Show Summary

With real estate insurance, you don’t know what you’ve got until you need it. At that point, it’s too late. One other problem – paying for many years to find out that you were over insured, or insured for things that you didn’t really need. Tim Norris joins us today to talk about insurance, and how to make sure you’ve got what you need. It’s not a sexy topic…but you’ve worked too hard to not have your assets protected properly. Don’t miss this episode of the FlipNerd.com Expert Interview Show!

Highlights of this show

  • Meet Tim Norris, President of National Real Estate Insurance Group.
  • Learn why so many traditional insurance companies and agents don’t ‘get us’ as real estate investors.
  • Join the conversation on how to make sure you’re properly insured, and know the right places to consider cutting costs.

Resources and Links from this show:

  • Request Info on Rental Coverage here

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting Expert Interview where I interview successful real estate investing experts and entrepreneurs in our industry.

Today I’m joined by my friend Tim Norris. He’s the president of National Real Estate Insurance Group which is a large real estate insurance group that caters to real estate investors specifically. And we’re going to talk about the importance of being properly insured today, which may include some level of being self-insured. It’s not a topic that gets talked about when you’re not dealing with insurance companies that focus on real estate investors because they don’t quite get this. They want to be able to overcharge you.

I should also say that National Real Estate Insurance Group is one of our platinum sponsors of this show and actually the insurance company that I use for all of my rental properties. Tim is one of the best resources I know in the insurance space by far, and actually a good friend of mine, so happy to have him here today. Before we get started with him though, let’s take a moment to recognize our featured sponsors.

RealtyMogul.com is an on line market place for real estate investing, connecting borrowers and capital from accredited and institutional investors. Get a rehab loan fast and close in as little as 10 days with rates starting as low as 9%. For more information, call 888 296 1697.

B2R Finance makes loans tailored specifically for rental investors. They can help you unlock equity from existing properties so you can get cash to grow your rental portfolio. That’s huge and it opens up lots of opportunities previously not available to rental investors. Need a loan? Call 855 819 4412 or visit B2RFinance.com today.

National Real Estate Insurance Group is the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.

We’d also like to thank Crestar Funding, MidAtlantic IRA, and Renters Warehouse.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Hey Tim, welcome to the show.

Tim: Mike, good to see you buddy, as always.

Mike: Yeah, good to have you back, actually. So we got a good laugh out of this. You actually have been on the show before, and this is going to be show number 234, okay, and the first time you were on was show number 2. So it’s been a while.

Tim: That is funny. The big two. Right. As I joked with you earlier, I’m the bridesmaid. I was number two.

Mike: Yeah. Hey, sometimes that’s okay. We had to work out some kinks on number one and then we perfected it on number two and…

Tim: Sounds good.

Mike: Awesome. Hey, well great to see you. Before we get started, for those that don’t know you and aren’t familiar with your company, why don’t you take a minute to tell us how you got into this space.

Tim: Yeah, sure. We could probably take more than the 45 minutes, but I’ll try to give you the nuts and bolts story. I was actually an insurance agent with a company called Nationwide, many of you have heard of the national company, and probably about 15 to 18 years ago I started getting involved in real estate investing. What did Will Rogers say, “Buy land because God ain’t making any more of it.”

Well I kind of [inaudible 00:03:24] real estate, God may be making more of it, but quote unquote, to diversify my own income, and have something to fall back on. So I had met at the time, a client of mine, Missy McCall Hammonds. You probably know Missy.

Mike: She’s been on the show before, yes.

Tim: Great lady. Love Missy to death and I consider her a real good personal friend and all of that, and she’s been a partner for a while. But she came to me, again to try to make a long story very, very short, you may not have heard this before. But she came to me again, about 15 years ago, and said, “Do you have any money?” And when anybody asks you that question, do you have money? And one thing led to another, and what she was really doing was, she was looking for partners. She had the systems, she had the processes and she had the people to build a nice real estate business. But the banks would only give her so much money as her, so she needed partners. So she was forming partnerships, LLCs and what I call the white collar side of it. She needed the money coming in to help form those.

