committee to Green the MLS's.  I think we did some good work.  It required and structured a few energy consumption related data points in the MLS's around the state that would allow brokers and appraisers to prove to homeowners and buyers just what the additional value might be.

That effort has now seen some return on the invested time.  A new survey just came out that details how much, if any, additional value a homeowner might expect when selling his or her home after investing in solar energy panels.

To read the entire study, click here.

The long and short of it, though, is that the study found that adding solar to your home improves the value in the $1,400 - 2,600 range per kilowatt hour installed.  Since you acted on that decision, your home is worth more to a buyer, and time on the market on the average is less.  That's the good news.

Now the bad news.  According to the data, if you hire a reputable company to install solar, assuming no grants or tax credits of any kind, the retail price will be more than what you gain on the value of your home.  The estimated cost today is between $3,000 - 4,000 per kilowatt hour.  Again, that assumes you pay for it all, and you own the system.

Of course, your cost for electricity before you sell your home will be reduced significantly, as you don't pay for electricity you generate from your panels.

So there it is, real data-based proof.  Again for the detail artists in the room, I encourage you to read the entire study to get the real numbers and methodology.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.541.1920 office
303.859.4467 mobile

Monday, September 30, 2013

I want a good positive cash flow, and I want it NOW!

I got a great question from a client last week.  He came to me to talk about buying a rental property, and after looking over the cash flow potentials for a number of properties, he wasn’t finding what he wanted.

“My dad has been buying rentals for years, and he tells me that he’s making a few hundred dollars a month on everything he has.  Why can’t I find something that has a good positive cash flow?”

I asked him a few more questions, and then showed him the true greatest thing about owning a rental.  It gets better over time, and there’s a simple arithmetic reason for it.

Here’s the simple explanation.  When you buy a property to rent out to someone else, you just bought a small business.  You invested money at the beginning, you may add additional money at some time in the future to improve the property or cover a short month or two, you take some nice tax benefits along the way, and in the end, you hope the business you own is worth more money than you have in it.

In that you own a business, you have a cash flow.  As in every business, money takes two forms:  you have income, and you have expenses.  When you subtract the expenses from the income, you have your cash flow.
Let’s look a bit more closely.  You have income, almost always and almost entirely in the form of rent.  Your tenant pays you rent.  Once in awhile, you have income from the laundry machines or a parking space, but it’s basically all rent.
Expenses are a bit more complicated.  You have yearly property taxes to pay.  If you have any sense about what you’re doing, you pay for an insurance policy to cover losses from fire, water intrusion, liability from a law suit when someone falls down your staircase, etc.  Maintenance costs cover the costs of cleaning up between tenants, mowing the lawn, new flooring occasionally, a new roof every other decade, and whatever else comes up.  You may pay for the use of water and sewer, trash removal, and possibly even heating and electricity.  Your manager, if you have one, doesn’t work for free either.
The big one, though, is the mortgage.  If you have one, it’s by far your biggest monthly expense.  Statistically, most landlords pay between 50-75% of their expenses in principal and interest on a mortgage. 
Now step back and look at the big picture, this time taking inflation into account.  You don’t own this small business in a vacuum.
Rents don’t stay where they are over the years.  They change.  Usually, they go up.  That’s called inflation.  For this example, let’s say your rental income this year is $10,000.  If the rate of inflation is around 3%, the rent for next year will increase about 3%.  ALL of the rent.  You can expect your rental income next year to be $10,300.
Your expenses will also increase about 3%.  The property taxes, insurance, all of your maintenance costs and utilities – ALL of them will increase about 3% in an average year.
Except one.  The biggest expense you have, your mortgage payment, will stay the same.  If you have a 15- or 30-year fixed rate mortgage, the principal and interest payment will stay the same.  And again, that’s the lion’s share of your expenses. 
Big picture again.  You have income and expenses.  On a yearly basis, 100% of your income will increase.  Less than half of your expenses will increase.  That means that every year, you make more money in the form of cash flow. 
Turns out that my client’s father had purchased all of his real estate at a break even or small   positive cash flow at the times that he bought them.  After a number of years, they were all making him nice positive incomes in the average month.
It’s all in the arithmetic.  Fact is that most of the time, real estate as an investment, taken over time, just keeps getting better.

Let me know when you need me.  I'm always here for you.

Enjoy the day,
303.541.1920 office
303.859.4467 mobile


Tuesday, March 26, 2013

Weather Report for the Nation

Helena Talbot has a real estate blog that I like to read on occasion.  One reason.  Common sense.  She has it.

But I have to be careful.  I trust her information because she's obviously a real professional.  But she markets real estate in Loudoun County in northern Virginia, and what she writes sometimes will have nothing to do with what's going on in Boulder County, Colorado.

One of her latest blogs is about one of the most common sense ideas I've ever seen, and about which I've written many times over the years.  Simply put, you cannot write one weather report for the nation.

Ms. Talbot points out that all real estate value is local, and that watching the national trends from any source will be misleading nearly every time.  The home sales market (right along with the weather) will be different in the next state, next county, adjacent town or large subdivision just out of town, in fact, the next block.  I've seen time after time a perfectly good home sit on the market at a good price and in good condition, while homes are selling two blocks to the north.  Who can explain it? 

