Factoring in Windstorm & Flood Insurance in South Florida When Analyzing Properties
How are you determining windstorm and flood insurance costs for properties in the south Florida market? For those of us who cannot pay cash and require a loan, banks require windstorm insurance and many times flood insurance as well. I don't see a place in the Bigger Pockets calculators which allow us to take these insurance costs into acount when analyzing properties. I assume we would just add these insurance costs to the calculator's "Insurance" field, for which you would essentially be combining homeowners ins, flood ins, and windstorm insurance into a single field. For multifamily, I assume we will need to carry multiple policies, or would one policy cover the entire structure and all units contained therein? What about other insurance options, such as whole-property ins, rental/business income ins, general liability ins, and umbrealla ins? Which online resources/calculators are you using to calculate these substantial insurnace costs that are uniaue to south Florida and other coastal cities? THANK YOU for your guidance and input as I begin my journey.
@James Bridges: It is best to reach out to an insurance broker for the most accurate estimate. If you are looking at properties in that particular area, then you can use this estimate as a starting point. The FL insurance market is very fluid currently. Thus, I recommend checking with your broker frequently and definitely a few times before you close, as it is not uncommon for the final insurance quote at closing to vary (increase) from the prelim quote obtained during your initial diligence process.
I have a small 1 bedroom across the street from the ocean that went from 1400 a year to over 2000 a year. My other property which is also across the street from the ocean, although a further distance, 2 bedroom 2 bathroom, and the rate has remained the same at 1000 per year. Very confusing!!
Quote from @Vessi Kapoulian:
@James Bridges: It is best to reach out to an insurance broker for the most accurate estimate. If you are looking at properties in that particular area, then you can use this estimate as a starting point. The FL insurance market is very fluid currently. Thus, I recommend checking with your broker frequently and definitely a few times before you close, as it is not uncommon for the final insurance quote at closing to vary (increase) from the prelim quote obtained during your initial diligence process.
Thank you so much for this information.
Quote from @Suzanne Stark:
I have a small 1 bedroom across the street from the ocean that went from 1400 a year to over 2000 a year. My other property which is also across the street from the ocean, although a further distance, 2 bedroom 2 bathroom, and the rate has remained the same at 1000 per year. Very confusing!!
That is extremely confusing. I guess this is why I read that some investors prefer a higher Cash on Cash return than others, to help make up for these unexpected increases in the event they happen?
I don't know why this has happened, but many insurance companies won't even write policies in Florida any more. I use the same company for both of my properties, and one has increased exponentially, the other has not??
P.S. I'm on the southeast area of Florida
Quote from @Suzanne Stark:
I don't know why this has happened, but many insurance companies won't even write policies in Florida any more. I use the same company for both of my properties, and one has increased exponentially, the other has not??
Maybe consider reaching out to them and asking what factors are influencing the vast difference in premiums. You sharing this experience is beneficial to me and I'll remember this conversation should I ever experience the same thing as I get started.
P.S. I'm on the southeast area of Florida
@James Bridges Your concern is very valid. Insurance is very high in FL and you need to be prepared well before you make the purchase. On the plus side, you could add an amendment to a contract stating the maximum insurance you would need to have in acquiring it. I did this last year for a client in Westchester (Miami). If the policy would have been too high, he would have been able to back out of the contract.
Assuming the place is currently insured, you could ask the seller for a copy of the current insurance (they don't have to provide it btw). And even if you don't own the place, you could also ask an insurer about approximately what the cost would be based on a few known factors of the house. You will usually get an answer within 48 hours.
I'm in Louisiana and have the same insurance problems as flordia. You need to find a good independent agent that can run policies from multiple companies. They will give you an idea of what to budget for insurance expenses. My insurance cost have doubled in the last couple of years and its only going to get worse. Do not buy a house in a flood zone with the flood insurance 2.0 system rates have skyrocketed and will continue to do so. This will eat any cash flow and make the home almost impossible to sell.
wind, flood & general will be the same policy. I usually tell my clients ESTIMATE between 0.5 - 1% of the purchase price as your annual cost of insurance. This still holds true even though SEFL insurance landscape continues to shift (for example, it has recently become challenging get a clear 4 point inspection needed to secure insurance UNLESS you have a date of the roof permit). There are ways around this, yet, you got to have a savvy insurance person & inspector on your team.
@James Bridges, if you need an expert realtor in the area to help you, reach out to @Malgorzata Sadowska!
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