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Let’s Talk Insurance and Why Every Investor Has to Pay Attention · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents, Real Estate Investing Rocks.
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  And I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  from here. Are you a seasoned real estate investor
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  hone a few skills here and there? This is the
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of. All through real estate investing,
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  you're already taking the first step. just by
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  joining us here today. Hey guys, thank you all
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  for being here. You know, we're talking about
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  a lot of different things today, like the operation
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  side and the system side. Well, one of the other
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  really important things that you need to always
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  have in the back of your mind is the insurance
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  side. And so JT is here and we're going to talk
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  some about insurance, some of the potential reasons
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  why insurance is going up, which for me it killed
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  a deal. insurance companies are even leaving.
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  They're leaving this particular space too. And
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  so we're going to kind of talk about all of those
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  and then anything else that we think of that
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  might be relevant. We'll talk about that too.
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  So JT, thank you for being here. The good thing
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  is anytime that I'm with you, who knows where
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  the conversation is going to go. So there'll
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  be plenty of questions and scenarios to go through,
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  I'm sure. So we will not be without content,
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  that's for sure. Just to kind of let what the
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  audience know, JT is the guy you call. when you're
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  looking at a property. So if insurance policies
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  are really, they're modeled to be paid out over
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  a longer time horizon, how are they going to
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  mitigate that since so many people now are, I
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  mean, well I'll say now, it may slow down some
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  in this environment, but in the past five years,
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  people were turning them in 18 months, they were
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  turning them in three years. How does an insurance
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  company ever, well, number one, how do they get
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  ahead of that? And then number two, how are they
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  going to mitigate that now that it's been occurring
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  for so long? Yeah, it's a great point. Yeah,
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  I mean, you think about if you had a, I don't
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  know, you owned a convenience store, right? Whoever
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  writes the insurance for that, they've probably
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  been with the same person for 10 years. You know
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  what I mean? They just don't change. It's 80
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  % For those types of businesses, 80 % of people
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  that they're going to renew every year, just
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  to convenience, they're already with the best
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  policy. They don't have crazy claims so they
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  can stay there, things like that. It's just easier
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  to stay where you are. But like you said, in
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  this industry, properties are changing hands
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  so much. And they have been here recently for
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  a while. Yeah, these carriers, if there was a
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  claim, they could normally go, well, Let's keep
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  them on here and the years going forward that
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  they're paying premium will recoup some of that
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  that we paid out. But if they leave the next
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  year, they can't get that. It's hard for them
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  to forecast when can we get these losses back
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  to us. So yeah, to your point, if we're not exchanging
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  properties every year or every three years or
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  whatever, then maybe it can kind of write itself.
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  So that'll be interesting to see. because yeah
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  it would be tough to recoup a 1 .6 million dollar
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  loss when you're not even keeping that that property
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  there next year. Now if you, so this happens
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  you know um somebody sold in 28 months instead
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  of you know three to five years or whatever and
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  they had a 1 .6 million dollar claim when the
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  next people who purchase that property get insurance
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  Are they going to pay a higher premium because
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  of that $1 .6 million claim? Absolutely. It's
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  not fair that something someone else did would
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  affect you, but they don't look at it as you.
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  It's the property. This is the property. The
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  worst is maybe there was some sort of crime at
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  a property, but you're coming in and I'm going
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  to install new lighting security cameras I'm
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  going to have a courtesy patrol come by at night
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  I'm going to have a new gate you know all these
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  things to make it safer plus that old property
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  manager was terrible I know the owners they didn't
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  even care and I'm going to do all this stuff
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  still that property it's it's it's known for
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  crime so a similar property in the same area
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  that that didn't happen is less risky right so
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  The good news is that doesn't happen forever.
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  You go in there, you prove yourself, you did
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  all this stuff, and there's no incidents. Most
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  carriers only look back three years, so your
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  three years claims free, and then you've helped
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  yourself. So no matter what claim is on there,
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  just know it doesn't have to happen forever,
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  these certain premiums. But it is what it is
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  right now, but use that as a negotiating tactic,
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  but definitely underwrite to it. So you stay
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  ahead of the game and not get surprised. My friend
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  is waking up, hold on just a second. He's got
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  a new baby. I've got a new co -worker. Oh, it's
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  her first conference appearance. Again, I tried
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  to time it, so then I fed her and then she'd
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  be asleep, but of course, of course she's not.
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  Yeah, she is not asleep at all. We're matching
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  shirts though today, matching clothes. Yeah,
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  as you can see, she's wide awake. That's awesome
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  though. I was thinking like, is insurance going
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  at like everywhere or is it really focused in
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  Texas that was hit hard or? I think it depends
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  on the asset, depends on, you know, Are we talking
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  multifamily or single family? But yeah, for the
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  most part you can see increases across the country
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  for a lot of different things. But definitely
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  in states where you see those big catastrophic
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  events. So when you're seeing hurricanes or big
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  storms that come through like that winter storm
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  we had. So Texas, Florida, Louisiana, and good
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  luck getting a policy in New Orleans. It is so
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  hard. I'll get people to call me and for help
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  in New Orleans or in Louisiana, you know, along
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  the coast. Hey, this insurance is ridiculous.