So I wanted some depreciation, I wanted some revenue and some cash flow and some insulation, so to speak. And one thing led to another and I think if you would ask her, she would admit that I was her first turn key investor in her program years ago.

At the same time I thought, I need to really get involved with more real estate investors like Missy and I said, “What do you think I should do?” And she said, “Well, we’ve got a group here in Butler County called the IPOA and then you’ve got the REIA groups.” So I went down to a REIA meeting, dressed up in a shirt and tie. I heard the word investors and I thought, “Well gosh, investors, this must be the big deal.” So I show up there really nicely dressed and of course everybody’s there in jeans and flip flops and all of that. And figured out very quickly that market, if you will, from the insurance industry’s perspective was very under-serviced. The State Farms, the Nationwides of the world, they loved handling a guy or a gal with a couple houses, or a house and a couple cars and a boat and an umbrella. And then the Travelers, the Hartfords, the big companies, if you had large apartment complexes, office buildings and retail spaces, they would love to handle that for you.

But nobody was in that sweet spot, what I call, the Yogi Berra syndrome, hit them where they ain’t. If you had six investment properties and you flipped a house every three months, the State Farms were like, “We don’t want that, that’s not really in our space.” And of course it was too small for the travelers and the aforementioned Hartford. So I thought man, there’s got to be a way to do this. So at the time, the company that I was with didn’t do it very well consistently, and a few carriers were out there doing it, at least on the vacants and the rehabs.

And I was at a real estate investors event for National REIA back in 2008 and it was in Orlando. And I’m trying to take you somewhere, I promise. They had a program called Renovator’s Insurance who started a course with the Homevestors franchises out of Dallas, who you know very well. But Mike’s program, Mike Wrenn, his program really focused on the fixers and the flippers. The transactional type investor that needed coverage for 30, 60, 90 days. And my, call it what it is, my bailiwick, I wanted to deal with the Missy’s or the yous who have multiple rental properties that are static in nature. They may be adding and growing, but it wasn’t as transactional. Because to me a transactional investor is a little tougher to deal with, not because they’re not good investors but because it’s a lot more work on the front end.

Mike: A lot of in and out.

Tim: Yes, if you have a static portfolio, rentals are a little bit easier. And this is where I cut the four year story really short. My company, National Real Estate Insurance Group, merged back in late 2010, early ’11, with Mike Wrenn’s company, Renovator’s Insurance, and we’re based in Kansas city, we went from the time I merged and moved to Kansas City four years ago, believe it or not. I think we had about, 1200 clients or accounts, if you will. And we had seven people on staff in our company, plus Mike, Becky and I, the three partners. Becky Coal who’s Mike’s wife and our CFO.

And now, to this day, granted we’ve expanded into other things, whether it be media and private lending associations, there are things that we do collectively. I think we have 120 employees at last count. So it’s been a lot of growth and I think it’s now 9100 account holders. So it’s grown about eight fold in about…

Mike: So roughly how many doors is that?

Tim: We count basically on units. So we’re looking at about at last count, about 45,000 units. Predominantly in the one to four family space. Now of course, if investors, and what you and I would know that Johnny Lunchbucket investor space, they’ll delve into small apartments, we’re happily and easily able to accommodate those things, but most of our business is in that one to four family, if not, predominantly, I think 90% of our doors are in one to four families.

Mike: Yeah. That’s great. And folks all of the time, especially a lot of newer real estate investors, and even people that have been around for a while, it’s kind of like real estate agents, they know somebody who’s an insurance agent, and so they’re dealing with paying for an annual policy up front and having some issues whether the house is vacant or not. Kind of all of those issues that make sense for an owner occupant type house, but just don’t fit the investor space.

