Blow Me Down! Climate Change Coastal Investments
Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes
Blow Me Down! Climate Change Coastal Investments
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Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes
2yI prefer states that are landlord friendly - for example in Virginia you can evict for non-payment and usually get a judgement and possession in a few months. CA - not so much.
Climate change? Whatever. The last time I looked all the wealthy climate change lunatics are buying houses on the coast and places that they say will be underwater soon. Actions speak louder than words.
Insurance costs are a REAL problem though - we decided to back away from Florida due to the risk of climbing insurance rates.
41 Replies
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Gayle Eisner:
Greetings fellow investors.
Climate Change is a topic that is not discussed enough on this forum.
I have a couple of rental properties in the Monterey area that are about a block from the beach. Great rental income, great location, great tenants. I have been increasingly anxious however, due to the proximity to the ocean. Last year was, in my opinion, not a once in 100 year occurrence. Power was down, homes and businesses damaged and closure of highways. This year, again, extreme damage to businesses has occurred in Santa Cruz, CA (near me) and winter has just begun. I was thinking of selling and doing a 1031 exchange to a "safer" location. Ideally, I would love to keep the rental properties but the possibility of losing these assets is of great concern. Both are paid off. Rumors in the area are that insurance companies will be pulling out and I will be stuck with the expensive, minimal government insurance.
Questions: Has anyone experienced this same situation or have any advice on new investments still in CA?
Thanks kindly!
We do not own in california, but have a friend in the insurance business and yes they are saying insurance companies are pulling out of areas in Florida, Texas and California. This means less competition and significantly higher prices.
7e investments53 Reviews - Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes2y
I prefer states that are landlord friendly - for example in Virginia you can evict for non-payment and usually get a judgement and possession in a few months. CA - not so much.
Climate change? Whatever. The last time I looked all the wealthy climate change lunatics are buying houses on the coast and places that they say will be underwater soon. Actions speak louder than words.
Insurance costs are a REAL problem though - we decided to back away from Florida due to the risk of climbing insurance rates.
- Member since 2023 · 84 posts · 35 votes2y
Quote from @Gayle Eisner:
Greetings fellow investors.
Climate Change is a topic that is not discussed enough on this forum.
I have a couple of rental properties in the Monterey area that are about a block from the beach. Great rental income, great location, great tenants. I have been increasingly anxious however, due to the proximity to the ocean. Last year was, in my opinion, not a once in 100 year occurrence. Power was down, homes and businesses damaged and closure of highways. This year, again, extreme damage to businesses has occurred in Santa Cruz, CA (near me) and winter has just begun. I was thinking of selling and doing a 1031 exchange to a "safer" location. Ideally, I would love to keep the rental properties but the possibility of losing these assets is of great concern. Both are paid off. Rumors in the area are that insurance companies will be pulling out and I will be stuck with the expensive, minimal government insurance.
Questions: Has anyone experienced this same situation or have any advice on new investments still in CA?
Thanks kindly!
Invest in Kansas City! No need to worry about being underwater out here
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Gayle Eisner:
Greetings fellow investors.
Climate Change is a topic that is not discussed enough on this forum.
I have a couple of rental properties in the Monterey area that are about a block from the beach. Great rental income, great location, great tenants. I have been increasingly anxious however, due to the proximity to the ocean.
We actually have discussed it and pretty regularly I would say. The general consensus (I think) is that the climate will do what it has always done and go one way and then the other. Your game-on is to decide what you feel the trends will be during your investing lifetime, and invest accordingly.
I would interview several Insurance Agents (maybe start a thread on here?) and get a feeling for what those experts are saying.
I love Monterey, that would be hard to let go. I'm aware of that river that overflowed and took out huge swaths. Very scary. I had concerns about one of my houses near Waikiki which is only 3' above sea level. I figured as a layman, Wakiki will be under water around 2050. It's another level of stress on top of being a landlord. Try to figure the risk the best you can, if it's bleak, get out early.
The biggest challenge will be insurance premiums in these areas.
Even for the "stuff naturally happens with the climate crowd", the fact is that we have had a LOT more extreme weather conditions in multiple areas and insurance companies have decided that doing business in those areas is not profitable for them, so they are packing up and going home. Consequently premiums are rocketing up, making profitability for investment properties drop a lot, plus if you live in those areas, it hits your pocketbook too
So I would personably not be worried about the weather itself, but more with the cost of living there and investing there due to the insurance premiums
- Because this is a real estate forum and not a contentious political issues forum.
Quote from @Gayle Eisner:
Greetings fellow investors.
Climate Change is a topic that is not discussed enough on this forum. ...
Thanks kindly!
