All Forum Posts by: James Jenkins

Thanks for replying, Neil. I was very general by intention. I find it better to engage with investors 1:1 or in small groups. But, since you asked, here are a few items to be very aware of when you're reviewing your insurance program:

Matching the property to the correct type of policy: Every type of property (single family, 1-4 multi-family, 5+ unit multi-family, vacant, rehab, commercial, etc. All have different needs and need to be matched up with the right type of policy. Most insurance professionals can provide a good policy for a traditional single family rental, but for any complex or complicated portfolios, you need to be working with someone who has specific expertise for the REI market and client.

Cause of loss form: There are three categories of coverage; Basic, Broad and Special. Each builds on the last. There are many concerns here, and restrictions that vary by company based on the age and renovation history of a property.

Valuation method: Actual Cash Value will deduct depreciation over time from your claim settle (which can be thousands of dollars), while Replacement Cost Value will not deduct depreciation, and will almost always result in a claim settlement being larger by several thousand dollars.

Theft Coverage: How does your policy handle theft claims? Are there restrictions on the circumstances where they will honor theft claims? Do they make a distinction between the fixtures and features of the property itself, and any tools/equipment/materials you have at the property? (**This is extremely important on rehab projects or flip homes)

Risk Management Concerns: Additional Insured designations, Hold Harmless agreements, Waivers of Subrogation, and other specific policy conditions and limitations. 

All of these items are critically important, and very few agents and salespeople from the well-known big national companies have the expertise and knowledge to provide good advice.

I figured it was a good time to post here, since I had a conversation last week with yet another new investor client who got bad advice from their previous insurance agent. Most people don't know that your typical insurance agent from a big name company has very little experience in working with investors, especially investors that are also contractors or GC's. The needs of real estate investors are very different from the needs of "normal" insurance clients who just live in a house they own, and drive a few cars.

PLEASE, for your sake and the local market as a whole, only work with insurance professionals who can demonstrate a deep and thorough understanding of your needs as a real estate investor. 

It's VERY easy to get a bad policy for a great price. Unless you want the burden of trying to figure out yourself if you have the right insurance program, you need to be talking with me or another local insurance professional who is very experienced in the investor world.

Message me or reply to this if you have questions or want to talk further.

Glad you found it helpful, Paul. If your current agent isn’t big into business and commercial insurance, they won’t be able to execute this strategy correctly. Very few personal lines agents have the right carrier connections to set it up. Let me know what you find out, and I’ll be happy to help if they can’t. 

Hey, folks! I wanted to touch on an important topic that I've run into quite a few times with recent new clients I've brought on. I'm surprised how many people don't even know what's possible when it comes to protecting their properties in the most efficient way possible.

I'm specifically talking about tenant occupied properties here. There's a different solution for flip properties, and that's a topic for another post. Virtually all of the investors I talk to have their portfolio insured where each property has its own policy, its own coverage, its own fees, etc. While this is the fastest and easiest way to get a property insured (if you're only considering the short term), there is another option that may be exactly what you need, especially if your portfolio is larger than 5 properties.

There's a concept called a Master Policy in real estate insurance, where all of your properties can be scheduled on a single policy. With this method, coverage like liability can be shared among all of the properties, and each individual property still gets to select its own deductible, lost rents limit as well as the specific value of the property coverage itself.

One of the biggest benefits compared to traditional insurance strategies is that you completely eliminate many of the fees you normally pay with individual policies. This alone is guaranteed to save you (potentially) thousands of dollars, depending on the size of your portfolio, without sacrificing any coverage or raising any deductibles.

Secondly, and something almost every investor I talk to appreciates, is the cost efficiency of the master policy approach. You get to take advantage of economies of scale. This can be a total game changer in how you approach the insurance and risk management part of your operation as an investor.

If you're wondering why your current insurance person hasn't mentioned this approach, it's entirely possible that they don't have access to a Master Policy program. This strategy is considered "commercial insurance" and so most agents and brokers don't write any of it. You have to get a consultation with a fully equipped broker to gain access to it for your portfolio.

---

So, I'd love to hear from you all on this. How are your properties protected? Do you have a Master Policy? Have you heard of this strategy?

Obviously, I'm available to talk with you personally or just reply here and we can talk more.

Cheers!

--

James

Thanks for writing, John! The simple answer is that the amount of rents is a direct indicator of the risk exposure of the property, along with your occupancy rate which they almost always ask as well. Insurance companies are all driven by Big Data, and they base much of the liability rating on the total receipts for a given property. The property rate is driven mostly by loss history and the details of the property itself (age, composition, condition, etc.), and the property rating and total premium has virtually nothing to do with your gross rents, unlike the liability premium. I hope that helps you with your question. If you'd like to talk further, I'd be happy to talk with you personally. My email is james at jamesismyagent dot com. ALSO, since you have property here in my state, I'd love to compete for the privilege of being your insurance and risk management provider. I'll hope to hear back from you.

Hey, folks! This is my first BP discussion to start. I just found out about BP, and I'm loving it so far. TONS of great info.

Along those lines, I wanted to throw something out there, if it's any value to anyone here. I'm an insurance agent and broker, and one of my big specialties is the real estate market, specifically working with investors. This post IS NOT a sales pitch! I wanted to make myself available for any sort of risk management or insurance topics that you may be facing. Obviously, the needs of RE investors are very differently from the typical insurance client. Most agents or salespeople are not equipped to provide the right advice, or the right products to properly protect the property in question.

Anyways, since this is what I do... I thought some of you might find my expertise helpful. Whether this is your first investing deal and you need advice on how to minimize risk as a landlord, or you've got a large RE portfolio, and you'd like to maximize cash flow and minimize disruption by making sure your risk management plan is as efficient and streamlined as possible. I'd love to get some good conversation going on any topic in the risk management or insurance area.

Also, happy to meet up in person, if you'd prefer. My office is in Addison, but I have clients and referral partners all over.

Talk with you soon. Cheers!

@Sean Ray, You're in a bit of a middle ground spot, frankly. In the DFW market, if you're less than the $150k or so price point, you're pretty much guaranteed to be competing with all cash offers, so getting an financed offer approved is pretty unlikely. Also, the rental market for the $250k and up segment isn't nearly as robust as sub-$200k, generally speaking.

Perhaps, consider finding another investor to partner with on a few flips, to build up your available cash to somewhere in the $100-150k range. Then you could do a couple of flips by yourself, and get to the point a few months down the road that you can do a cash buy-and-hold deal without too much trouble. It's not the most direct route, but you'd have a lot more control over the situation and you wouldn't be at the mercy of your lender, or a very particular seller.

Good luck!