Well I think Insurance just put the nail in the coffin

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

@Jeremy Horton I am not a tax person but you might talk to one before you sell. You may want to spread this out depending on what the impact of concurrent sales would be on your taxes and how long you have owned the properties. Also consider where your leases are, you might want to let them all go month to month in prep for sale, it may give you more options. I assume you did shop the insurance already and have no better options?

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Colleen F.:

@Jeremy Horton I am not a tax person but you might talk to one before you sell. You may want to spread this out depending on what the impact of concurrent sales would be on your taxes and how long you have owned the properties. Also consider where your leases are, you might want to let them all go month to month in prep for sale, it may give you more options. I assume you did shop the insurance already and have no better options?

You bring up a good point regarding taxes. I haven't owned them long, between 3 and 5 years for all of them. Most of my leases are month to month (another good point), I typically let it go month to month after the first year. The less the tenants think about the leases, I think the less likely they are to move
I did shop the insurance - I'm actually in a pretty good boat compared to a lot of people. I hear a lot of people's are worse. The carrier for my personal home actually didn't allow for renewals and pulled out of the state, so I had to get new insurance there too. As you can imagine it also increased. None of the properties are in a flood zone and I've never made any claims. At this point I would not be mad if any of them burned down honestly.

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Michael Wyatt

Lender · Boston, MA · Member since 2021 · 125 posts · 64 votes

7mo

Is this FL?

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Michael Wyatt:

Is this FL?

South Louisiana. Probably similar to Florida minus the people moving here (we actually have more people leaving the state if I remember right), minus the nice beaches, plus the cancer (basically tons of pollutants get deposited at the mouth of the Mississippi), plus flooding, plus crappy roads/schools, minus the increase in property values etc
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
7mo
Quote from @Jeremy Horton:

Quote from @Michael Wyatt:

Is this FL?

South Louisiana. Probably similar to Florida minus the people moving here (we actually have more people leaving the state if I remember right), minus the nice beaches, plus the cancer (basically tons of pollutants get deposited at the mouth of the Mississippi), plus flooding, plus crappy roads/schools, minus the increase in property values etc

> minus the increase in property values etc
This was exactly what I was going to ask about. There are various sources or RE return. You covered tax benefit and cash flow. Equity pay down can only contribute so much. Appreciation could save the ship especially with its tight coupling to rent growth but alas it is not a savior in your case.
RE will not be the optimal investment for all people in all markets. There may be better opportunities for you outside the RE as you described.

good luck

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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7mo
Quote from @Jeremy Horton:

Quote from @Michael Wyatt:

Is this FL?

South Louisiana. Probably similar to Florida minus the people moving here (we actually have more people leaving the state if I remember right), minus the nice beaches, plus the cancer (basically tons of pollutants get deposited at the mouth of the Mississippi), plus flooding, plus crappy roads/schools, minus the increase in property values etc

The moment when you realize that cash flow without appreciation is an illusion. Sorry you have to deal with this, I think you are right to trade out of what you are currently doing (1031) and do something else. But you can make it work with SFRs, actually really well, but you need higher rents ($2000) and higher appreciation (5%) for this to pay off long term.
1 Reply
Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Marcus Auerbach:

Quote from @Jeremy Horton:

Quote from @Michael Wyatt:

Is this FL?

South Louisiana. Probably similar to Florida minus the people moving here (we actually have more people leaving the state if I remember right), minus the nice beaches, plus the cancer (basically tons of pollutants get deposited at the mouth of the Mississippi), plus flooding, plus crappy roads/schools, minus the increase in property values etc

The moment when you realize that cash flow without appreciation is an illusion. Sorry you have to deal with this, I think you are right to trade out of what you are currently doing (1031) and do something else. But you can make it work with SFRs, actually really well, but you need higher rents ($2000) and higher appreciation (5%) for this to pay off long term.

Yep - been kind of a slow bleed where the profit is just dwindling away more and more each year. The appreciation is the real kicker, we just don't see it like a lot of places do here in South Louisiana. Then you tack on abnormally high insurance increases and it's a bad deal as time goes on. I think there's a lot of people in the same boat honestly.
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Michael Wyatt

Lender · Boston, MA · Member since 2021 · 125 posts · 64 votes

7mo

Haha well damn

1 Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

7mo

@Jeremy Horton In your situation once you get a good handle on the tax situation you sound like you have the rest under control. Keep in mind a business is also a second job though too so if you go with something new there is a time investment that is hard to quantify if it is worth it. Now if you love what your business will be doing it may be worth it.