There are tons of political forums out there for those who seek this stuff.
This forum is about making more money with real estate.
Good Luck!
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Quote from @Ned J.:
The biggest challenge will be insurance premiums in these areas.
Even for the "stuff naturally happens with the climate crowd", the fact is that we have had a LOT more extreme weather conditions in multiple areas and insurance companies have decided that doing business in those areas is not profitable for them, so they are packing up and going home. Consequently premiums are rocketing up, making profitability for investment properties drop a lot, plus if you live in those areas, it hits your pocketbook too
So I would personably not be worried about the weather itself, but more with the cost of living there and investing there due to the insurance premiums
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
I would pay attention to the FEMA flood zone maps that are updated pretty regularly...models only and models can be flawed, but those are the models' insurance companies use to determine their risk and therefore their rates. Same with NOAA weather pattern predictions. So you can quantify your potential cost increase. We passed on one property in Gloucester, MA that was on a low lying part of a major road near the harbor...10 feet of elevation above high tide seemed to be asking for trouble in storm surges, etc.
Certainly, anything in or near a flood zone should get a closer look. Lots of potential/current practical issues if you are right on the waterfront. Maybe pay more attention to new building codes in heavy weather areas and update instead of relying on grandfathering?
Beyond that? Eh...live your real estate life.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Jonathan R McLaughlin:
I would pay attention to the FEMA flood zone maps that are updated pretty regularly...models only and models can be flawed, but those are the models' insurance companies use to determine their risk and therefore their rates. Same with NOAA weather pattern predictions. So you can quantify your potential cost increase. We passed on one property in Gloucester, MA that was on a low lying part of a major road near the harbor...10 feet of elevation above high tide seemed to be asking for trouble in storm surges, etc.
Certainly, anything in or near a flood zone should get a closer look. Lots of potential/current practical issues if you are right on the waterfront. Maybe pay more attention to new building codes in heavy weather areas and update instead of relying on grandfathering?
Beyond that? Eh...live your real estate life.
many midwest cities are now under flood zone.
- Member since 2019 · 7k+ posts · 4k+ votes2yyes yes yes you should get out, it's horrible :-)
Quote from @Gayle Eisner:
Greetings fellow investors.
Climate Change is a topic that is not discussed enough on this forum.
I have a couple of rental properties in the Monterey area that are about a block from the beach. Great rental income, great location, great tenants. I have been increasingly anxious however, due to the proximity to the ocean. Last year was, in my opinion, not a once in 100 year occurrence. Power was down, homes and businesses damaged and closure of highways. This year, again, extreme damage to businesses has occurred in Santa Cruz, CA (near me) and winter has just begun. I was thinking of selling and doing a 1031 exchange to a "safer" location. Ideally, I would love to keep the rental properties but the possibility of losing these assets is of great concern. Both are paid off. Rumors in the area are that insurance companies will be pulling out and I will be stuck with the expensive, minimal government insurance.
Questions: Has anyone experienced this same situation or have any advice on new investments still in CA?
Thanks kindly!
I will put it simply, if you want to sell it cheap with 50% discount , sell it to me please :-)
- Investor · Santa Cruz, CA · Member since 2014 · 13 posts · 7 votes2y
As a Santa Cruz resident I worry about this a lot. I think you have a good idea. 1031 to something that you have researched that you feel more confident in.
I personally would not buy property in the fire zone or where I see real risk of sea water / flood damage. But I’m also not convinced that all of Santa Cruz should be written off. My house is pretty unlikely to get hit by fire or sea water in the next 100 years so I’m optimistic my area’s insurance won’t go too wild any time soon. And I’m about a mile from the ocean which is still close enough to surf frequently.
Climate change is a serious variable and definitely should be accounted for to the best of your ability in your investment strategy.
So I was just going over how my insurance premiums have changed in different cities.
Property 1: single-family, masonry construction on south side of Chicago. 2019 insurance premium: $847, 2023 insurance premium: $959.
Property 2: single-family, wood frame construction in Missouri. 2019 insurance: $861, 2023 insurance: $1414.
Coverages are similar on each property.
The numbers speak for themselves. You have to be selective in where you invest. The Missouri insurance premiums went up more because it is classified as a high wind area and the property is wood frame.
@Alex Olson- I use NREIG for some and a broker named Brian Caputo at Rosenthal Brothers for others. If you have any other suggestions, feel free to shoot them my way.
- 2yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
@Gayle Eisner Ask yourself what lets you sleep at night? Had a property in a flood zone and was relieved when Blue acres buyout came. Even before then FEMA wasn't bad but floods are a big hassle. That was a nothing special two family. If you are rakeing it in waterfront somewhere it might be worth the risk if you can absorb the insurance cost. California has some other issues to consider as well but everyone has a different tolerance.
