Make Sure Your Rental Properties are Insured Properly with Tim Norris

Mike: Welcome to the FlipNerd.com podcast. This is your host Mike Hambright, and on this show, I will introduce you to VIPs in the real estate investment industry, as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week which are available in the iTunes store or by visiting flipnerd.com. So, without further ado, let’s get started.
So, today I’d like to welcome Tim Norris from National Real Estate Insurance Group on the call and, we’re going to introduce Tim in just a second, here. Before we get started, I’d like to recognize our featured sponsors.
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Okay, so Tim, hey, welcome to the show.
Tim: Hey, good to be with you Mike, Merry Christmas, Happy Holidays.
Mike: Yeah, yeah. So, where are you at right now?
Tim: I’m in Kansas City, Missouri. About a mile or so south of the international airport.
Mike: Okay, okay. Well, for those of you that don’t know, Tim Norris is in the insurance business and we’ll let him talk about himself a bit but, one of the biggest challenges I’ve faced, or bigger challenge, is really understanding what you have in terms of insurance as a real estate investor. And when we started working with Tim and his company, it really helped us understand where we had some weak links and where we probably were over insured in a lot of areas and that’s the importance of working with somebody you know. So, Tim, will you take a minute and introduce yourself? Let us learn a little bit about you.
Tim: Sure, happy to Mike. Appreciate the time today. My name is Tim Norris. We have a company called the National Real Estate Insurance Group and, as I indicated, we’re based here in Kansas City. There are about 25 people on staff, and frankly, our company was designed and built around the unique names of the real estate investor.
We figured, I figured out, really, a long time ago, back in the early 90s, when I attended my first REA meeting, all kidding aside, dressed in a shirt and tie because I heard the word investor and I thought, ‘well, I better dress up a little bit, right?’ As I come to find out very quickly, it was more like a flip flops and cargo shorts was the dress code for those REA meetings but, the long story very, very short.
One of the first folks with whom I met, there, was the president,
[inaudible 00:03:13], that’s where we were located at the time and she was basically kind of pushing me to buy a table at one of the vendor shows. I asked, well, gosh, looking around the room I can’t believe no other agents involved. That was back in the day, as they say, and you probably remember those days, Mike. There were 400 or 500 people at a REA meeting in the mid 90s.
And, I thought to myself, well, holy cow, you got all these people with, call it what it is, expendable income. They’re investing in non occupied property. You’d think there’d be 30 insurance agents involved there. People have [inaudible 00:03:44] cars, you would think and homes and boats and those types of nice little amenities.
Come to find out, though, that the one agent that had been involved there, was taking people’s premiums and not buying any coverage. So, very quickly, they figured out, in that group, that there wasn’t much of a trust factor. Well, I told the president at the time, I said, ‘well, I can guarantee you that much, that won’t happen with us.’
Well, went ahead and took her bait and had the vendor table at the show and there was literally, I don’t know, 400 or 500 people there at that vendor show that night and it’s probably been 15 years ago. And, thank goodness I told one of my staff people, I said, ‘I’ll tell you want Jill, you come with me and I’ll give you a day off. You just spend three hours manning this table. I don’t know, there might be ten people there, there might be 1000 people there.
Well, there were literally people lined up to talk to us because they had questions about insurance as it relates to real estate investing. From the fix and flip type model, all the way to the [inaudible 00:04:34] or landlord type model and I started scratching my head thinking, ‘wow, every now and then you kind of fall into something that’s pretty smart.
And I just made a decision then, that most agents, in the insurance business, the property and casualty business, they’re in one end of that spectrum or the other. They only wanted to deal with personalized insurance, the home, the car, the life, those types of things, or they wanted to deal with, what I would call the easy commercial, the retail, the office space, the warehouse, the larger apartments buildings. There’s nobody really addressing that, again, unique need for residential real estate investors, where they’d have to deal with multiple, ownership entities. You might buy properties in your IRA. You might buy them in an LLC. They’re dealing with multiple phases of occupancy.
As I grew in my business as a real estate investor, figured out a lot of folks were investing in other states. Well, nobody was really addressing that from a local basis, let alone from a national basis. And, that really evolved into what we call now the National Real Estate Insurance Group.
Back in 2010, I merged with a company called Affinity Group Management. I think, of which, you’re aware and know. And, they had a program that was very focused on the flip model. It was called renovators insurance. You know, again, four or five years ago, when flipping was kind of the flavor of, flavor of the year as it relates to the types of modeling you would do in the real estate investing world. That’s what they did. They focused on that sliver, if you will, that market demographic that mostly what those folks did was flip.