We aren't similar as rents are rising for now but do have increasing costs each year from insurance and 8 to 11 k and we can't find another company to write it.

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

7mo

@Jeremy Horton, If you're looking to weather the storm but not exit RE entirely, you could do a 1031 exchange, which would allow you to defer all of the capital gains taxes plus depreciation recapture, and reinvest it into another investment opportunity.

Within the 1031 strategy theres lots of directions you could choose from. You could move into more raw land, as you mentioned. And even use the re portion to grow businesses on - but without paying the tax on the sales of your SFRs. You could also implement what we call a consolidation exchange. This is when you sell multiple investment properties and reinvest in another or larger investment property in a better market, in or out of state, with a better cash flow and appreciation potential. This could get you into the higher margin markets and outside of LA, as you said.

There may be more lucrative opportunities outside of real estate. But there's also a huge opportunity cost in selling that real estate and just paying all the tax and depreciation recapture. Make sure you know how long it will take you to break even from the sales, even with the additional margin from the business. Or find a way to make both work. We do many 1031s for business owners selling the real estate portion of their business to grow the business into larger real estate.

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Dave Foster:

@Jeremy Horton, If you're looking to weather the storm but not exit RE entirely, you could do a 1031 exchange, which would allow you to defer all of the capital gains taxes plus depreciation recapture, and reinvest it into another investment opportunity.

Within the 1031 strategy theres lots of directions you could choose from. You could move into more raw land, as you mentioned. And even use the re portion to grow businesses on - but without paying the tax on the sales of your SFRs. You could also implement what we call a consolidation exchange. This is when you sell multiple investment properties and reinvest in another or larger investment property in a better market, in or out of state, with a better cash flow and appreciation potential. This could get you into the higher margin markets and outside of LA, as you said.

There may be more lucrative opportunities outside of real estate. But there's also a huge opportunity cost in selling that real estate and just paying all the tax and depreciation recapture. Make sure you know how long it will take you to break even from the sales, even with the additional margin from the business. Or find a way to make both work. We do many 1031s for business owners selling the real estate portion of their business to grow the business into larger real estate.

I'm glad you brought this up - this was my exact thinking when I first started getting increases. Initially I wanted to do the consolidation 1031 that you are speaking of and go into a STR. I think you see better tax advantages (active business, possibly cost seg and bonus deprecation). Or buy land and do cattle - agricultural deductions, could live on the property etc. There's affordable land around here as well.
I really hate to get out of RE just because there's so much opportunity and different niches. There's potential in different things, it's just being able to pivot and do the "right" thing. Right now it seems to be building. Tons of neighborhoods going up. Moderately flipping works (really buying at a discount, minimal rehab and relisting) and trailer parks/modular homes w/ a small land package (ie: affordable homes). There's a lot of overlap in RE as well, so after some time I think you can be pretty good at most of it.
I'm going to shoot you a message, I am not sure the best way to go about this honestly. Maybe there's something we can get figured. Thanks for your thoughts
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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

7mo

I don’t know how old your properties are. But there was just a guest on the real estate guys radio podcast. He talked about significant Florida tax saving for homes built after 2004 and more than 13’ above sea level. If you like the area maybe do a 1031 in to different properties in the area.

Our insurance went up almost 35% in a couple years about 5-6 years ago. But the last 2 years have actually been modest to negative, a nice change. 10 years ago insurance was $5-600. Now it’s easily $1,000-$1,400/yr. I suppose it comes with property values quadrupling. Good luck.

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Bill B.:

I don’t know how old your properties are. But there was just a guest on the real estate guys radio podcast. He talked about significant Florida tax saving for homes built after 2004 and more than 13’ above sea level. If you like the area maybe do a 1031 in to different properties in the area.
Our insurance went up almost 35% in a couple years about 5-6 years ago. But the last 2 years have actually been modest to negative, a nice change. 10 years ago insurance was $5-600. Now it’s easily $1,000-$1,400/yr. I suppose it comes with property values quadrupling. Good luck.

