Escaping rising homeowners insurance

John: (looking around the office) So, William, we’re here because of necessity, not preference. I think you understand the situation of people like us who have a portfolio of homes.

William: I totally understand, John. Homeowners insurance in Florida has been a real challenge for property owners across the board. I’m glad we could get together to see how I can help. Why don’t we start first with the most pressing issue?

Shayla: Well, as you know the insurance premiums have skyrocketed here in Clermont, and it’s hard to justify holding onto our laggard investment properties. We’ve held on as long as we could, but it’s just not sustainable. One of the properties in particular is in bad shape, needing way too much love than we can afford.

William: Got it. And you’re thinking of selling that property first?

John: That’s what we have in mind. But I’ll be honest, William. We’ve always bought and sold the traditional way – through agents and listing on the MLS. Selling to an investor feels unfamiliar and uncomfortable.

William: I get that a lot. People associate real estate investors with quick sales and, let’s be honest, sometimes lower offers. But my approach is to find solutions that make sense for everyone. Can you tell me a bit about the property in question?

Shayla: It’s a single-family home. Built in the 1970s. The roof needs replacing – the plumbing and interior is outdated.

William: It’s probably seen its fair share of wear and tear throughout the years. Are there any tenants currently?

John: No. We decided not to renew the last tenant’s lease because the renovations can’t be ignored. It’s time to sell my house fast and avoid the nagging aspects of the business.

William: Understood. Keeping it vacant definitely simplifies things. What are you looking to get out of this sale?

John: In this specific situation we’re not idealists. Maybe enough to pay off the remaining mortgage balance and walk away with some cash. I really haven’t done enough research about what we can reasonably expect.

William: Got it… well, here’s the gist of how I work: After assessing the property’s current condition, I determine the market value and the cost of repairs and renovations. Then I make an offer based on those factors. My goal isn’t just to get a quick sale of your house but to make it a mutually beneficial transaction. Have you asked for any recent appraisals or estimates for the repairs?

Get a quick close

Avoid extra mortgage payments

Based on a 30 year fixed rate loan @ 7.125%

Shayla: We had a contractor look at it about six months ago. They quoted around $60,000 for the plumbing, roof and basic renovations.

William: Having had a cursory look of the place, $60,000 sounds about right. Do you mind if I ask what the current mortgage balance is?

John: It’s a little under $110,000.

William: Okay, that helps me frame things. Let’s talk market value. If the house were fully renovated, what do you think it would sell for?

Shayla: Comparable properties on Minnehaha Avenue and Lakeshore Drive have sold for around $275,000 to $290,000, but those were properties that were ready for the market.

William: That’s helpful context. Based on what you’ve shared, we can all assume that the property’s value is significantly lower, keeping the repairs in mind. Let me do some quick calculations and then show you what’s going through my mind. (He jots down some numbers down.)

John: This is where I’m wary. Given our sudden financial needs I do need to sell my house fast but we’ve put a lot into these properties as a form of investment, and the idea of selling below market value doesn’t feel right.

William: That’s completely understandable. The key thing to remember is that I’m taking on the repair costs, the time to do the repairs and the market risk. But my main role is to make this process fluid despite all of the typical blockades that come up. How does this sound: I’ll make an offer that anticipates a fair profit for both sides, and you can simply take your time to think it over.

Shayla: That sounds fair. What kind of timeline are we looking at if your offer is inline with our goals?

William: Typically, I close within 21 days, sometimes sooner if there are no complications. I handle the paperwork at the city hall and the title company and cover the closing costs, so you won’t have to worry about all of that.

John: What’s your offer?

William: (after a pause) Based on everything you’ve told me and the numbers I’ve run, I’d offer $144,000 for the property as-is. That’s taking into account the $60,000 in repairs and leaving room for a reasonable margin on my end.

John: $144,000? That’s… lower than I expected but then again it’s a number that makes sense.

Shayla: It’s not far off from the mortgage balance, though. We’d at least walk away with something.

William: I tell you what, let’s do a quick walk through of your home now? I can then email you a quote and we can work from there.

John: A quote definitely can’t hurt. OK let’s start from the kitchen and we can work ourselves out to the yard.

Conclusion

For those in an older age bracket like John and Shayla, DIY renovations can be an undue burden. In this example, the M.O. “sell my house fast” is not just a necessity, it’s a common sense way of doing business. Clermont, Florida is a quickly transitioning area with a parabolically burgeoning population. For many it can be an ideal place to live as it is relatively close to Orlando. However, rising taxes and homeowners insurance has made living there prohibitively expensive for some. Especially for those who have accumulated multiple property assets, monthly financial obligations have become an Achilles heal. Many of these homeowners have realized that the role of the real estate investor has become necessary as a way of battling unforeseen events.

In the first scenario of this article, a table can be found which accentuates the drag that monthly mortgage payments can have on a homeowner. It also shows that after 6 years of a 30 year mortgage, just a few hundred dollars of each payment go to paying off the balance. The rest goes to interest. When one realizes this, the allure of home ownership loses its luster. For many, this becomes a mindset changer when the tide of adversity comes in. Selling their house fast to a real estate investor in favor of an affordable rental can provide a free lifestyle and a way to plan and regroup for the next chapter of life.