And like today even, the stats are roughly that one in three houses in America, or one in three homes in America is owned by a real estate investor. And so it’s kind of crazy that there’s not more knowledge out there, I guess there’s not more sources of insurance companies, for example, of how to serve that crowd of course, certainly the institutional folks have figured it out. But a big part of that one-third of homes in America is really a lot of smaller mom and pop type investors that own between one and probably ten houses.

So talk about why that is. Why are there so few… because you used to be on the other side, the agency side, why don’t they get us?

Tim: I don’t know. I don’t think that’s honestly anomalous to just the insurance side of our industry because it seems like on the education side, there’s a lot of different facets, if you will, it’s almost an under the radar industry still. I think when you get companies like Lowes and Home Depot that started over the last few years to really take notice of what we do as investors as more of an industry, I think it’s changing. I think with the internet and the ability to garner information literally on your fingertip on a smart phone, it’s changing. I think it’s changing very, very quickly.

But I still think the way insurance is done, at least with that, call it what it is, that interpersonal relationship predominantly with an agent. Sometimes that agent is on an 800 number on line, but still there’s that, call it what it is, how do I put this in a good way? Call it what it is, that intimate relationship. That agent that your parents had growing up, that’s what people do. And that’s changing a little bit with the ability to garner that information, and literally at the touch of a button or your fingertips. I don’t know, I think it’s just, it’s so new as an industry still. Even though it’s matured, it’s still new from a recognized perspective, as an industry.

Mike: I think probably because it’s so fragmented. I mean there’s just so many mom and pops that own one or two houses here and there, and I think that’s part of the problem. It’s just so fragmented.

Tim: Yeah. Our numbers, at least in the insurance program, to back that up, our average client owns less than five units. And that counts the ones that have 200, and it counts the ones that have 1. But our average is a little bit less than five.

Mike: Right.

Tim: You know, depending on your perspective, that’s not a bad thing. There are more people to serve, if you will, versus having 400 clients across the country that everybody was after. I don’t know, you probably have better numbers than I have, but the last I heard there were two million plus real estate investors in the country. That could be Joe and Jane Smith with one location or it could be an aforementioned Missy McCall with how ever many she’s got. I don’t know how many she’s got now, but still. I think it’s a good thing honestly.

Mike: Yes. It opens up a lot of opportunity but hopefully, for folks listening to this show, that are looking for insurance, they’re going to realize here when we talk a little bit that there might be some better options out there than what they have today.

So one of the things that was interesting when we first met and we have our rental properties insured with you, and we have for years, was the discussion around this idea of self insurance. And I’ll say I do that in my high health insurance. I have a high deductible plan where I cover any instance we have, problems that we have, which, knock on wood we have had very few issues. We’re kind of self-insured for that first whatever it is, $6,000 or $7,000 for my family.

But I think most people that deal with a traditional insurance company for their investments, I guess even for their homes. I think most people feel like, for their individual homes, for their personal homes, that they’re over insured. Like insurance company says, no, we have to insure it to that value. And you’re like, I could never sell it for that. I don’t know if that’s just a gimmick to get you to come in, or what it is.

Tim: It might be a strong word, but you’re right. I think a lot of insurance companies, I think what they’re trying to do, and we could get into a lot of the idiosyncrasies and technicalities of how most policies work, but typically you have to deal with an issue called co insurance. In other words, you can’t take a building, let’s just take a single family, that’s actually worth, if you will, and that word “worth” quote unquote, how many worths are there in the tax value, appraisal value, reconstruction value, which is different from replacement costs, which is a term most of us affiliate with the insurance world.

By the end of the day what most of those carriers are doing is trying to avoid what’s called a co insurance issue, for lack of a better term. Trying to keep it in layperson’s terminology. And what that again in a nutshell means is you can’t underinsure a property and expect to get the full, quote unquote, “benefit” of the insurance. So if you’ve got a building that would cost you $250,000 to rebuild, you can’t insure it for $100,000 then expect to get a claim paid, quote unquote, in full less the deductible.