They vary in age, probably around 40 years old average. One is about 85 years old. That is one thing with Florida - they have property tax. We have it here as well but it's not nearly as significant as theirs is. I'm in south Louisiana - we have state income tax which is even worse in my opinion. At least property taxes stay in your area. State income tax is just used to subsidize waste and fraud.
I'm south of I-10 (Lafayette, LA) out property values haven't changed like that. There's some micro markets that did see a big increase when rates were low but Louisiana is pretty much the lowest when it comes to appreciation. Several different sources will verify this - it's bottom 3 every time. It's the same with rent increases - sure you can increase slightly but it's not worth the possible vacancy. And the increase you'd need would result in extended vacancy. The nicer areas show better appreciation but these are "expensive" houses - ie $350k+ and aren't really rentable. The "affordable" rentals <250k don't seem to have the same appreciation and are in more established areas.
Nice to hear your insurance leveled off a bit - that's what I was hoping for for this year renewals. But I've gotten a few letters in the mail and it's another increase. The facebook groups I visit are seemingly in the same boat.
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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

7mo

@Jeremy Horton. Sorry Jeremy. That was supposed to say INSURANCE is SIGNIFICANTLY lower for 2004+ homes and 14’ above sea level. His example was paying 1/5th as much for insurance on a house that was 4x bigger than his neighbors. I dunno why I wrote taxes.

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Bill B.:

@Jeremy Horton. Sorry Jeremy. That was supposed to say INSURANCE is SIGNIFICANTLY lower for 2004+ homes and 14’ above sea level. His example was paying 1/5th as much for insurance on a house that was 4x bigger than his neighbors. I dunno why I wrote taxes.

Interesting - I'm going to get with my broker and see what I can find out. That would make a huge difference
1 Reply

Stuart UdisPro Member

Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes

7mo

@Jeremy Horton You've touched on the realities of owning rental real estate in 2026. While property insurance and property taxes are headline inputs when evaluating operating expenses, the challenges landlords face are far broader and extend to many other costs incurred by property owners. Rising cost for ordinary services such as extermination, to snow & lawncare to misc. repairs. Building code evolution has made construction more costly. Labor and material costs have gone up which adds additional strain to operating cash flow and of course heightened interest rates do not help. The difference is interest rates do trend downward at times whereas the other operating costs will not provide the same relief.

Ironically, much of what has been promoted on BiggerPockets over the years such as finding markets that meet the 1 percent rule, focusing on affordable housing markets, and scaling to a door count that replaces W2 income has pushed many investors toward the type of real estate that is now most vulnerable to today’s challenges. Single family homes themselves are not the problem. The issue is which single family homes investors chose to buy and their expectations.

Setting aside Florida and other areas where weather has dramatically impacted insurance pricing, the silent killer has been replacement cost. In markets where real estate values are relatively low, which are often the same markets where investors believe they are finding the best deals, the cost to rebuild or replace structures has increased far faster than property values. As a result these properties are disproportionately impacted by rising insurance premiums.

Higher priced markets tend to absorb these shocks more easily. When property values are higher the cost of modern construction is closer to what the market can support. This allows insurance pricing, replacement cost assumptions, and capital expenditures to be absorbed more naturally within the reall estate value. These markets also typically support higher rents which means rising operating expenses can be absorbed.

Another overlooked advantage of single family homes in stronger markets is operational efficiency. Landlords can push more responsibilities onto tenants. Items such as lawn care, snow removal, extermination, and certain utilities can often be shifted to tenants. Multi unit buildings rarely offer that flexibility. Common utilities, shared systems, and building wide services are difficult or impossible to shed which locks higher operating expenses.

This does not necessarily mean that purchasing single family homes in more established markets will always produce higher cash flow. Cash flow is mostly driven by leverage and interest rates. However, the underlying properties tend to be far more durable to own and operate over time. They can be managed without taking operational shortcuts and their economics are better positioned to withstand rising insurance costs, capital expenditures, and broader operating pressures. Most importantly and where the real profits are generated, these homes are often in markets that have the greatest barriers of entry and have the more predictable long term appreciation trajectory as you're on the correct side of supply and demand.

That's the reality of owning real estate today. Sadly, this is not what most real estate investors are being taught. How many fewer BiggerPockets subscriptions are sold if new investors are taught buying the $100K SFH's in distant markets is not a wise investment decision? How much less commission is earned by real estate agents selling this same housing product and are promoting these properties widely on the internet and social media. How many fewer REIA memberships are there across the country? Turn key and management services have become big business as well, but they recognize the profits aren't in ownership which in itself should be the red flag that gets more investors attention.

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Rod HanksBusiness Member

Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes

7mo

I’m hearing this a lot right now. Insurance and property taxes have been rising faster than rents in many markets the last few years. From the insurance side, carriers took huge losses from storms, fires, and litigation, so premiums are being repriced everywhere. Unfortunately I don’t see that reversing anytime soon.