Well, I was on the other end. I wanted the folks like you, had multiple rental properties, it was more residual in nature, it was more of a static business model. Well, it was a great merger because between those two entities, we’ve grown considerably. To the tune of about, we insure 4400 investors across the country that, approximately 32,000 locations on a monthly basis. Predominately still in that one to four family arena with mostly single family investment properties.
When we built that model around those, again, I’ve said it probably four times now, around those unique needs of real estate investors, we can talk about some of that stuff as we go on if you’d like to.
Mike: Yeah, yeah. One of the things that’s been interesting for me is, I mean, I’ve always thought this about insurance, in that you don’t know what you have until you need it.
Tim: Sure.
Mike: And, from car warranties to other things, it’s like, you never really know what you have. Health insurance on and on and, you know, we were unfortunate to have a claim. We had a fire at a rental property, it was a total loss, a couple years ago. And, that’s what really opened our eyes. Up to that point, it was like, well we probably, you know, I don’t know exactly what we have but, this is what they told us so, we should be okay. In fact, we were okay, we had enough coverage to get out of the situation and, you know, we actually rebuilt the house. And, part of that is because, as a real estate investor, I was able to get the work done quite a bit less than if I had to source it out but, we didn’t, for all the burden and all the things we had to deal with it, certainly wasn’t, you know, we probably, you know I say, made a little money but, it wasn’t…
Tim: Sure.
Mike: …but it certainly wasn’t worth, you know, six month’s lost rent and having to deal with all those things. And it’s one of those things that, even at the time we were putting in the claim, we really didn’t even know what we had. We didn’t know what we were going to get back and, you know, kind of always erred on the side of being a little bit over insured but, that was to protect ourselves from what we didn’t know. And, you know, now that we know what we have and what we need, a little bit more, and a big part of that’s been working with you guys, to help, kind of help explain it and and to understand that we can have different types of insurance on different types of properties, based on what we would do in the event there was a total loss on that specific property, instead of our whole portfolio. It’s been great.
Tim: Great.
Mike: Yeah.
Tim: Again, I think, too, you know, a couple things, and they may sound a little pollyannish, if you will but, one is that in my mind, our job as an advisor, so to speak is to educate, not so much to a level expertise but, to a level of cognizance so you can make a smart decision about the premium dollars that you spend.
Whether you spend with us or not, really, is neither here nor there. The point is, understand it enough to make the right decision, because, frankly, two hours after we have a conversation with somebody, that person’s likely going to forget 90 percent of what we talked about because it’s insurance, I mean for god’s sake. It’s the one think we pay for we never really want to use as to which you alluded.
So, it’s kind of like your prepaid funeral home benefit. But, I guarantee you’re going to use that one eventually.
Mike: Yeah, yeah.
Tim: But, you know, the second point I wanted to make is, that, you know, the best type of insurance is really self insurance. And that sounds somewhat contradictory or counterintuitive but, the more you can self insure the better. Because, at the end of the day, these insurance companies are in the business to do what? To make money.
Mike: Right.
Tim: So, if they can make money by averting themselves from the risk, that makes sense. Not so much out to take, call it what it is, that which you and I would know as maybe indemnification but, take that ability to be indemnified away. But, really, not to over compensate folks for a claim. And really, you touched on it, just briefly there. You got, quote, unquote, a little bit more than, maybe you needed but, at least with our program and not by any stretch to sound like a pitch here, but with our program, the attitude is we want our investors, the clients, the participants in our program, to be indemnified when they need it.
At the end of the day, the more powerful thing that we think we have is somewhat, more than anything is stability and the cost. We haven’t taken across the board cost increase, what I mean by across the board, for all our investor participants, in about eight years.
So, I don’t know about you but, if you had 50 locations and you’re with Podunk Mutual, just pick a company, and even though you didn’t have a claim the prior year but, where they’re located, predominately, in a geographic region, let’s say they didn’t have very good results. Well, you’re stuck with all the other clients with Podunk Mutual maybe paying a 20, 30, 40 percent rate increase. And with 50 homes, you know, that could put a pretty big dent in your cashflow.
So, our attitude is, if we can stabilize the cost, because we’re controlling the market relative to our participants, and keeping the insurance companies profitable, yet still providing appropriate protection, that’s the goal.
