CREPN #142 - Underwriting your Multifamily Insurance Cost Per Door

CREPN #142 – Underwriting your Multifamily Insurance Cost Per Door

J. Darrin Gross Insurance, Podcast, Uncategorized

Underwriting your Multifamily Insurance is more than plugging in a number.  

 

Multifamily Investors want rules and systems to make analyzing a deal easy.  If it was easy, there would be no value. Insurance is an operating expense that can vary from seller to buyer and property to property.  Here are some things to consider when underwriting your multifamily insurance.

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Insurance is regional.  

Some insurance companies offer coverage nationwide, but the rates are specific for the territory where the property is located. That’s because different territories have different exposure to weather related events.  

Think about it; the midwest has hail and tornadoes versus the southwest which has hurricanes and floods.  The northeast has long cold winters with deep heavy snow and the northwest has rain.

Each region has a different set of risk that can cause a claim.  

The Prospectus

Think about who put the prospectus together. The seller’s multifamily broker.  The broker has two jobs. The first is to get the listing, and the second is to get the seller as much as he can.  

When writing the prospectus, the goal is to show the highest NOI and value possible.  The expenses are likely a combination of actual and industry averages. I’ve seen brokers who will disregard the seller’s insurance cost and use the industry average because it supports a better NOI and value.

The Seller’s number

What do you know about the seller?  Chances are, you are nothing like the seller.  Does the seller have multiple properties with the carrier he is currently with?  How long has he been with the insurance company? What deductibles, limits and coverage does he have?  

All of these are issues that affect the cost of insurance for your property.  Unless you are a carbon copy of he seller, you are different, and will likely get a different insurance cost.  

Insurance is Subjective

Pick your insurance broker wisely.  Work with an agent or broker that specializes in multifamily, and you will get the best price the insurance company can offer.  

The insurance brokers job is to gather the information.  Then create a story for the underwriter that makes them want to apply all the available credits to get the best rate possible.

About the Author

J. Darrin Gross

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J. Darrin Gross is known to his clients & prospects as the most trusted insurance adviser for commercial real estate insurance. He is famous for helping apartment building and commercial property owners get high quality comprehensive protection at unbeatable rates. Download a free copy of the Real Estate Investors Guide to Commercial Insurance.