What you’re really seeing though is older deals getting squeezed over time. Taxes reset, insurance goes up with replacement costs, and maintenance creeps up. If the original spread wasn’t huge, the margin slowly disappears.

That said, I wouldn’t assume the only options are hold forever or sell everything. Sometimes small rent adjustments over time close part of the gap without causing vacancy. Sometimes selling the weakest properties and keeping the strongest ones improves the whole portfolio.

You’re right about scale though. Operating costs and insurance tend to make a lot more sense when they’re spread across more units. That’s why a lot of investors eventually move from scattered SFHs into small multifamily.

And you’re definitely not the only one having this conversation right now. A lot of landlords are reassessing their portfolios because of insurance alone.

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Rod Hanks:

I’m hearing this a lot right now. Insurance and property taxes have been rising faster than rents in many markets the last few years. From the insurance side, carriers took huge losses from storms, fires, and litigation, so premiums are being repriced everywhere. Unfortunately I don’t see that reversing anytime soon.

What you’re really seeing though is older deals getting squeezed over time. Taxes reset, insurance goes up with replacement costs, and maintenance creeps up. If the original spread wasn’t huge, the margin slowly disappears.

That said, I wouldn’t assume the only options are hold forever or sell everything. Sometimes small rent adjustments over time close part of the gap without causing vacancy. Sometimes selling the weakest properties and keeping the strongest ones improves the whole portfolio.

You’re right about scale though. Operating costs and insurance tend to make a lot more sense when they’re spread across more units. That’s why a lot of investors eventually move from scattered SFHs into small multifamily.

And you’re definitely not the only one having this conversation right now. A lot of landlords are reassessing their portfolios because of insurance alone.

You hit the nail on the head. I agree with not seeing prices reverse anytime soon. I honestly cannot remember a time insurance ever went down. If this was a fluctuation and we could expect to see decreases, it might make sense to weather the storm for most of the properties. But it seems it's only going to continue going up outpacing rent increases.
100% on the maintenance as well. CapEx will absolutely eat your margins up.
I have toggled back and forth with selling them all or selling about half (3 properties & the worst performing ones). This would allow me to better be prepared for CapEx on the remaining half and essentially cut the losers.
Funny enough the small MFH is what I would plan to keep. They are self sufficient, spread vacancy risk out, cashflow better, generally better tax benefits since they are more expensive. It's a no brainer honestly - MFH only from here on out.
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David F.

Member since 2018 · 113 posts · 136 votes

7mo

I’m certainly an investor who drank the “your profit will only go up over time” Kool-Aid. I was told by many that my payment would stay about the same, and rents would only go up... Sigh….not true.

I bought 5 SFH rentals in my local market the past 6 years and rents have softened, and insurance/taxes are going up quickly. Plus, the landlord laws are getting tougher.

My big takeaways are:

1) diversify investments more in the future

2) I can plan and research all I want, but the market’s gonna do what it’s gonna do, so the better skill set is to be adaptable as I go.

3) past performance of any investment is no guarantee of future performance.

4) take all REI coaching or advice with a grain of salt.

5) SFH rentals is a LOOONG game

I still like my small portfolio, but it’s not performing very well right now, so I might sell one or two and get more diversified.

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @David F.:

I’m certainly an investor who drank the “your profit will only go up over time” Kool-Aid. I was told by many that my payment would stay about the same, and rents would only go up... Sigh….not true.

I bought 5 SFH rentals in my local market the past 6 years and rents have softened, and insurance/taxes are going up quickly. Plus, the landlord laws are getting tougher.

My big takeaways are:

1) diversify investments more in the future

2) I can plan and research all I want, but the market’s gonna do what it’s gonna do, so the better skill set is to be adaptable as I go.

3) past performance of any investment is no guarantee of future performance.

4) take all REI coaching or advice with a grain of salt.

5) SFH rentals is a LOOONG game

I still like my small portfolio, but it’s not performing very well right now, so I might sell one or two and get more diversified.