Mike: Yeah.
Tim: A little bit different spin on it but, that’s really the goal.
Mike: Yeah. So Tim what do you think with real estate investors, you know, there’s people that are watching our show here that have one property or they have aspire to have some, do you guys focus on the individual investor with, you know, with one to a handful or properties? I know you prefer to, obviously, build relationships that work with people with larger portfolios. But, in terms of a resource, what level of investor do you guys serve?
Tim: Again, it’s going to sound flippant, so to speak but, across the gamut. 80 percent of our portfolio is filled by clients with one to two investment properties. So, we’ll handle the onesie, twosie, so to speak and the larger portfolios. And, of course, I like dealing with the larger portfolios because they’re some complexity to it, maybe some creativity when it comes to how we build that insurance around the business model for the specific investor. It’s- the wonderful thing, about what we do, is it by no stretch, cookie cutter.
We’re able to accommodate the large scale investor all the way down to the newbie, so to speak, that really needs the help, especially on the front end, we’re happy to do that.
Mike: Yeah. So what do you think, with new investors, I know they tend to, you know, they have a friend that’s a State Farm Agent and or, you know, some other brand, and they go set up an annual policy with those folks. What do you think the biggest thing that real estate investors, I don’t want to say doing wrong but, kind of the opportunity they’re missing out on or do you think they’re misinsured or under insured or over insured more often than not.
Tim: Yeah. I think when it comes to the rental, the true rental property, where the investor is a landlord, it’s kind of tough. I hate to say this but, it’s really kind of tough. It’s like boiling water. It’s tough to mess up. Because State Farm, Allstate, you know, those are really, really good, solid companies. I think when you run into issues, especially as a new investor, is when you’re speaking or working with an agent that may not have the experience as a real estate investor. Not so much from the terminology perspective, but the actual hands on experience of dealing with investment properties. It’s in that vacant and rehab phase. That’s where we see a lot of misinformation.
I’ll give you a quick example. I remember, I forget the name of the website. It was one of those bigger pocket type sites, years and years ago, I remember being a moderator on there on the legal and insurance forum, so to speak. And, you get a lot of misinformation that’s promulgated, especially from agents that may just not have the capability or not have the markets to appropriately accommodate that rehab or that flip investor. And I, literally, saw in there somebody that had posted, well go ahead and just put some furniture and some lights in there and we’ll just count it as occupied. Well, I don’t know about you but, that’s, in many states, that’s fraud and that’s a felony and there’s another f word that we could use that we won’t but you could really be, you know what, if you actually do the wrong thing.
The point is, there’s insurance for every phase of occupancy for anything. You can buy insurance for about anything, if you’re willing to pay a premium for it. So, not so much as making a mistake but don’t try to over simply because there is a difference, not just in cost, but in coverage need when you’re dealing with vacant and rehab as opposed to a rental property.
And don’t even for that short period of time, that it may be under rehab or may be vacant, don’t try to skirt that issue by putting the proverbial, you know, round peg in the square hole or square peg in the round hole or whatever it is. Do it the right way.
Mike: Yeah, yeah. I actually know of someone that, had his property insured, had a tenant in there, and the tenant had stopped paying rent, basically, and had moved out, he didn’t even know they had moved out. Then somebody broke in and stole copper out of the house, which the whole house flooded, so there was mold everywhere. It was a big deal. He really had to go round and round with his insurance company because they were trying to say it was a vacant house and you didn’t make us aware of it . . .
Tim: Sure.
Mike: . . .and they were trying to not pay that claim. They ended up paying it. I don’t know all the details but, it was a big issue for him, and the fact is, is it was vacant but he didn’t even know it was vacant.
Tim: Sure.
Mike: He knew it was a non performing property but, and just the fact that you have to call your insurance company for every house and say, ok, it’s vacant now, ok now it’s not, that’s just nuts when you’re a professional real estate investor of any level really.
Tim: Well, and that’s why our program, again, not to pitch here but, our program with the reporting form, it utilizes, every month you’re simply reporting to us any changes to the prior month’s inventory relative to occupancy, relative to coverage amounts, adding locations, deleting locations. We’ve had clients with hundreds and hundreds of properties have gone from a part time administrative person, just dealing with the insurance across their portfolio, to, literally, 20 to 30 minutes a month just making the changes appropriate to whatever change in their business.
Mike: Right, right.
