Investor · CA · Member since 2015 · 41 posts · 13 votes
My insurance for a 15 unit apartment that I own in California went up from $3500/year to 10k to 12k/year.
Are you guys seeing a big increase in California?
Would love to connect with any insurance broker who deals with Multi-family in California? Any recommendations from other investors would be greatly appreciated too.
Yes. We are in a unique kind of hell. My personal insurance nightmare started on Sept. 10th and required $120K in improvements during the past four weeks. No claim history and not located in a flood or fire zone. My carrier, Mercury, opted not to renew because my buildings turned 60 in 2022 (policy cost = $11K). I had to choose between spending $18K for "not so great" policy, or agreeing to the improvements and spending $14K for a great policy. I chose the better policy but now I have an underwriter breathing down my neck. Not fun at all. I don't know your circumstances but I can tell you that a great agent can make all the difference. John Mocker and Jason Bott are BP members - both wonderful resources. Abernathy Insurance Agency is Arcadia-based and was highly recommended by a commercial broker. The owners are heavily invested in rental property and understand the challenges. I think multifamily owners are best served by agents who understand the business and can help you make informed decisions.
You are not the only one. I have been going through the same thing recently. I closed on 14 mid Sept. Past underwriting would have been $4500 for insurance. I buffered it to $6500 but not be surprised to see $8500 based on my previous purchase in April. It turned out to be almost $20K!!! Main reason was the building age. Sad part is that they were remodeled and renovated to current standards. However, there was slim pickens on insurers. I had to take it to close the deal.
Here is what I did: I cancelled the policy a week after closing. I continued to shop and had more time to look for other options. I found a different insurer later that was $3k less. Still expensive, but it's $3k more in my pocket per year for now.
This is just part of the current CA landscape. I closed on another 9 last week. Insurance was almost 2X where they should be. In the end, you still for a CA property that is likely very desirable and holds values very well with high appreciation potential. This also includes strong rental demands.
Make up the difference in rent. It's just business. If you had planned a 6% raise when you have the legal grounds to do 8% or 8.5%, always lean towards the higher rent raise. You need to prepare for these operational cost increases that are out of your control.
That's a huge bummer, Andy. This trend is affecting many property owners in California, especially in multi-family units. Natural disasters, higher construction costs, and a competitive insurance market are driving these increases.
Review your current policy to ensure you’re properly covered without overpaying for unnecessary coverages. Implementing risk mitigation measures like fire-resistant materials, updated electrical systems, and security systems can help negotiate better rates. Document these improvements and present them to your insurer.
Working with an insurance broker specializing in multi-family properties in California is crucial. They can find more competitive rates tailored to your needs. Reach out to your network, the California Apartment Association, or local real estate investment groups for referrals.
Be aware that insurance premiums in California may increase even more. According to some of my insurance contacts, we could see a 20% to 100% increase in premiums in the worst-case scenario.
If you need further assistance or connections, feel free to reach out. My network includes experienced professionals who can help you navigate this challenging landscape.