If you think about it, the theory of insurance is that everybody that is participating in the insurance, call it what it is, world, is putting enough money in this big bucket, so when a claim occurs, like we had tornadoes blow through the area yesterday, knock on wood, not much damage we heard. But that there’s enough money going in that bucket so when claims occur, there’s not only enough money there for people to get paid and their properties to get repaired, but obviously for the insurance industry in general to make a profit. Because at the end of the day, I’ve joked with you before, believe it or not, these insurance companies are in the business to make money. That’s really what they’re in it for.

So the co insurance issue really relates to being, call it what it is, sufficiently insured. You’re paying enough premium into that proverbial bucket that when a claim occurs there’s enough there for people to get paid. So what these carriers did, and I can go way off the beaten path here, especially after Andrew hit, I believe it was in ’92 and before that it was Hugo hit the Carolinas in ’89, there were a lot of guaranteed replacement value policies in place. When Hugo hit the Carolinas, I don’t know if you remember when Sears was with All State? That was back about that time.

The problem was, they were guaranteeing that they would build these properties back, even though they may have only been insured, let’s say one property was insured to $100,000, it cost them $150,000 to rebuild it. And on one property, okay, they didn’t collect enough premium to offset that additional $50,000 risk. Well when you see tens of thousands of properties that were literally destroyed in an event like that, well there was a lot less money in that bucket then was needed to repair those.

So what happened was then insurance companies started to, for lack of a better term, making sure that they had enough premium going into that bucket. So what you see even today is, even though a property, you may have paid $100,000 for it, it may be worth ARV, $125,000, you’ll get an insurance company come in and say, “You need to insure that to $180,000.” You’re left literally scratching your head. What do you mean $180,000? I just paid $100,000 for it, I could get another one for $100,000. All they’re doing is saying, “Well you need to put enough in that bucket to make sure that if we ever have a catastrophe again, that there’s enough there to pay it out collectively.”

Mike: I see.

Tim: You used the word, gimmick. Let’s again, not the proper word, but it’s true. It is true. It is a gimmick. Because the insurance company doesn’t want to evoke what I’ve kind of eluded to, the co insurance penalty. Meaning, you are underinsured by X percentage and policies have different co insurance requirements. Eighty percent, 90%, 100%. You want to try to avoid co insurance because anything that you’re underinsured and I’m trying to keep this high level but very, very simple. Any percentage you’re underinsured could be levied against your claim settlement in a penalty. So if you have a co insurance requirement on a policy of 80%, but you’re only insured to 60% at the time of a loss, that 20% shortfall, if you have a $50,000 claim, you might have a 20% shortfall, a $10,000 before your deductible is taken away and before, what’s called the depreciation is taken away in a claim.

So the reason the gimmick, as you put it, that these carriers have pushed those values higher, they want to avoid those things too. Frankly, they like to get the extra premium of course, but there’s never a good thing when co insurance penalties apply. So my answer is, make sure that you’re sufficiently insured, but if you can find a policy or program that doesn’t have a co insurance or has the ability for you to avoid it, then by all means, avoid it.

Mike: So talk a little bit about the idea of different ways that people could be self-insured. Some of that is high deductible. Some of that is as you start to build a portfolio up, is you can get some kind of blanket policies. And there’s things you can do as you have more and more properties, it’s not like… let’s say you had 50 properties and like you said, a tornado rips through your town, it’s not going to take them all out. It might take a portion of them out. But just talk about some ways that people can, some kind of high level ways that people could effectively self insure.

Tim: Yes. You just kind of hit both of them.

Mike: Sorry.

Tim: No that’s okay.

Mike: We’re done here. We’re done here.

Tim: Exactly. Thanks, guys. Take care. No, but you know, a high deductible. My rule of thumb has always been, if you go back to Episode 2 of Flip Nerd, you probably hear me say the same thing is take the minimum claim that you would ever file and double it. So if you’re never going to file a $2,000 claim on your investment property whether you own 1 or 100, then don’t carry a $2500 deductible or $1,000 deductible or for gosh sake, a $500 deductible. You know go to a $5,000 deductible because the cost savings over a period of time, by the time you do, knock on wood, statistically have a claim, you’re probably going to offset that over a few years. So you’ve put that, call it what it is, that money back in your pocket and then you’ve got a deductible fund, whether it’s real or imagined, you’ve saved that in the form of premium savings.