Tim: It’s an easier way to do it.
Mike: So where do you see things going in the insurance industry as it relates to real estate investors over the next let’s say five to ten years. What’s, is it going to kind of stay status quo, is technology making a difference in real estate insurance? What’s happening?
Tim: Yeah. Opinion more than anything. The insurance that we offer in my industry, relative to these investment properties is no different, frankly, than it was 80 years ago. This is dwelling and liability insurance. You can’t reinvent the wheel. I think the methodology may change relative to giving people, especially real estate investors, the more professional real estate investors, if you will, a little more ease of use, a little more capability.
We’ve invested, literally, $300,000, $350,000 over the last year to year and a half into the technology side of what we do to give people, like you, and especially the larger scale investors, the ability really manage their portfolios relative to the insurance 24/7 type thing.
Not that you do anything different than sending an email in and making a change but, to be able to do it yourself, print and/or, you know, copy evidence of insurance for private lenders or for traditional lenders, those types of things. That’s what the people have been asking for and that’s what we’ve got to accommodate. So, it’s a little more, you know, call it what it is, the, not so much the entitlement mentality but, you know, I’ve got to have it now mentality and that’s what I think it’s going to be more and more capable as technology continues to progress.
Mike: Okay, okay, great. And, you guys serve real estate investors in all 50 states? Or are you. . .
Tim: Yeah. All over the country. About a year ago, I think we picked up a location in North Dakota or something like that to make it all 50 states. You got the oil fracking and all that going on in some of those areas and I think that’s going to be a little bit more, we’ve added a lot more locations up there but..
Mike: Yeah, yeah. Okay. And, how do you get to, how are you guys creating awareness with real estate investors that you exist because, you know, in my instance it was finding you through word of mouth, just through. . .
Tim: Sure.
Mike: . . . mutual friends or business relationships and things like that. Do you guys, and I’ve seen some advertising as well but. . .
Tim: Sure.
Mike: . . .how do you, you know, just like all the real estate investing, it’s an extremely fragmented business. So, from a business standpoint, and kind of of an entrepreneurial standpoint, how are you guys finding more customers and what’s kind of going on in the competition for finding new people to work with in your space?
Tim: Yeah, we, we- like any other business that’s growing, you’re always trying to crunch the numbers and see where leads are coming from, where you’re picking up business. Still, about 70 percent of our new business comes from word of mouth, comes from referral, which, I think that’s the best business anyway.
Mike: Yeah.
Tim: And that’s not only, I think, a testament to the type of work that we do in helping folks and all that but it just tells us, hey, maybe we’re still doing the right thing. But, that stated, between different events, I know that I’ve seen you out many, many times, even, not just as clients as friends, but, just we’ve been there together. Events. We don’t do a ton of SEO because, again, I think, predominately that word of mouth, that referral’s really what we want to target. I think showing up at events. I speak to many, many groups across the country on those insurance issues, not in a pitchy type way but an educational type way. I’ll do that probably 10, 15 times a year. Just between all those things and, just the momentum, I think, that we’ve created just being in the space. Even though you said it’s a small space but, it’s a small space filled with maybe what, a million and a half, two million real estate investors, so . .
Mike: Yeah.
Tim: It’s big but small at the same time, if that makes a lot of sense.
Mike: Ok, ok. And how have, I guess big increases and decreases in prices, in some states, it hasn’t really happened, you know, throughout the Midwest and Texas, has been pretty stable but, on the coast where values have moved around quite a bit, what do you guys do to protect, to make sure your customers are protected for, you know, large increases in value, I guess more than anything, where the values are kind of increasing and therefore their insurance levels need to be increasing as well?
Tim: Yeah. We, we do it a little bit differently relative to the valuation. We typically use State Farm and we can just pick on them for a minute or two. You go to the carriers like that and you buy a house. Let’s just use some, maybe Kansas City or Midwest numbers. You buy a house for 50 grand, you put 10 in it and either market it for 100 or you rent it out for 900 bucks, and let’s just say it’s a 1200 square foot single family ranch. Traditionally, you go to those box carriers, if you will, and they’re going to utilize a reconstruction cost methodology, many of them, there are a few out there but, most of them are using what’s called M&SB. Marshall and Swift Boeckh. They’re going to come back to you with a cost to reconstruct that, likely, could be 60, 70, maybe 100 percent higher than what you paid for the property and what the property’s even worth on the open market.
