Fire Victims-Money Mag Jan 08

User Forum Topic
Submitted by equalizer on December 16, 2007 - 11:28pm

http://money.cnn.com/2007/12/11/pf/fire_...

Wish the family best. Money mag should have focused more on the getting rebuilding costs fully covered by insurance such as through rider.

Questions

1. After 2003 incident, didn’t policy limits change to account for current costs? Companies are insuring for only 150-170 SF, which is builders cost for hundred not 1 home.

1. How much were they paid for the story? Just the free financial planner, worth $500-1000?

2. Money's goal is to provide readers with advice to get most benefits for lowest cost. They encouraged family to try to collect to max policy limits: They are entitled up to $489,000, not just the 245,000 they received for their furnishings. The paid around 800K for house with upgrades and have investment property and he works as a Q eng. Practical, not likely they had Monets.

3. They completely ignored the advice on selling the Hard Rock condo/Hotel. It will have 0% vacancy and price will double in 5 years. Looks like the family should be the financial planners. No joke. I bet their net worth is much HIGHER than the financial planners. High risk (or no risk thanks to Money Mag, Greenspan et al) equals high net worth.

4. With $1.3M in net worth they got $1300 from Red Cross and $300 from a Buddhist relief agency (I'm not even going to bring up Myanmar allegedly killing peaceful Buddhists). Did Red Cross do any means testing, did the family with $5M NW or $50K NW also get $1300? Not their problem if people give them money.

We should discuss insurance problems here and after we solve that issue, we can make comments on the Hard Rock investment.

‹ Sub-prime article with graphs/pictures Credit Crunch = Recession ›
But the couple had borrowed
Submitted by kev374 on December 17, 2007 - 9:12am.

But the couple had borrowed heavily against their house, in part to pay for a risky real estate venture, leaving them with loan payments that eat up more than two-thirds of their net income

So these guys are speculators?
Feel sorry that they lost their home but had they not used their home like an ATM they would've been able to cover their losses. Their situation is their own fault.

I appreciate that greater
Submitted by taz on December 17, 2007 - 10:44am.

I appreciate that greater risk often leads to greater rewards, but I for one couldn't sleep at night if I were carrying 1.2 million in mortgage debt on a $145k salary. To do so, they obviously must be using interest only loans...

1. After 2003 incident,
Submitted by Russell on December 17, 2007 - 11:10am.

1. After 2003 incident, didn’t policy limits change to account for current costs? Companies are insuring for only 150-170 SF, which is builders cost for hundred not 1 home.

Many insurers still under-insure to keep rates low and competetive. They are willing to deal with the issue on a case by case basis when there is a big loss. Not that they make it easy all the time.As stated in the article they put the customer in a bind between wanting the house back quickly and fighting for the rest of the money . Most losses are small so the question doesn't come up. In place of actual coverage, most offer or automatically put a rider increasing the limits of coverage but the terms for recouping this money are different.

With AAA, my policy coverage
Submitted by equalizer on December 18, 2007 - 4:24pm.

With AAA, my policy coverage has gone from $125/SF to $155/SF in last four years. AAA supposedly only company to cover all losses, even the underinsured. Guess they can afford to because of limited # of policies and stricter underwriting.

Let's start putting some
Submitted by Eugene on December 18, 2007 - 5:18pm.

Let's start putting some numbers together.

Current asking rates for Hard Rock Hotel studios are ~$300/night (high end of the spectrum for Gaslamp). They probably get 50%. 4500/month cash flow assuming full occupancy. This income is taxable (let's say 25% tax bracket). They have to pay property tax ($500/month) and possibly some sort of association fee. This leaves them with
$2500-2800 per month after tax. They have to pay $1700/month mortgage (not tax deductible), and they forego ~$900/month income (after-tax) they could have had if they took their 300k and put it on a 5% CD.

They will roughly break even if hotel can maintain full occupancy at those prices.

Appreciation/depreciation is a more difficult question. I can't find any resale listings for Hard Rock condos. Ultimately resale prices will depend on how profitable those places really are.