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Colleen: Thank you for some sunshine. What is the Blue acres buyout? What year did the flood happen? California insurance companies near the coast and in the mountains (flood/fire) are cancelling clients left and right. In fact, most of my friends in the mountains are forcing folks to purchase the federal insurance for fires. Prices have skyrocketed. Paying over $2000/yr for Mountain Home ins. (fire only) Although we have earthquakes, I can't afford both. My Monterey coastal area insurance is still reasonable but, again, I am only one block from the beach.... Seriously thinking about selling coastal property and keep mountain property. They just build a new fire department a few blocks from mountain house and it is massive, makes me feel a bit more secure... But the question remains Can I sleep at night?
Question: If the coastal property is paid off and I am in an LLC, could I be sued personally for damages by my tenants if incurred by a coastal flood ? just a thought....Thx!
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Quote from @Ned J.:
The biggest challenge will be insurance premiums in these areas.
Even for the "stuff naturally happens with the climate crowd", the fact is that we have had a LOT more extreme weather conditions in multiple areas and insurance companies have decided that doing business in those areas is not profitable for them, so they are packing up and going home. Consequently premiums are rocketing up, making profitability for investment properties drop a lot, plus if you live in those areas, it hits your pocketbook too
So I would personably not be worried about the weather itself, but more with the cost of living there and investing there due to the insurance premiums
What if the house is paid for? Could I rent it out and use the LLC to help cover my liability?
@Gayle Eisner- You could be sued personally even if your property is in an LLC, and even if the property is paid off. This actually happens quite frequently. When there are property damage issues, California landlord tenant laws allow the tenant to recover attorney's fees in addition to other damages. This means that a relatively minor issue can escalate into something much larger.
I hate to be the bearer of bad news, but that's just what I'm seeing. Best of luck.
*This does not create an attorney-client relationship. It is for informational purposes only and is not meant as legal advice.
- 2yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
@Gayle Eisner We were on FEMA insurance at the time. FEMA targeted our area not to be rebuilt so they gave offers on the targeted houses and bought the houses in that area and it is now open land, that was called Blue acres. It was after a flood though there was foundation flood damage we started to rebuild first but eventually the government got around to making offers, ours was good, other people weren't as happy. It was NJ. It isn't just something you can sign up for.
A block from the beach and a long term rental you would not find that in RI. Is that common, most by us are STR.
Not sure how you write your lease but ours cancels with significant damage and we require renters insurance. Don't know if you can write the lease to cancel in Cali. Someone local would have to comment on that. Liability, if you require renters insurance it is on them.
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Quote from @Ryan Fox:
@Gayle Eisner- You could be sued personally even if your property is in an LLC, and even if the property is paid off. This actually happens quite frequently. When there are property damage issues, California landlord tenant laws allow the tenant to recover attorney's fees in addition to other damages. This means that a relatively minor issue can escalate into something much larger.
I hate to be the bearer of bad news, but that's just what I'm seeing. Best of luck.
*This does not create an attorney-client relationship. It is for informational purposes only and is not meant as legal advice.
Thanks Ryan, good (and bad) to know!
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Quote from @Ryan Fox:
@Gayle Eisner- You could be sued personally even if your property is in an LLC, and even if the property is paid off. This actually happens quite frequently. When there are property damage issues, California landlord tenant laws allow the tenant to recover attorney's fees in addition to other damages. This means that a relatively minor issue can escalate into something much larger.
I hate to be the bearer of bad news, but that's just what I'm seeing. Best of luck.
*This does not create an attorney-client relationship. It is for informational purposes only and is not meant as legal advice.
Thanks Ryan, good (and bad) to know!
- Investor · Monterey, CA · Member since 2014 · 177 posts · 55 votes2y
Quote from @Ryan Fox:
@Alex Olson- I use NREIG for some and a broker named Brian Caputo at Rosenthal Brothers for others. If you have any other suggestions, feel free to shoot them my way.
what is NREIG?
@Gayle Eisner- National Real Estate Insurance Group
@Gayle Eisner.... your are talking more about personal liability.....someone gets injured and they go after you. I'm talking about insurance on the property for physical damage from rain/flood/fire/earthquake etc. TOTALLY different...location and climate dont play a role in the cost of liability insurance
And as for the LLC "protecting" you..... For you average small time LL, having your properties in an LLC and thinking they are more protected from a lawsuit is a fantasy. Unless you follow every principle of an LLC, a half decent attorney will pierce that "shield" in a matter of minutes. LOTS of discussion on BP about that...... have lots of liability insurance is a much better option
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