insurance cost for older investment houses?

Question

Hello there,

I am thinking of buying my first rental in Florida (either Orlando or Tampa), however I was warned by a friend who bought a few months ago and had to spend 3000$ on landlord insurance. He said that there are only a few insurance company can do landlord policy there, and if your roof is old (like 10 years) then you are out of luck. Generally speaking is it true that insurance company are very strict on roofing age? I hope I can go with cheaper older home, however you probably never know how much insurance would cost until after you bought the house and insurance underwriter approves or denies?

Jared Townsend · Answer

@Feng Ye Insurance costs are rising every year here in FL. I have moved my policies to excess and surplus carriers that bundle all my properties onto a single policy. I pay about $800 per concrete house and $1200 per frame house (ranging between $75k-150k coverage limits) with $1mil liability. The catch is that they want to see that the houses are updated nicely. Its great for BRRR houses where you need to replace everything anyways. Hope this helps!

Shawn McCormick · Answer

@Feng Ye Insurance has become increasingly more expensive in Florida, but not to the extent you should not buy something here. They are finally fighting back against all the fraud that has gone on for decades.

You mentioned you want a 'cheaper, older home'. That statement tells me you will be getting a home that needs updates and likely will be more expensive to insure. Homes built in the 60s or older will need plumbing updates, electrical updates too. Look for galvanized pipes for anything before 1970, look for Federal Pacific, Zinsco, and other electrical panels that insurance companies stay away from. If the house is from the '80-'90s, you'll need to watch out for polybutylene plumbing, in the early 2000's, Chinese drywall. And if the roof, water heater are more than half of their life expectancy, yes, the insurance will be more expensive.

And those are just the bigger systems to worry about. The a/c is the only other big ticket item, but insurers won't give you issue with those. So if you want an older, cheap house, you have to know walking in that these will be issues you have to plan for regardless of what state you are buying in.

Feng Ye · Answer

Thanks AI for the detailed numbers. The premium seems reasonable. My other house in another east coast state cost me 1200$ per year (includes 1M liability) so I expect them to be the same.

Yes remote management is quite reasonable. I just came to know from a friend, he manages two houses in Orlando from California, one is airbnb (he manages booking and use local clean lady) another is long term rental (he uses local handyman, keyed door lock, cameras inside to do showing). I'd rather pay someone local to do that so I am not tied up with management, my local agent said he charges 7% which is very reasonable. From the numbers they look pretty good, far better than the host spot area like Austin etc.

Al D. · Answer

@Feng Ye I bought a brand-new townhouse inland from Tampa in 2016.  Not a flood zone.  A 2017 hurricane resulted in a window screen disappearing.  Since the place was still under the builder’s warranty - and a couple of other, unrelated, repairs were already pending - I asked the tenant to ask the warranty repairman to check on the screen issue while there...  The builder also replaced the screen at no cost - and not a word - to me.

Insurance: I have had the same policy since 2016.  While individual preferences and property-specifics vary, the following should still serve well for basic math purposes: in 2016, my policy cost just over $500/yr.  My 2021 renewal invoice was for over $900/yr.  Asking my insurance broker whether I have the best possible price for my needs resulted in a “yes.”  I found another broker to make sure: Through her, I got a quote for a similar coverage with another insurer for less than $700/yr.

However - surprise - as I was in the process of binding the policy, the broker advised me that (to her surprise) the insurance company no longer issues policies in my zip code.  I did not ask when that changed.  (A couple of things about the zip code - and apologies that I don’t get more specific, for privacy reasons: a good majority of properties in the zip code were built in this century.  As stated previously, this is inland.)  Her next-best carrier would be $1,100/yr.

(My property has a potential option of getting an HO-6 policy, currently quoted at just under $800/yr.  But - due to certain specifics of the property - I choose to not go that route for liability considerations.  For a comparison point on this: a CA rental condo’s HO-6 policy at latest renewal cost me under $200/yr.)