Well, the challenge to that is, at the end of the day, if you use that insurance, the limit that they’re going to engage with you on is only available if you actually rebuild the home. If you can rebuild the home for less than that limit, then that’s really all you’re going to get, quote, unquote.
We do it a little bit differently. What they’ve done, though, before I go much further, is they’re doing that to do two things. One, you’re going to get a little higher cost, of course, because it’s a higher limit.
Mike: Right.
Tim: Two, they’re trying to avoid what’s called a coinsurance requirement. Those policies have what’s called a coinsurance requirement that, basically dictates, in a nutshell, that if you’re under insured, at the time of the loss, that is, you haven’t paid enough premium for what’s really as risk, again, I’m over simplifying this, then they can potentially penalize you at a loss.
Mike: Yeah.
Tim: So, to avoid that, because that coinsurance issue is never a positive thing for anyone involved in the equation, it’s really only a negative thing, they simply, I think, have over insured these properties.
Where, our program, we do it a little bit differently, maybe a 90 or 180 degree spin and that is, if you want the replacement cost coverage, you simply need to insure the property to at least $65 a square foot. And, before you go thinking, or somebody on the call may be thinking, well, gosh, 65 a square foot, I couldn’t rebuild it for that. That 65 a square foot is nothing or no warranty against being able to rebuild it, it’s simply a benchmark to garner that which is known as replacement cost insurance. Replacement cost insurance simply gives you the ability to recoup depreciation that’s initially levied against the claim settlement. That’s it.
If a client or a prospect were to say to us, hey, this is a beautiful duplex in a B+ area. It’s 2700 square feet, it is a cash cow. Got a waiting list of tenants and it will always churn that cash. We would say forget the 65 a square foot, carry enough coverage to be able to rebuild it.
Mike: Right.
Tim: More often than not, though, that’s not the case. People would go take that proceeds from a large loss, raze the property, sell the lot and move on and buy another one.
Mike: Right.
Tim: So with that in mind, that’s where the 65 a square foot would kick in. Garnish the replacement cost coverage in our program, and avoids the coinsurance issue. So, that’s where the big deal is, I think, is most carriers are going to over insure them because of that coinsurance issue more often than not.
Mike: Yeah.
Tim: Go ahead. No, you go.
Mike: One of the things that I thought was really helpful when we kind of sat down to think about covering all of our rental properties was, I mean, in hindsight it seems obvious but, that we didn’t have to have the same type of insurance and the same level of insurance for every property we have.
Tim: Sure.
Mike: I guess I kind of thought of it more of a portfolio level, here’s what I want, I want to keep this simple but, the reality is, and this isn’t the same for every investor, it depends on what part of the country you’re in, what you’re kind of dollar per square foot that you’re in that house for but, there, clearly, are some houses, like you said, that we have, that on this one that I mentioned, we had total loss and it made sense for us to rebuild that house vs. sell the land for nothing. . .
Tim: Sure.
Mike: . . .because, it just made sense. But, I clearly have some houses that we’re in them for, you know, the ARV, the market value, if you will, is way under the build cost and if something, if we would have a total loss, we would literally, just take the money and clear the lot and find a way to, you know, sell the lot or possibly even just give it to the city, you know. . .
Tim: Sure, exactly.
Mike: . . .to avoid taxes. It just, every house has a different kind of business case, if you will, for how it should be insured.
Tim: Yeah, and you don’t want, like you just alluded to, I don’t think you want to over complicate your business model, especially if you’re, you know, a larger portfolioed investor. But, at the same time, you know, those little nickels and dimes start to add up, of course. . .
Mike: Yeah.
Tim: . . .so, if you keep a good eye on it periodically, if it’s once a quarter, again, frankly, once a month, if you’ve got a methodology that you apply to each location, hey, is it this? Would we rebuild it? Then yes, we need to insure potentially the this, it doesn’t take that long to do that even on a monthly basis for 100 properties.
Mike: Right.
Tim: So, if you take the time and get educated a little bit, and we’re happy to do that, whether someone’s our client or not, educate yourself a little bit about what it is you’re paying for.
Mike: Right.
Tim: And then, we always joke, hope you never need it, right?
Mike: Yup, yup, yup. Great. Well, what else do you see going on in the investment space? I know over the past year, you know, investing has become cool again.
Tim: Yeah.