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  And I'll ask him, we'll carry your with, oh,
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  I'm with this. It's like, it's a good one. Really?
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  Yeah. I mean, there's nothing, there's not much
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  you can do, you know, for some of these circumstances.
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  But that is what it is. You probably got a great
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  deal on it also, you know? just because you know
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  that this area is prone to certain storms or
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  the premiums are going to be higher. Does it
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  still underwrite well? Does it still produce
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  well? Then, okay, you just know that the insurance
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  is going to be this and you budget for that.
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  I live next to a tollway. I live next to 121,
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  right? I just know that I'm going to use the
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  toll almost every day. I'm not going to go on
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  the side streets and use the lights. That's crazy.
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  But I just worked that into my budget and know
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  that I've got a toll tag and know that I pay
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  tolls and it is what it is now. Now we don't
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  even notice it because we've worked that into
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  our budget. So it's the cost of doing business.
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  Yeah. And you have to have insurance. You can't.
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  Not insurance. Necessary evil. The necessary.
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  You know, one thing that we're seeing right now
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  is with interest rates going up. with supply
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  and demand on materials. That's a property that
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  we would ensure replacement costs for maybe $100
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  a square foot. Now lenders are going, no, we
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  need it to be higher than that. We need to be
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  $120 a square foot, right? And so that's going
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  to change the insurance premiums right there
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  just because we're ensuring it at a higher amount.
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  So we've seen that this year too. So Just be
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  ready for that. Unfortunately, it's hard to know
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  which lender is going to do what, and they don't
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  tell you until usually when the appraisal comes
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  in. So we'll try to get it as close as we can,
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  but ultimately we're at the mercy of what the
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  lender asks. The good news is, is for all my
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  clients, I fight for them. I'll go, there's no
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  way that you're asking for this amount of loss
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  of rents. There's no way they can even collect
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  this amount. There's only so many units. There's
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  only so much. You can increase the rents too.
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  Market rent is this in the area. We know that.
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  So why are you asking for this amount of loss
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  of rents? It's not feasible, right? So I'll fight
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  for you. I'll also do replacement cost estimators
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  on your behalf, which shows, no, this estimator
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  tool that we have shows that it's $110 a square
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  foot in this area. you're $144 that you're looking
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  for that's it's not reasonable. A lot of times
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  they do meet us at least in the middle which
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  is good. So then if a property is going to use
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  one of those like it's like a renter insurance
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  but it's more for the owner like Rhino or Assurance
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  does that change how the big insurance policy
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  is written? not necessarily, they won't necessarily
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  give you a discount for doing it. But what it
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  does is for you in the long run, if there is
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  a claim that's tenant related that they did this,
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  well then now you can fall back on their renters
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  policy to help cover it, depending on what the
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  claim is and how big it is and all that. But
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  they do damage to their own units. They've got
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  $500 ,000 worth of coverage. Then yeah, take
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  it out on their policy if you can. And we offer
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  some programs that are similar. You're in control
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  of it. So they can't just show you, yeah, I've
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  got an insurance policy. Here it is, and then
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  cancel it the next day. No, you're in control
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  of that policy. You offer it. And a lot of owners,
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  they just tack that onto the rent. And so they
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  almost don't notice that they have that. And
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  it costs the owner, I think, $8 a unit, something
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  like that. So it's pretty cheap. But yeah, you
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  want to make sure that your tenants have a policy
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  in place. And don't worry about asking a renter
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  to have one because most places make you do it
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  anyways. So by asking them to have their renter's
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  insurance policy, you're not going to be different
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  than the place across the street because it's
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  pretty normal nowadays to ask for that. Awesome.
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  And for a tenant, they're so cheap. So like,
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  yes, why wouldn't you want this policy that You
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  know, it's it's $30 for the year, whatever. And
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  it protects all your stuff, right? You've got
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  that awesome TV. Don't you want that protected,
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  you know? So, yeah. That's awesome. You know,
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  I just, I want to thank you for being here and
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  absolutely for showing your gorgeous little baby
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  there. Yeah. This is Remy and she is seven weeks
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  old. So, you know, just y 'all being here and
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  then just talking about insurance and it's a,
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  it's a necessary, it's a necessary thing. You
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  have to have it whether you consider it to be
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  evil or not. I mean. That's on you, but it's
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  something you have to have. Thank you for sharing.
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  Absolutely, and happy to be here. Thanks for
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  having me on anytime. You let me know what you
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  need, and I'm here for you. But for all your
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  listeners, insurance is a crazy thing. So call
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  me, email me, all my information's all around.
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  So I'm happy to talk with you about whatever
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  property you're looking at or your current property,
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  or if you just have a question in general, happy
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  to discuss it with you. because the ad is confusing.
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  So happy to help. Awesome. Thank you so much.
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  And guys, there's way more to come. So stick
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  around or go ahead and upgrade and come join
• 12:46
  us on the live side. So until next time.