Yea this is exactly the thing. I'm primarily in the stock market and that's part of my frustration. My stock market gains have absolutely dwarfed my RE gains the past 5 years. It's not even close. And the S&P 500 just dipped below the SMA50 and SMA100. This is a perfect time to be primed to enter the market. We know it recovers. I mean if I wait until a 15-20% dip, take a margin loan and then buy leveraged ETFs, that is an easy 30-40% gain in less than a year...I mean why would I waste my peace of mind worrying about vacancy, rehabs etc? Or if you don't want the risk, robinhood HYSA is paying 4.25%. DIV I think is around 6.5%
And I'm here thinking what I can change to lower expenses and increase income. I could refi a property and save ~$350/mo - but I was ideally waiting for rates to come down farther, which I think they will once oil prices stabilize. I'd guess 2 cuts by the end of the year. But that still leaves me with increasing insurance/taxes next year and the year after that. Then South Louisiana WILL get hit by another hurricane (Florida/Georgia/Mississippi, Texas would all effect us too since it's the same few carriers down here) and then boom, we are really in for it.
And then the income. It may make sense to increase 2% or so across the board and see what I can get. This makes it "less painful" but still doesn't solve the problem.
Or what I think makes even more sense is pivoting into STRs. It seems like the "business" route is the route to go. I like RE, don't get me wrong. There's a lot of different niches and opportunity. The market is making it particularly rough, and there's no end in sight.
1 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
7mo
Quote from @Jeremy Horton:

Quote from @David F.:

I’m certainly an investor who drank the “your profit will only go up over time” Kool-Aid. I was told by many that my payment would stay about the same, and rents would only go up... Sigh….not true.

I bought 5 SFH rentals in my local market the past 6 years and rents have softened, and insurance/taxes are going up quickly. Plus, the landlord laws are getting tougher.

My big takeaways are:

1) diversify investments more in the future

2) I can plan and research all I want, but the market’s gonna do what it’s gonna do, so the better skill set is to be adaptable as I go.

3) past performance of any investment is no guarantee of future performance.

4) take all REI coaching or advice with a grain of salt.

5) SFH rentals is a LOOONG game

I still like my small portfolio, but it’s not performing very well right now, so I might sell one or two and get more diversified.

Yea this is exactly the thing. I'm primarily in the stock market and that's part of my frustration. My stock market gains have absolutely dwarfed my RE gains the past 5 years. It's not even close. And the S&P 500 just dipped below the SMA50 and SMA100. This is a perfect time to be primed to enter the market. We know it recovers. I mean if I wait until a 15-20% dip, take a margin loan and then buy leveraged ETFs, that is an easy 30-40% gain in less than a year...I mean why would I waste my peace of mind worrying about vacancy, rehabs etc? Or if you don't want the risk, robinhood HYSA is paying 4.25%. DIV I think is around 6.5%
And I'm here thinking what I can change to lower expenses and increase income. I could refi a property and save ~$350/mo - but I was ideally waiting for rates to come down farther, which I think they will once oil prices stabilize. I'd guess 2 cuts by the end of the year. But that still leaves me with increasing insurance/taxes next year and the year after that. Then South Louisiana WILL get hit by another hurricane (Florida/Georgia/Mississippi, Texas would all effect us too since it's the same few carriers down here) and then boom, we are really in for it.
And then the income. It may make sense to increase 2% or so across the board and see what I can get. This makes it "less painful" but still doesn't solve the problem.
Or what I think makes even more sense is pivoting into STRs. It seems like the "business" route is the route to go. I like RE, don't get me wrong. There's a lot of different niches and opportunity. The market is making it particularly rough, and there's no end in sight.

Doesn't the stock market ONLY increase? 🤑
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Shiloh LundahlPro Member

Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes

7mo

@David F. did you buy the properties in your portfolio at market value or did you buy them under market value? And when you bought the properties, how much did you expect to make in cash for monthly? And what was your overall strategy with them?

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David F.
Member since 2018 · 113 posts · 136 votes
7mo
@Shiloh Lundahl

My wife + I bought our first 2SFH at market value in ‘20/21, and the last 3 at 80-85% of ARV in ‘23/24.

We made a down payment for each to where CF was (breakeven) after all expenses on Year #1, and believed our CF would slowly improve over time. Avg rent for our properties Year 1 was $1,750 and avg PITI was $1,300. But each year our CF has gotten worse due to rising expenses, taxes, insurance. Each property costs $200/mo more to hold than a few years ago.

The overall strategy was the Coach Carson strategy. Buy 5 and pay them off. Trying to decide what to do next. My market has had sales prices soften in the last 6 months.

Quote from @Shiloh Lundahl:

@David F. did you buy the properties in your portfolio at market value or did you buy them under market value? And when you bought the properties, how much did you expect to make in cash for monthly? And what was your overall strategy with them?

0 Reply

Ed O.