Now there’s a point of diminishing returns. If you only have one investment property and the difference, you call it what it is, the savings percentage-wise between a $2500 and $500 deductible is 5%. Well that 5% on your one property may only mean an $80 savings for the year. So in that case maybe not. But take that 5%, and now you’ve got 50 properties, and it might mean $3,000 a year difference. And the chances of you having multiple claims frankly aren’t that good in the course of one year.

The other one that you just alluded to was the multiple properties. If you can get with an occurrence deductible versus a per location deductible, now of course a fire is one occurrence and the chances of you having one fire damaging multiple properties, like in Chicago and Mrs. O’Leary’s cow 100 years ago it might have been the case. But today it’s really to do with wind and hail and tornadoes and those types of things. To carry a per occurrence deductible, where let’s say you’re with an insurance company that has a per location deductible of $2500, you have 50 homes and 20 of them are damaged in a tornado or hail incident. Well 25 times, 20 locations times $2500 deductible, that’s your deductible for that incident. You could carry a $10,000 deductible for that one occurrence, likely shave off a considerable amount of premium percentage knowing that you’re limited to that exposure of $10,000 even if there are 30 of your properties damaged.

So if you can work that out, not all carriers do it, and not all geographies within a carrier will allow you. You go to Oklahoma or many parts of Kansas where we are here in the Midwest, most carriers won’t allow you to do that because they’re afraid of the same thing you are. A big large incident like that. And if you really think about it, even with a $2500 deductible per location, I don’t know about you, but you know, we can have a roof put in our area in the homes we’re investing in for a lot less than $5,000 or close to $5,000 at most. I mean you’re self insuring those things anyway. I mean, when push comes to shove, even on a per location deductible, you really don’t have a lot of exposure as long as they’re all insured.

I think there are times that you can self insure an entire property. You get one at a sheriff’s sale, depending on the type of investing you’re doing, for 10 grand or less, or even 15 or 20 grand and you’re going to be flipping it right away. You may be fixing it and flipping it, but until you have some value to it, it’s of significance. And that term, of significance is very, very personal. From the property itself, to go spend $150 per month for that property, that may be worth at that time, less than what the lot’s worth, why do it?

The one caveat I think I’d share with anyone and everyone is that it’s very tough to self insure something of unknown risk. So the property itself, you may know that, that house you just bought at a sheriff’s sale or deeds sale or what have you, is worth 20 grand, you know what you’ve got at risk. But to self insure the liability is a little bit, to me, less secure.

Mike: Yeah. If some kids get hurt on the property.

Tim: Yeah. If some kids sneak in there with a 12 pack of beer at night and you thought, “Well, I’m going to save the money. Oh shoot, I didn’t put liability coverage on it.” And somebody gets hurt, somebody’s getting sued. It’s not just the actual exposure. You may really not have, call it what it is, negligence involved, but it’s the just the cost to defend that law suit, which is predominantly, usually picked up by your liability insurance, that’s what you’re really worried about.

Mike: Yes. Sure.

Tim: There are negligence claims, but more often than not, we call them nuisance claims. Somebody slips and falls at your own property, well everybody gets that attorney letter periodically saying, “Joe tenant slipped and fell and you’re at fault for it, send us your insurance information.” More often than not the insurance company will defend it, with their attorneys of course. They may pay a claim of 8 grand just to get rid of it though you weren’t negligent at all because it costs them a lot less to pay it out than it does for them to defend it.

Mike: Right. Right.

Tim: So something like liability is a little bit tougher nut to crack, I think.

Mike: Right. What kind of advice do you give to real estate investors, this comes up once in a while when I’m talking to people, is what to insure the house for?