Mike: I assume that that’s feeding your business. I think there’s a lot of, there seem to be a lot of folks, at least in the markets that I operate in, that a lot of kind of out of state investors, by, really, in some instances, over paying for houses but, it’s because they’re keeping them as rentals, and, you know, able to get great financing, which, I assume, a lot of that is kind of fueling your business as well.
Tim: Sure, yeah. We’re growing, we’re growing profitably, which is a good thing, good thing for not only us, of course, but for our investor participants in our program but, I think what we are seeing over here is more shifting, not so much in the insurance side of things, in the investment side of things but, really in the educational space.
I think, with what you’re doing is, you’re getting a lot more real world advice out there that’s available it’s, you know, the back of the room selling that you and I’ve seen for many, many years, I think is really falling by the wayside. Not to say that that’s bad information but, that methodology with not so much the advent of the internet but, the access to information all over the place. . .
Mike: Right.
Tim: I think if you can find a good spot, or spots, for that matter, to aggregate and get information when you need it. It’s like anything else. I think Mark Twain said it. He never let schooling get in the way of his education, right?
Mike: Yeah, yeah.
Tim: So I think that’s what we’re seeing a lot more of is people have access to education. If you’re willing to put the work in, it’s like anything else. What do they say, the average overnight success is what, about 20, 25 years?
Mike: Yeah.
Tim: If you’re willing to put the work in, the information’s there.
Mike: Yeah.
Tim: You just got to go find it and I think that’s what we’re seeing a bigger shift in, is that education space more than anything.
Mike: Yeah. You know I think there’s, I mean, there’s, I don’t know how to measure this or how to validate this but, it just feels, to me, like there is, not to take anything away from the traditional real estate investor but, it just seems like there’s a more, kind of of educated group coming into real estate investing and, again, not to take anything away from anybody, I feel like there’s this, you know, there’s a lot going on in the macro environment, people that are just, basically, tired of working for the man. .
Tim: Sure.
Mike: . . . they can’t count on their company any more, even a company they’ve been at a long time is, there’s no such thing as a blue chip company anymore, nobody’s jobs are safe and I think there’s this general trend towards people wanting to just take their responsibility for their job and their family and their financial situation into their own hands. More than, you know, what I’ve felt like in a long time, I guess.
Tim: Yeah. I would agree with that and it’s beyond the world of real estate investing. I mean, think about, you know, 30 years and the gold watch. That’s never going to happen again. I just can’t see it. Than, again, maybe we’re getting a little, not so much political, but a little philosophical here and I know your and my kids are in that same kind of ball, age range, so to speak. So, I tell them, you got three things. Never stop learning, always be willing to change and provide value and service to others. And if you commit yourself to those three things, you’ll never want for anything. You’ll always be able to provide for yourself and your family.
Mike: Right.
Tim: Whether that’s in real estate investing, it’s whatever you do. I mean, think of the trades, I mean, gosh, go back to welding school. I mean, all kidding aside, go find a welder right now. Those guys set their own hours. They make 100, 120 bucks an hour. Nobody does that stuff. Everybody’s focused on, you know, my wife and I we’re, off on a tangent a little bit, my wife and I joke, the mid 80s when we were in college, maybe late 80s think about some of the majors that existed then. Fashion merchandising, wow, there’s a real great career. . .
Mike: Yeah.
Tim: . . .all kidding aside, so. You know, I think there’s a shift in that, and, I’m hoping, I think there’s an awakening, maybe is a good word, where people want to self suffice, they want to do their own things and they want to control their own destinies. I think, with what you’re doing and, I think what we’re willing to accommodate relative to the insurance and that little piece of what you’re doing, I think there’s some good things happening. It’s just, hopefully, we can hang, and you hate to say it but, turn this ship around that the country is and, hopefully, everything will work itself out.
Mike: It’s interesting times, for sure.
Tim: Yeah, that is for sure.
Mike: Well, great, Tim. Any other words of wisdom you want to share on, kind of real estate, not so much, you know, pitching yourself, we’ll add links to your company and how to learn more maybe how to even get quotes on houses. . .
Tim: Sure.
Mike: . . .below the video. But, any kind of high level words of wisdom just on making sure you’re insured properly with real estate investing?
Tim: I think the one thing, that I would say, is it’s not so much words of wisdom but something to think about, is that, there are certain times, especially, call it what it is, in the phase of a property, from a vacant to a rehab, that you need to make sure that you, you alluded to it with the friend or the person that you knew that didn’t even know that somebody, the property had gone vacant.