Remote management: I have had properties in other states that I manage/d myself remotely.  In fact, I still have not even seen this very property since before the foundation was even poured.  I use a local - licensed - RE agent for lease-ups.  I am on my third tenant in this property.  In another market, I use an unlicensed - but recommended/trusted - person to show my properties, while I do the (phone/email) interviewing and approval.  That has even included two Section 8 tenants over the years.  And most of these properties are far older and didn’t have builder’s warranty at purchase.  This is 21st century; more things are possible from a distance.  The only thing that has mattered to me is whether the location is good.  Based on your intended target price, I imagine that you should not have a problem finding respectful tenants - but this is certainly not an axiom.

Michael Haynes · Answer

Hello Feng Ye, so you are in California. I grew up in Silicon Valley, Palo Alto. My family lives in Santa Cruz, San Jose, Napa and Los Angeles. I left there during the Vietnam War and never came back. Your opportunity to make money with Real Estate in California is very limited with the buying a Single Family Home to Rent idea. But, that is the same all over the US. You need to watch the youtube videos by Reventureconsulting.com. Nick has one called Buying a Home in 2021=Financial Ruin? Find out why. He has very detailed Graphs and Charts of all that is happening in the US with Real Estate Valuations and What to Buy and Where to Buy. You can also learn from Del Walmsley youtube videos. Try The Five Ways We Make Money With Real Estate video. You need to do a lot of Study and Searches with Zillow in different areas if you want to find a Real Estate property that will even pay for itself. Lastly, you live in California and are thinking of buying something in Florida? One of the worst things you can do is trying to be an Absentee Owner. For me that meant that it would have been better to try and "Farm" one section of the City and not buy "Deals" all over the County or in other Counties as a hands on Landlord. All you end up doing is driving around doing the repairs and collecting Rents and paying Bills. With a small portfolio of Rentals it is hard to pay a Manager etc. and still make a Profit. Enough? Do your Due Dilligence and "Look before you Leap."

Feng Ye · Answer

wow, so much useful information, thanks! I will for sure go to search the maps.

Just like here in California, I don't know anyone who bought earthquake insurance, but so far there's no big earthquake. Flooding in FL would be more often thank earthquakes in CA.

As long as flooding do not happen in Wesley Chapel (or Valrico) I can still look into it, traffic is not as big an issue as flooding.

Michael Haynes · Answer

Hello Feng Ye. You have everything backwards. If your impression of the history of Hurricanes affecting Florida was the way everybody thought of Florida, no one would buy in Tampa. You need to Google, "NOAA Historical Hurricane Tracks" online map to see each area in the Atlantic and Gulf of Mexico for 100 years. Tampa is never hit. Tallahasse and the Florida panhandle are wiped out each year with the storms running up to Atlanta and the East Coast. Central Florida, Orlando to Lake Okeechobee is where all the swamps are. Just heavy rains cause flooding all the time. Wesley Chapel was the place to buy ten years ago and now it is a new Highway, traffic nightmare, an hours drive from downtown Tampa. BP discussed the Flood Insurance problems last year and it seems that everyone wants to buy a Short Term Rental apartment near the beaches to rent on Airbnb. Flood Insurance is a Federal program which cannot be solved by Congress. Look at the insanity of all the new rules and regulations and crazy taxes that this new "Administration" wants to turn into Law! Ten years ago Congress decided to not fix Flood Insurance and kick the can down the road, by just raising the price 10% per year until the whole thing collapses. Thirty years ago, the Builders moved South of Miami to build out the Homestead area where the Turkey Nuclear Power Plant is. Just in time for the 1992 Hurricane Andrew. That destroyed 63,500 houses and damaged 124,000 others. Andrew caused 27.3 Billion dollars in damage and killed 65 people. Do you think that even a tenth of that was paid for by Citizens Insurance Company, the State company of last resort? The only way Flood Insurance would work is if everyone who takes out a Mortagage, anywhere in the US, would have to pay for a Flood Policy. That way the cost would come down and be affordable for the people that live on hills or out in the desert or downtown in lots of big Cities where they would never think that they would ever be affected by a flood. Downtown Tampa has underground garages and is on the low side of a hill on the Tampa Bay. Homeowners Insurance in Florida only covers Wind and Fire damage...not Flooding. Look at the Houston area...there are three rivers that run into a Flood Plain through downtown to the Port of Houston where I used to load Oil and Gas to ship all over on the Tankers. Did you see the two weeks of flooding rains they had last month? Do you think any of them had Flood Insurance? They don't have rising Water damage for all the hundreds of cars that got swamped. There is a lot to consider. BP make Real Estate Investing look like buying Stocks and it isn't. Remember, Real Estate is not Liquid.