Now, as real estate investors, at least in my world, we’re generally buying houses at a pretty significant discount to market value, and so my take has always been, if I have a claim, I guess I could self insure more, but my take has always been, if I have a claim, I want to protect myself from, I guess my opportunity costs of what I could do when I sell that retail. Another way, if I had a house that was $100,000 ARV and I paid $50,000 for it and I’m going to put $20,000 in it, I would have a tendency to insure it more at the ARV level because I hope to get that money back out soon. Some investors are like, “Well, I don’t want spend any more than I have to so I’m just going to insure it for what I have into it.” Of course if you had a total loss then you would… you certainly wouldn’t make anything, you probably would still even lose money.

Tim: Yes. It’s a personal choice. You just alluded to that. It’s really how your business model works. But most folks need to understand that just because there are rare exceptions to this. There are what are called value policy states, where whatever is on that declarations page, if that place burns to the ground, and there are different laws relative to this in different states because the insurance is still driven by the states, there’s no federal oversight of property causality insurance. But with the exception to that value policy state, you can and I know many have, quote unquote, “profited” from an insurance claim. But really that profit more often than not, especially in the real estate investor world, comes from a result of this.

You have a claim and let’s just use a specific example and I’ll just throw some numbers out here, and I’ll keep the math simple, because I was a history major. You have a claim that does $30,000 of reputable damage on a retail basis, where Bill and Betty Smith who don’t invest and don’t have connections to contractors and deals at Lowes or Home Depot or any of that kind of stuff cost $30,000. And let’s just say, to keep the math easy, you’ve got a $5,000 deductible.

Well even on a replacement cost policy or coverage, your initial claim settlement is levied with what is called depreciation. So let’s just say the kitchen that was damaged in our fire was 10 years old. Now in a real claim, depreciation is levied on a line item basis. So you could have a depreciation schedule that is 30 pages thick on a kitchen because cabinets don’t depreciate as quickly as floor coverings do, those types of things. But again just to keep my example simple, let’s just say there’s 30% depreciation levied against that $30,000 claim.

So here’s how your initial settlement will work. $30,000 less your 9% on $30,000. So you’ve got 21 grand, less your $5,000. So your first claim settlement check is 16 grand in my example. And statistically most claims are not total losses, they’re really not. It’s like 99% partial losses. So you get a check for 16 grand. You’re a real estate investor. I used that term retail on that $30,000. Well you could probably go get that work done for 10 to 12. You’ve done nothing wrong but take that check, get the work done, get the property back to a livable or rentable condition and take that difference and put it in your pocket. That’s not profit, that’s just simply, you’re taking advantage of your ability to garner those things at less than a retail basis.

So in our program, even on replacement cost insurance, 80% of the time we payout an ACV claim, or the carrier represent pays out an ACV claim, the insured does not come back for the difference. Why? Because to come back for the difference you have to show that you have exhausted that ACV settlement and show need for, and receipts for the difference up to that $16,000 in my example, or I’m sorry, to that $21,000 in my example. Eighty percent of the time they don’t do it because you and I, and call it was it is, our peers in the industry, don’t pay retail for those things.

Mike: Right.

Tim: So I have a tendency to push investors, especially more seasoned investors such as yourself into that ACV settlement knowing one, most losses are not full losses or total losses. They are partial losses and take advantage of the lower premium you could pay to garner that actual cash value insurance, believe it or not.

Mike: Right. And you know, I was going to say, one of the things that I appreciate about you guys is when we moved over there were so many things as a real estate investor, I had never put a lot of thought into, like insurance. Like we need insurance, but without a lot of thought into, what does that mean? What am I not covered for that I need and what am I covered for that I’m never going to need? So just things like that.

But the biggest thing was the realization that through our portfolio, we didn’t have to have everything that was cash value, that was either cash value or replacement cost. So we ended up having a mixture of some that ended up saving us quite a bit of money because we have some, especially some lower end houses where the square footage is big because maybe they added on a couple of times and it’s a good rental property. But we had properties that were insured for, I mean let’s put it this way, I & have some properties that, you have to do kind of a minimum if it’s an actual cash value, a certain amount for a total lose per square foot, right?