Mike: Right.
Tim: It’s like my old man used to tell me. Pay attention. You got to pay attention, especially when something’s going on, whether it’s a drive by, whether it’s a check in, those types of things, what’s going on in that property? What’s going on with your tenant, if it’s a tenanted property?
Mike: Yeah.
Tim: But the one phase that we see, from the insurance prospective, that’s probably, the property’s most at risk is not so much from the storms
[??], believe me, believe it or not, it’s that eviction.
Mike: Yeah.
Tim: If you can pay attention to the eviction, whether it’s a cash for keys program, whether it’s something to lightly, if you will, get that guy out of there, that family out of there, it’s not a good thing, by any stretch but, you can keep it from becoming a worse thing. . .
Mike: Yeah.
Tim: . . .by paying attention to that property in that, what’s called that transitional phase.
Mike: That’s interesting that you say that. I didn’t tell you this but, the house that I had that burned down that was a total loss, the tenant was being evicted that day.
Tim: Yeah.
Mike: They said it was an accident, ok but, that was just a little too much of a coincidence.
Tim: I know. Not to interrupt but we’ve done the research and I forget the source but, 60 percent of property claims are caused by a negligent tenant.
Mike: Yeah.
Tim: 60 percent. So, if you do the math, and maybe this is another little addendum to the words of wisdom. If you don’t encourage and/or require your tenants to carry renter’s insurance you should. Because forget the obvious reason that you should do that is that is because their stuff isn’t covered by your insurance. The not so obvious reason is the liability insurance that’s part of a renter’s policy, actually protects you as the property owner. They leave a candle burning, they leave the stove on, they leave the cigarette falls on the couch while they’re watching TV at night and causes damage to your property, you’re lucky enough to get the rent out of them every month, right?
Mike: Yeah.
Tim: So, if they don’t have any renter’s insurance, you still may have a liability suit against them but, boy, that drawer of default judgments does you very little good.
Mike: Right.
Tim: If they’ve got renters insurance, now you’ve got a deeper set of pockets to go to. We’ve had situations where our clients have engaged in that. Actually gone to the renters insurance. The renters insurance has actually paid the property damage because the negligence was clear cut, obvious and admitted and our client didn’t even have to engage their property insurance so that’s the one little, maybe point to ponder is even though most investors think about it. Yeah. I should probably do that. They engage in it. But, if you’re a numbers cruncher, and 60 percent of those claims are caused by the negligent tenant, maybe you should carry a higher deductible.
Mike: Yeah.
Tim: More than 60 percent of the time you can go back to that renters insurance to get the property damage covered and still enjoy, if you want to use the word enjoy and insurance in the same sentence, still enjoy, maybe the benefit of lower cost by carrying a higher deductible.
Mike: Right, right. Well, hey Tim, thanks so much for your information. I know you’ve got a lot more information to share, and knowledge and a big part of the shift I’ve made in my business, over the years, is really to align myself with smart people and people I trust and value their opinion because, you know, there’s so many things that you don’t know unless you’re aligned with somebody that can just tell you little nuggets like say, have you thought about doing this or, you know, I won’t share them here but, you’ve said some things to me, recently, that really kind of opened up our eyes, in fact, I will say it here, it was really kind of thinking of our business and everything of protecting the assets of my family, you know, more so than just the, the actual properties, when we talked about some of the things, that you and I recently talked about that we’re doing in our rental portfolio. And I hadn’t really thought about, really kind of insurance as part of estate planning, if you will and wealth planning. In fact, you know, it just took a second for that to sink in and realize that wow, that is a part of what we need to be thinking about is how to protect everything that we’ve built up not just an individual house and so, I think that without surrounding yourself with smart people like you on the insurance side and a lot of other people in other, kind of adjacent to real estate investor areas, it certainly makes your life a lot better if you’ve got smart people around you.
Tim: That’s a Henry Ford mindset, isn’t it?
Mike: Yeah, yeah.
Tim: Put a bunch of smart people around you, that’s the way to do it. I agree.
Mike: Well, Tim, thanks so much for your time today. I really appreciate you joining us on the show.
Tim: Happy to do it, man. Merry Christmas again.
Mike: Thank you and, again, we’ll add some links for people to get to you below the video, here and we’ll look forward to seeing you again soon.
Tim: Sounds good. Thanks, Mike.
Mike: Take care, Tim.
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