David, you asked for a comment on why insurance is going up. I’m a pricing actuary at an insurance company. Home insurance costs are a reflection of what home insurance covers: cost to rebuild property, legal liability, severe weather, etc. all going up. Pretty simple. It’s worse in states with more hurricane exposure (FL), or more stringent regulation (CA). California’s insurance commissioner is an elected position; as a result you have a journalism major that doesn’t understand the nuances of a complex, data-driven industry who is bossing around insurers and creating an inefficient market. Carriers are leaving…lower supply, higher cost. Maybe some day when I’m a big shot like you we can have an episode about insurance. All the listeners would be thrilled about such an exciting topic.
Prop 103 keeps rates low in CA, but that low rate and high costs makes it very difficulty to pencil out for insurance companies. Politics is a minor factor here. It just comes down tot he fundamentals in CA - high costs, high risk and low rates. (Low rate - not necessarily low cost, since assets are expensive here)
@@alexpader7342 prop 103 has been around for 35 years, yet the outflow of carriers didn't skyrocket until the last few years. CA didn't approve any rate increase filings from insurers from early 2020 until late 2022. Politics plays a heavy role in this. Ricardo Lara (insurance commissioner) wanted it on his resume that he stuck it to insurance companies and didn't let rates rise. It will now backfire as insurers leave and the public struggles to find affordable coverage. Thinking about it rationally, rates should have risen to recoup the increased cost of rebuilding, frequency/severity of wildfires, and increase in punitive damages for liability claims. The cost to provide insurance increased, but the department of insurance expected that the cost of insurance did not. It's like if the cost of steel, iron, aluminum increased, you'd expect the cost of vehicles to increase. The public doesn't have a strong understanding of how insurance works, or any empathy for insurers, so Ricardo wants to leverage that for his political career.
From what my agent told me is that so many insurers have left CA that my insurer, State Farm, found it was left insuring a larger percentage of homes meaning their risk was very concentrated in a state prone to large scale natural disasters. State Farm and presumably Allstate suspended issuing new homeowners and rental unit policies for this reason as well as the skyrocketing replacement cost.
David, the reason why insurance rates are going up is because insurance companies are required to only invest in bonds with customers insurance premiums. Bonds are crashing in value because it’s an unrealized loss from rising interest rate yields. Once there are claims (Maui fires, Wildfires, floods, Hurricanes), the insurance companies are forced to sell these bonds at a loss to pay out the claims. This is why insurance is going up in value. It’s because the bonds have crashed in value from the higher interest rates
In FLA part of the issue is the door to door roofing contractors that prey on owners telling them they will get them a new roof at no cost due to storm damage, normally hail. This has created a lot of litigation and pay out costs to insurance companies, and when it doesnt work out the owner is stuck with the bill. The law was recently changed to help lower costs, allowing insurance companies to depreciate the replacement value paid out for roof damage based on age and material type. The root cause is not fixed but allegegdly supposed to help lower costs to owners. The other issue is the impact of storm damage and flooding along the coastal areas.
In regards to the insurance for Airbnb and vrbo, don’t they offer some kind of liability insurance through them? Or is that just insurance on the property?
This is the answer: The two fundamental reasons for insurance increases and availability issues are from the devastating disasters that have destroyed communities, but also insurance company actuaries with giant payouts to disaster victims. Inflation is a the other primary driver here that is hitting insurance company actuaries when the need to payout. Also, in these major disaster areas, all the contractors and building suppliers are completely maxed out with huge competition for resources and time, so costs start rising quickly from there and it all largely ends up on an insurance companies tab. The only viable solution for insurance companies is to raise their rates and/or leave high risk markets. Lots of other local market and state related issues too, but devastating disasters and inflation are the two main drivers for the cost increases and availability of insurance.
David gave some great advice. He suggests comparing your options in a straightforward way. Think about how your current property in Canada is doing, like how much it's growing in value and making money. Then, compare that to what you could get in the US. Good luck with your real estate plans in the US! It's a big step 😊
Open house attendance is slowing down in Palm Beach County. 2 years ago buyers were sending cover letters to sellers. Now, sellers are struggling to get anyone to show interest in their homes. Between insurance rates and HOA fees, South Florida is not worth the headache.
Best bet right now is to put it in a money market fund earning you 5% interest it will go up a little bit as long as interest rates go up hassle free no management no BS 5% interest on your money.
5% interest rate? That's laughable. I'd much rather invest in a $500K property that's appreciating at 3% than sit on $250K in cash growing at 5%. And that's assuming you even have $250K just lying around in the bank, which most people don't.