Tim: Yes. In our program you do. And that’s kind of anomalous to our program because we do it just a little bit different. The coverage that we offer is the same coverage, the same policy forms that have been offered for 80 and 90 years in the insurance industry, but it’s more methodology. So your ability in our program to garner actual cash value coverage, again avoiding that whole co insurance issue, is $45 a square foot. Most carriers out there, most have come to realize if you want their coverage, it’s a minimum of $80, $90, $100 a square foot. So we kind of give you that ability to kind of get in the game and avoid that co insurance issue at a lower value.

But I think what you’re eluding to and I can expand on a little bit is, you need to take a look at your portfolio, whether you’ve got 1 or 100 properties and look at, what would you actually do in the event of a large total loss? So if you actually take that property, raise the ground and take whatever actual cash value settlement you got and sell the lot, then why would you ever insure it to rebuild it?

Mike: That’s exactly right. That’s what we kind of realized. Hey, we have some houses that, I don’t have anything that is in the ghetto, but we have some that are in lower neighborhoods, working class, more of a C class neighborhood. But houses there are selling for half of build price or something, so if there was a total loss we would never build… If we built a new house there it would be instantly worth half of what we put into it. So that was kind of looking at it that way. What would we do if we had a total loss? Would I actually fix it back up or would I just give the lot away and take my claim and run?

Tim: Right. And go buy another one somewhere.

Mike: That’s right.

Tim: That’s what most investors would do.

Now there are exceptions to that. Let’s say you bought this beautiful four family that, I’ll give you a quick example, we were in Cincinnati for many, many years and there’s an area of town called Batavia. It’s on the southeast side of town. There was, I’m sure it’s still there, there was a Ford plant down there. So there was always a tenant in line to get into that four family. It was solid brick. You’d never be able to rebuild it for less than, I think it was 800 grand.

But because of the ability to have that thing filled, it literally was a cash cow for that investor, they wanted to be able to rebuild it because if it got blown away or gutted in a fire which was really… because it was solid brick, that was more of a chance something happening was a fire gutting it, they wanted to make sure that they could rebuild it. Because in that case, it was literally a goose laying golden eggs for them every month. If they lost a tenant, boom, there was somebody lined up right behind them waiting for it.

So there are always exceptions to that rule of thumb, to insure the actual cash value. But if you have something that you would rebuild for many other reasons too, then by all means, insure it to rebuild it. And not so much the value that the insurance company gives you, as long as you meet their requirements relative to their guidelines of insurability, make sure you’ve got enough there to rebuild it if that’s what you ultimately would want to do if it was lost.

Mike: Yes. I think the important thing is to work with somebody that you can have these conversations with. That gets what it is you’re trying to do and asks questions instead of just, what’s the address and the square footage. Right?

Tim: Yes. It’s where you’ve got to start everything. But again I think my attitude is I’d rather make a client, I’d rather our team make a client, not so much an expert, but be knowledgeable about certain things that are relevant to their insurance needs and then make decisions about it. They’re not difficult. If it were rocket science I wouldn’t be doing it, that’s for sure.

Mike: You’re a history major.

Tim: Yes. Exactly.

Mike: Awesome. Tim. Well if folks want to learn more about you guys, where should they go?

Tim: Probably the website, NREInsurance. Like November, Romeo, echo, the word insurance, dot com. And we’ve even got a knowledge center on there. As long as I’ve been doing this I’ve written quite a few articles for different places and there’s web and blog posts and all of that literally on issues like actual cash value versus replacement costs, what you and I have talked about. Co insurance, deductible, what deductible you should carry. So we’ve put some pretty good information on the website in our knowledge center. It’s free to use so just go there and check it out.

Mike: Great. We’ll add a link down below and Tim, definitely ap preciate your time today my friend.

Tim: No problem. It’s always good to see you.

Mike: Good to see you. Take care.

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