Feng Ye · Answer

Hurricane is the first impression when I tell my friends that I am looking into Tampa. From some online search it looks like Tampa is more affected than Orlando. From your data, it looks like cities like Tallahassee would be worse than Tampa, I thought it was the other way.

Also thanks for mentioning Valrico, I mainly looking at the Wesley Chapel area. Both places are quite inland.

One related thing, is that FEMA is changing flooding zone insurance and most of the Tampa residents (near the sea) would be affected. I do not know the long term impact but I would guess inland would be more expensive.

Michael Haynes · Answer

Hello Feng Ye, You now mention Hurricanes in Florida? I was a Merchant Marine aboard Oil Tankers with a Union and we had 120 year Weather Charts onboard. I looked at them 30 years ago and found that the only place in the Gulf of Mexico that had not been wiped out by Hurricanes, was Tampa, Florida. We just celabrated our 100 year anniversary of the only Hurricane in 1921 that had a direct hit on Tampa...so, I used that to target Tampa as the safest place for me to invest my money in a Rental portfolio for my retirement. No one on BP ever considers Weather or Floods or Tornadoes or Hurricanes in their decisions for investing in longterm properties in the States. I just sold my last house in Tampa and I paid Cash for a 3/3 Townhome, on a hill, on the North side of Hwy 60 where all the streets are like new with big homesteads on one to three acre lots and new home developments all around the rolling hills. I am far from the Tampa Bay and the Flood Zones, with no big trees in this Townhome Community to blow down etc. The Valrico, Brandon area is covered with trees and ponds. There are businesses for four miles along the highway coming from Tampa. It has an area around the Brandon Hospital full of doctors offices and laboratories etc. as Florida is about half, retired persons who need easy access to Medical. I have been here for a year and not heard one siren or seen one person on the corner begging for drug money, like in Tampa. The rest of my paid off properties are in Brazil, three hours East of Rio in the Oil Field Capital of Brazil. We don't have ANY Inclement Weather. No Earthquakes or Tornadoes or Hurricanes or Freezes or Floods beyond the Macae River. The Oil Field in front my beach house on a hill, has 200 years of National Oil and Natural Gas consumption. The weather is much like Tampa except that we have wind blowing off the beaches almost every day to keep things cool. We are building a second, large Gas powered Power Plant on the highway to Rio. It is a fishing port and they raise cattle in the surrounding mountains with rivers that run into the ocean along the miles and miles of tourist beaches. I did the five or ten rental houses to a Million plan twice. I plan to start spending more time down there with my Rental Apartments and trading Futures on my laptop for Daily Cash Flow. The one thing that is said about Real Estate is, "Location, location, location." But, they never say anything about, the Weather or the View.

Feng Ye · Answer

Thanks. "Rent was 1% of the Sale Value" I guess you can't find this anywhere now. The example I gave is real, that's what draws me there. Yes the house price has appreciated. Tampa (or FL) is a new area to me, I don't know what's going to happen, maybe there's a hurricane and wipe it all out. But for now, from her number looks like she can get decent cash flow.

insurance cost for older investment houses?

Most Popular Reply