For Corinne: (because I have fam in DB) I’d also recommend talking to a realtor/property manager in FL to better understand the comparison. They’re building a lot of new construction in your area without a lot of strong demand/wages to offset it and a unit can stay vacant for 1-2 months before you land a tenant. This is the same situation that can limit appreciation; but on the other hand; it could be a good time to get in before everyone else does; and a local agent/investor will be able to tell you that. Extra work is also not necessarily a reason to cash out a property. Do your research on Daytona (or port orange or Orlando) and maybe try to keep the Toronto property and add a FL property
David, thank you so much for all your videos, cant appreciate enough. Recently purchased a 5 bedroom single family home in San Diego, got an offer for 5 year long term lease by Board n care facility, what are the things I should consider when committing for long term lease, thank you in advance
My insurance has doubled, I finally did a cost analysis, and I went with liability insurance on 5 of my free & Clear properties, reducing my expenses 10K a year. I realize there is increased risk, but I don't work for Insurance companies, and don't plan on it. I'm only doing that with about 25% of properties I have. Do you think this is a sign of things to come? (Lakeland , FL)
Anyone else tired of the episodes being an advertisement for all of David’s businesses? Seems to be getting worse and worse. This isn’t the David Greene podcast, it’s the Bigger Pockets podcast. Get back to helping people and stop pushing your own businesses.
Maybe the Canada property is costing her mental state some stress. Maybe there are some political policies coming down the pike that'll be a problem with her triplex. I know in California, I sold mine when the political environment tipped heavily on the side of tenants. Risks were just too high to keep a rental in California there are other states that are favorable towards owners/ landlord s
I'm assuming the insurance is going up overall due to more natural disasters in various places. It may be that insurance company's cannot cover all the output payments without increasing rates over more or all areas as the high risk geographies are really high and in some cases, insurance companies are not even covering those anymore. So gotta get make it up elsewhere. Seems legit. Just a guess on my part, but I can see this making sense.
In CA at least, building age is an issue too. Most homes were built pre 1960 and very few people have fully upgraded the plumbing until it leaks, and even then, they often just do a partial fix since replacing the whole plumbing system is practically akin to rebuilding the whole building. Also tenant vs landlord lawsuits have increased over the years so the minimal $300k in liability coverage often is insufficient if a claim is made. but yeah, lots of reinsurance carriers are pulling out due to the high costs/frequency of natural disasters and that's forcing normal carriers to jack rates up.
David, you asked for a comment on why insurance is going up. I’m a pricing actuary at an insurance company. Home insurance costs are a reflection of what home insurance covers: cost to rebuild property, legal liability, severe weather, etc. all going up. Pretty simple. It’s worse in states with more hurricane exposure (FL), or more stringent regulation (CA). California’s insurance commissioner is an elected position; as a result you have a journalism major that doesn’t understand the nuances of a complex, data-driven industry who is bossing around insurers and creating an inefficient market. Carriers are leaving…lower supply, higher cost.
Maybe some day when I’m a big shot like you we can have an episode about insurance. All the listeners would be thrilled about such an exciting topic.
Prop 103 keeps rates low in CA, but that low rate and high costs makes it very difficulty to pencil out for insurance companies. Politics is a minor factor here. It just comes down tot he fundamentals in CA - high costs, high risk and low rates. (Low rate - not necessarily low cost, since assets are expensive here)
@@alexpader7342 prop 103 has been around for 35 years, yet the outflow of carriers didn't skyrocket until the last few years. CA didn't approve any rate increase filings from insurers from early 2020 until late 2022. Politics plays a heavy role in this. Ricardo Lara (insurance commissioner) wanted it on his resume that he stuck it to insurance companies and didn't let rates rise. It will now backfire as insurers leave and the public struggles to find affordable coverage.
Thinking about it rationally, rates should have risen to recoup the increased cost of rebuilding, frequency/severity of wildfires, and increase in punitive damages for liability claims. The cost to provide insurance increased, but the department of insurance expected that the cost of insurance did not. It's like if the cost of steel, iron, aluminum increased, you'd expect the cost of vehicles to increase. The public doesn't have a strong understanding of how insurance works, or any empathy for insurers, so Ricardo wants to leverage that for his political career.
From what my agent told me is that so many insurers have left CA that my insurer, State Farm, found it was left insuring a larger percentage of homes meaning their risk was very concentrated in a state prone to large scale natural disasters. State Farm and presumably Allstate suspended issuing new homeowners and rental unit policies for this reason as well as the skyrocketing replacement cost.
David, the reason why insurance rates are going up is because insurance companies are required to only invest in bonds with customers insurance premiums. Bonds are crashing in value because it’s an unrealized loss from rising interest rate yields. Once there are claims (Maui fires, Wildfires, floods, Hurricanes), the insurance companies are forced to sell these bonds at a loss to pay out the claims. This is why insurance is going up in value. It’s because the bonds have crashed in value from the higher interest rates
Best thing I did was sell my properties in 2022. I have one left and wish I could have sold it too.