The Takeaway here is to consult with a very good professional person, somebody who's willing to do the research on a very local level.  If you don't see it all on your kitchen table, he or she didn't do it.  Look at the trending in your neighborhood over the past year, six months, three months, and two weeks.  Review the absorption rates (how many homes are selling each month, compared to how many are on the market now) to determine how long they'd all take to sell if no one else entered the market.  Are values trending up or down?  How much?  What have the successful sellers been doing to make it happen for them?

As a Seller, you're about ready to hire a broker to manage the marketing and sale of a tremendous asset, and your money, your time and your levels of stress will be impacted significantly by both the process and the outcome. 

Fact is, the weather in New York City on rare occasions will be about the same as Miami.  Very rare occasions.  Very, very rare.  And when it happens, it's sheer coincidence. 

I like making informed decisions.  Things just turn out better when I do.  Meanwhile, I'll continue to peruse the markets around the country, noting that some of it relates nicely to us here in the Boulder area, and some is just for comparison.

Call me as you need.  I'm always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.541.1920 office
303.859.4467 mobile

For the latest on real estate, and everything having to do with it, go to Mike Moger's Business Facebook page.  I'd love to hear your thoughts.

Tuesday, March 19, 2013

Boulder is in the Black

What's your home worth?  Everybody wants to know.

Fact is, the only way to find out is to invite me over -- and I'm happy to do this all for free -- and show me what you have in your home currently, and let me compare it to the marketplace.

Short of that, there are the Appreciation Charts, which are available on the Internet to anyone interested.

If you remember buying your home, these charts will give you an arithmetically valid way to value what you have now.  Just start with the purchase price of your home when you bought it, and multiply it by the yearly increases or decreases in value in your community.  Your arithmetic exercise may come close to real value.

I said you may come close.  For curiosity, this is a fun game.  If you're planning to sell, don't even consider this as valid. 

But for fun, let's do the math.  The following is the current chart for the MSA (metropolitan statistical area) the federal government calls "Boulder". 


If you bought your home in late 2000, just multiply the average increase in 2001, then 2002, etc. until you come to today.

And again, this may be close and it may not.  I've always said that you can't write a weather report for the whole nation.  Real estate is the same way.  It may be increasing significantly three blocks north of you, and your neighborhood remains motionless.  The good news is that the following year may be the opposite.

Lesson to take away -- Call me.  I'm happy to stop by.  As long as you're curious, you may as well get the accurate truth.

I'm always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.541.1920 office
303.859.4467 mobile

Saturday, February 2, 2013

Home Office Deduction just got a little easier

Tax time!  Write off about four or five days to gather all the receipts and hand-written notes to yourself, so that your accountant can come close to organizing all those numbers into a coherent tax return for you.

OK, so most people are not thrilled with the need to make all this happen.  But this time of year warms my heart, because there’s always some good news to come out of the inevitable list of tax law changes.

Here’s a good one.  Beginning with the 2013 return (which you will file in 2014), the home office deduction will be a lot easier.  A new rule, never before seen by an accountant in this country, reads that you do not have to gather all of the costs associated with owning or renting your home in order to take advantage of the space you use for your business.  No more utility and service costs, no mortgage info or insurance premiums -- nothing.  Just tell your accountant how much space you use.

True.  The new rule allows you to multiply the number of square feet you use solely for business, up to 300 total, by $5.00.  That’s your allowable deduction, if you choose.  Maximum 300 feet x $5 per foot equals a $1,500 home office deduction.  That’s it.

Of course, you still have the option of doing things the old way.  You may benefit more financially if your space exceeds 300 square feet by some margin, or your home costs are much higher than the maximum deduction the easy method allows.  It’s up to you.

And note that this is not available while you’re gathering your receipts for the 2012 year return coming due soon.  It’s a year away.

But hey, good news is good news.  Thought I’d pass it along.

Call me anytime for anything having to do with your home.  I’m always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
(303)541-1920 office
(303)859-4467 mobile

Friday, February 1, 2013

Save a bundle on insurance

For a real sense of excitement, let's talk about insurance.

I'm not kidding.  Saving a lot of money to me is exciting, and it may be as easy as 1-2.

First, if you have a number of insurance policies (and who doesn't, with auto, home or renter's, life, business insurance, etc.), you will oftentimes save up to 25% of the premium cost by bundling them all with the same insurance company.  The company likes the additional policies, and as a thank you, is willing to give you a cost break for the additional business.

Second, take a look at your deductible on your various policies.  The deductible is the amount of money you pay when something happens before the insurance company has to kick in.  Example:  If your deductible on your auto policy is $250, you pay the first $250 of damage when you have an accident.  After that, the insurance company pays the rest. 

If you're willing to up your deductible to $1000 (you pay the first $1000, and the insurance company pays the rest), your monthly premiums will take a dive.  Think about it.  The insurance company shoulders less risk, so it asks for less return, and your payments go down -- oftentimes considerably.

So here's your money-saving project next time you have a free hour.  Pull out the existing policies you have and note which companies you have now.  In particular, see what life insurance company you have, because buying a new life insurance policy is much more difficult than any other.  Call your agent to see if he or she sells other policies.  If it doesn't, call one of your other companies and ask.  Specifically, ask about bundling.

It could save you a bundle.

Call me anytime.  I'm always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
(303)541-1920 office
(303)859-4467 mobile