Investor · Statewide, MO · Member since 2011 · 819 posts · 427 votes

7mo

Haven't read all the posts in the thread....

anyways: insurance has been a bloodbath. Mitigation strategies: get an acv policy, up deductibles and drop coverage amounts if over insuring.

why have your loan payments moved more than once? We get a 5 year minimum lock... what rates have you been getting recently? Should be able to get mid to low 6s if willing to find the right bank in your area..

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Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Ed O.:

Haven't read all the posts in the thread....
anyways: insurance has been a bloodbath. Mitigation strategies: get an acv policy, up deductibles and drop coverage amounts if over insuring.
why have your loan payments moved more than once? We get a 5 year minimum lock... what rates have you been getting recently? Should be able to get mid to low 6s if willing to find the right bank in your area..
The principal & interest hasn't changed - just the taxes and insurance. The taxes aren't particularly bad since Louisiana has a state income tax (and a small property tax) versus states like Texas that just have a big property tax.
Rates vary - Duplex 4.125, Fourplex 4.625, SFH 1 3.75, SFH 2 7.25, SFH 3 10
They really aren't bad other than the 10% one - that house had a paper profit of $200 after paying the PM (great condition as well). I was waiting for rates to go down then refi it. Loan amount is ~120k, I could sell for 185k (easily, likely a little more). So a refi would probably save me $350/month or so. It still kind of leaves me in the same boat though - ROE isn't great, deductions are locked in and passed on a passive losses etc.
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Alecia LovelessPro Member

Member since 2019 · 3k+ posts · 2k+ votes

7mo

@Jeremy Horton I have multiple policies with my carrier. Last year when mine renewed one policy in particular was slated to increase by about $800. My independent agent called her contact at the company and told them that not only would she be shopping all my policies around but that she was going to start shopping her other clients policies around.

The insurance company said they’d get back to her and about a week later sent her a letter that my policy was only going to go up by $40.

Two months ago my first policy of 2026 came up for renewal with the same company. It’s got two properties combined on it and was $5 cheaper than it was last year.

1 Reply

Jeremy Horton
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Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Alecia Loveless:

@Jeremy Horton I have multiple policies with my carrier. Last year when mine renewed one policy in particular was slated to increase by about $800. My independent agent called her contact at the company and told them that not only would she be shopping all my policies around but that she was going to start shopping her other clients policies around.
The insurance company said they’d get back to her and about a week later sent her a letter that my policy was only going to go up by $40.
Two months ago my first policy of 2026 came up for renewal with the same company. It’s got two properties combined on it and was $5 cheaper than it was last year.

Interesting, seems like I need to get with my broker first thing. Where are your properties located? I'm in south Louisiana, a lot of our increase has been due to storms in the south the last few years
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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

7mo

Some thoughts:

1) How much research have you done on the reason your property taxes have increased?
- Increased millage rates?
- Increased market value?
- Increased taxable value?

Cities will over-tax investment properties of you let them!

2) Same question on insurance:
- What commercial blanket policies have you looked into?
- What's the cost difference between policies for replacement cost & just covering the mortgage amount?

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Jeremy Horton
OP
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Drew Sygit:

Some thoughts:
1) How much research have you done on the reason your property taxes have increased?
- Increased millage rates?
- Increased market value?
- Increased taxable value?
Cities will over-tax investment properties of you let them!
2) Same question on insurance:
- What commercial blanket policies have you looked into?
- What's the cost difference between policies for replacement cost & just covering the mortgage amount?

Property taxes increased primarily due to the market value - seems a reassessment results in an increase regardless of what the market value actually is.
I honestly haven't looked into a commercial umbrella policy - sounds like this is something I need to do. I figured it was more expensive, but there may be an opportunity here. Same on the replacement cost - I looked at this a couple of years ago, but didn't do it since the difference wasn't much. It may be time to look into that again. Or just insure for the mortgage/loan amount.
Thanks for your thoughts - and of course the stock market only goes up (just like my margin loans). Lol.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
7mo
Quote from @Jeremy Horton:

Quote from @Drew Sygit:

Some thoughts:
1) How much research have you done on the reason your property taxes have increased?
- Increased millage rates?
- Increased market value?
- Increased taxable value?
Cities will over-tax investment properties of you let them!
2) Same question on insurance:
- What commercial blanket policies have you looked into?
- What's the cost difference between policies for replacement cost & just covering the mortgage amount?