In FLA part of the issue is the door to door roofing contractors that prey on owners telling them they will get them a new roof at no cost due to storm damage, normally hail. This has created a lot of litigation and pay out costs to insurance companies, and when it doesnt work out the owner is stuck with the bill. The law was recently changed to help lower costs, allowing insurance companies to depreciate the replacement value paid out for roof damage based on age and material type. The root cause is not fixed but allegegdly supposed to help lower costs to owners. The other issue is the impact of storm damage and flooding along the coastal areas.
In regards to the insurance for Airbnb and vrbo, don’t they offer some kind of liability insurance through them? Or is that just insurance on the property?
This is the answer: The two fundamental reasons for insurance increases and availability issues are from the devastating disasters that have destroyed communities, but also insurance company actuaries with giant payouts to disaster victims. Inflation is a the other primary driver here that is hitting insurance company actuaries when the need to payout. Also, in these major disaster areas, all the contractors and building suppliers are completely maxed out with huge competition for resources and time, so costs start rising quickly from there and it all largely ends up on an insurance companies tab. The only viable solution for insurance companies is to raise their rates and/or leave high risk markets. Lots of other local market and state related issues too, but devastating disasters and inflation are the two main drivers for the cost increases and availability of insurance.
David gave some great advice. He suggests comparing your options in a straightforward way. Think about how your current property in Canada is doing, like how much it's growing in value and making money. Then, compare that to what you could get in the US.
Good luck with your real estate plans in the US! It's a big step 😊
Open house attendance is slowing down in Palm Beach County. 2 years ago buyers were sending cover letters to sellers. Now, sellers are struggling to get anyone to show interest in their homes. Between insurance rates and HOA fees, South Florida is not worth the headache.
Insane really jealous of people who bought before 2020 and sold in 2021
Best bet right now is to put it in a money market fund earning you 5% interest it will go up a little bit as long as interest rates go up hassle free no management no BS 5% interest on your money.
Lol - that interest is taxed to kingdom come
Online banking savings account gets you 5%
5% interest rate? That's laughable. I'd much rather invest in a $500K property that's appreciating at 3% than sit on $250K in cash growing at 5%. And that's assuming you even have $250K just lying around in the bank, which most people don't.
I wanna switch from a appreciation market to a cash flow market what do u think
For Corinne: (because I have fam in DB) I’d also recommend talking to a realtor/property manager in FL to better understand the comparison. They’re building a lot of new construction in your area without a lot of strong demand/wages to offset it and a unit can stay vacant for 1-2 months before you land a tenant. This is the same situation that can limit appreciation; but on the other hand; it could be a good time to get in before everyone else does; and a local agent/investor will be able to tell you that. Extra work is also not necessarily a reason to cash out a property. Do your research on Daytona (or port orange or Orlando) and maybe try to keep the Toronto property and add a FL property
Next time you record in a hotel, please get at least six box fans, and put them behind you
David, thank you so much for all your videos, cant appreciate enough.
Recently purchased a 5 bedroom single family home in San Diego, got an offer for 5 year long term lease by Board n care facility, what are the things I should consider when committing for long term lease, thank you in advance
My insurance has doubled, I finally did a cost analysis, and I went with liability insurance on 5 of my free & Clear properties, reducing my expenses 10K a year. I realize there is increased risk, but I don't work for Insurance companies, and don't plan on it. I'm only doing that with about 25% of properties I have. Do you think this is a sign of things to come? (Lakeland , FL)
Thanks for the video!
Good stuff, thanks for the insight!
Hey sorry when did you say the book is coming out?
Box FAN?? hahaha..Never noticed.
Anyone else tired of the episodes being an advertisement for all of David’s businesses? Seems to be getting worse and worse. This isn’t the David Greene podcast, it’s the Bigger Pockets podcast. Get back to helping people and stop pushing your own businesses.
Thanks.
Maybe the Canada property is costing her mental state some stress. Maybe there are some political policies coming down the pike that'll be a problem with her triplex. I know in California, I sold mine when the political environment tipped heavily on the side of tenants. Risks were just too high to keep a rental in California there are other states that are favorable towards owners/ landlord s
Toronto is 100% favorable to tenants. It's taking around 9-12 months for eviction. Rent control capped way below inflation
I'm assuming the insurance is going up overall due to more natural disasters in various places. It may be that insurance company's cannot cover all the output payments without increasing rates over more or all areas as the high risk geographies are really high and in some cases, insurance companies are not even covering those anymore. So gotta get make it up elsewhere. Seems legit. Just a guess on my part, but I can see this making sense.
In CA at least, building age is an issue too. Most homes were built pre 1960 and very few people have fully upgraded the plumbing until it leaks, and even then, they often just do a partial fix since replacing the whole plumbing system is practically akin to rebuilding the whole building. Also tenant vs landlord lawsuits have increased over the years so the minimal $300k in liability coverage often is insufficient if a claim is made. but yeah, lots of reinsurance carriers are pulling out due to the high costs/frequency of natural disasters and that's forcing normal carriers to jack rates up.
Fan Boys are something else.
Damn this dude looks tired 😂
"I said no camels!!"
No