Property taxes increased primarily due to the market value - seems a reassessment results in an increase regardless of what the market value actually is.
I honestly haven't looked into a commercial umbrella policy - sounds like this is something I need to do. I figured it was more expensive, but there may be an opportunity here. Same on the replacement cost - I looked at this a couple of years ago, but didn't do it since the difference wasn't much. It may be time to look into that again. Or just insure for the mortgage/loan amount.
Thanks for your thoughts - and of course the stock market only goes up (just like my margin loans). Lol.

How can you challenge the assessment?
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1 Reply
Jeremy Horton
OP
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
7mo
Quote from @Drew Sygit:

Quote from @Jeremy Horton:

Quote from @Drew Sygit:

Some thoughts:
1) How much research have you done on the reason your property taxes have increased?
- Increased millage rates?
- Increased market value?
- Increased taxable value?
Cities will over-tax investment properties of you let them!
2) Same question on insurance:
- What commercial blanket policies have you looked into?
- What's the cost difference between policies for replacement cost & just covering the mortgage amount?

Property taxes increased primarily due to the market value - seems a reassessment results in an increase regardless of what the market value actually is.
I honestly haven't looked into a commercial umbrella policy - sounds like this is something I need to do. I figured it was more expensive, but there may be an opportunity here. Same on the replacement cost - I looked at this a couple of years ago, but didn't do it since the difference wasn't much. It may be time to look into that again. Or just insure for the mortgage/loan amount.
Thanks for your thoughts - and of course the stock market only goes up (just like my margin loans). Lol.

How can you challenge the assessment?
I would compare to the neighbors houses that are similar value in the same area and see what the difference looked like. The primary difference should just be the square footage, and possibly what the house last sold for.
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Henry Lazerow

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

7mo

Kind of like what @Stuart Udis says you need different type of rentals that can eat these increases. For example a 4 unit I have in a class B+ part of Chicago my insurance went up $2000 last 2 years and property taxes went up roughly $1500 so $3500 total higher annual payments. But the rents are $7000 a month so its a tiny fraction of the costs and the gross rents have increased by $6000 annually the last two years so it actually cashflows higher then 2 years ago, even after those tax and insurance increases.

Regardless though zoom out, its unlikely tax and insurance will long term increase faster then rents they all should roughly track inflation. There will be years one increase faster and other years one increase slower vs the other. Hire an attorney to fight the property tax, for 2026 I just got a letter saying it will actually drop $800 as the attorney won the dispute.

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Carl Mcknight

Rental Property Investor · TN · Member since 2013 · 54 posts · 50 votes

7mo

Quote from @Jeremy Horton:

And it's the time of year when some of my rentals homeowners are up for renewal...big increases again across the board. Increases in property taxes across the board as well.

Duplex: PITI was $616/mo, to $696/mo, to $817/mo to $889/mo. A 44% increase. In 4 years. Rents for a total of $1350/mo.

SFH 1: PITI $1100, up to $1287 and now $1496. A 36% increase. In two years. Currently rents for $1500.

Fourplex PITI was $919. Now it's ~1300. A 41% increase. In 3 years. Currently rents for $2650 total.

SFH 2: PITI from $778 to $1055. A 35% increase. In 2 years. Rents for $1350.

A few others I haven't gotten notices for, but I know what to expect.

Now the question - can I increase the rent across the board ~40% without losing to vacancy? The obvious answer is no. So we can see that insurance and property taxes are vastly outpacing the allowable increases in rents. One month of vacancy is generally worse than leaving the rent the same. Never mind 2-3 months of vacancy. That can almost wipeout cashflow for the year.

I have also NEVER seen insurance go down. So we can expect this trend to continue. A big storm sometime this year and we're absolutely toast.

So what to do?

Hold the LTRs? I don't think it makes sense. I think LTRs ONLY make sense with SCALE. Meaning apartments, townhomes, trailers etc. Something with shared systems. These one off SFH make sense only for a quick flip or BRRRR for a year and sell (for capital gains).

As far as the tax deductions offsetting income - I have a W2 "high earner" so the depreciation losses are passed on, meaning I'm locking up passive losses. Which is essentially pointless. So there's no gain for me there.

Long story short - I think that's it for me in the SFH LTR space. I just don't see the returns. The money from these rentals would do better in the stock market w/ less risk and less work. When the market drops >20% I'll buy leveraged ETFs on margin with this money. Yes I will keep a healthy cash pile, but I prefer to use margin in this case. If I get margin called I'll use my cash (which I have no problem investing in a down market)

I'm going to plan to sell these off in the next several months and see what I can do to minimize my tax burden. From there it will be running a business. I have figured out that to get the most out of RE you essentially need to have a RE business - wholesaling/flipping/LTRs at scale/STRs etc.

I think I do much better in my W2 than an RE business and I have several business ideas I'd like to pursue. I purchased a plot of land off a major road here about a year ago. So that's going to be the next step. I actually think a business beats RE.

Anyone else in the same boat?

Hey Jeremy, i'm in kind of a similar boat: though we bought back in 2008-2012 when prices were severally marked down and put long term mortgages fixed rate mortgages on the properties, this has helped our portfolio overall. Also, I had invested in a State (CA) where the property taxes can only go up about 1% per year (although the radicals are trying to change that), which has also helped the portfolio. The insurance increases are a whole other issue. CA has rent control which makes it very difficult to raise rents to offset massive increases in insurance costs, for now we are still doing well, but I can forsee in the future selling everything due to the returns just not keeping up with other less time consuming investments. If you are already at the point where you've realized your rentals are not going to be doing as well as you''d like here shortly, i'd sell.

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

7mo

I look at real estate itself as a business. Without a plan to expand & scale to a point where it is actually a business, or just being at the right place at the right time, it's going to be hard to make it work as a debt instrument that outstrips the costs of ownership. SFHs are much harder to scale so that also plays into the equation. It's a tough equation clearing $200 per door if you only have 5 or 6 doors, less tough if you have 50 or 60 doors.

When I started in RE I literally was just looking for someplace to park cash that would make a better return than what I had in the bank and would diversify out of just being in the market with my IRAs. Lucky for me this was just after the crash and I live in a place where I could buy houses for $25-30k (I actually bought a house twice using a credit card [cash advance]). So some of that was just dumb luck of timing and some of it was recognizing a good opportunity at the time and some of it was a bunch of sweat equity and some of it was living in a market that was about to experience a lot of population growth.

It sounds like you have a lot of headwinds against you. In places where there are a lot of RE headwinds I look at rentals as a relatively low return, safe place to park principal and play the long game. In terms of making money there's no question that a successful business (including one that revolves around RE) is going to be more successful. The real lesson is that you kind of have to be all in or all out; there's not a lot of success in being a dabbler.

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Jeremy Horton
OP
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
6mo
Quote from @JD Martin:

I look at real estate itself as a business. Without a plan to expand & scale to a point where it is actually a business, or just being at the right place at the right time, it's going to be hard to make it work as a debt instrument that outstrips the costs of ownership. SFHs are much harder to scale so that also plays into the equation. It's a tough equation clearing $200 per door if you only have 5 or 6 doors, less tough if you have 50 or 60 doors.
When I started in RE I literally was just looking for someplace to park cash that would make a better return than what I had in the bank and would diversify out of just being in the market with my IRAs. Lucky for me this was just after the crash and I live in a place where I could buy houses for $25-30k (I actually bought a house twice using a credit card [cash advance]). So some of that was just dumb luck of timing and some of it was recognizing a good opportunity at the time and some of it was a bunch of sweat equity and some of it was living in a market that was about to experience a lot of population growth.
It sounds like you have a lot of headwinds against you. In places where there are a lot of RE headwinds I look at rentals as a relatively low return, safe place to park principal and play the long game. In terms of making money there's no question that a successful business (including one that revolves around RE) is going to be more successful. The real lesson is that you kind of have to be all in or all out; there's not a lot of success in being a dabbler.

You bring up some good points - thanks for the perspective. It is interesting about the "grey" area - hard to be successful unless you're 100% in. That's another tough thing, I work out of the country frequently. Makes it difficult to manage anything, not actually being there.
Initially the deals on paper looked good - maybe underestimated some CapEx here and there, but I just did not see the insurance thing coming. Then a lot of it was my expectations from reading online - "Rents go up but your payment stays the same" - that's just not the case in my area. Same with appreciation - Louisiana specifically has some of the lowest appreciation rates in the country - and now cashflow is fizzling away due to rising insurance rates.
I may take a slight L on one property - it's the selling costs, realtor fees specifically. May be worth it to get my license just for the next couple years (I've taken the education, just need to go take the state exam) to reduce the selling fees. Or FSBO and offer the buyers agent 4% so I can actually get them to come view the property.
I've had thoughts about basically doubling down too - really turning it into a business w/ advertising, website, SEO, skip tracing, direct mail etc. I guess at this point I would need to partner or something. I can bring the $, I just don't have the time or knowledge of someone that does this daily
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Well I think Insurance just put the nail in the coffin

Well I think Insurance just put the nail in the coffin

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