Multifamily Insurance
Anyone have any insight into the current multifamily insurance market? I manage a portfolio located in the Northeast and am getting crazy numbers for property insurance. 1200-1500+ per unit minimum, even seen a few north of 2500 and 3000 a unit. Broker pro-formas are coming in around 450 a unit and while my brokers admit those are a bit "brokered-up" it should still be in the 500-700 range. I thought underwriting to 1000 a unit was being safe but I guess not.
I would argue that 100% of class C and most of B Houston multifamily is underwater because of insurance. Underwriting at $800 / unit, and actuals at $2500. On a 250 unit property that’s $7mm of value at a 6-cap. Also known as all of the equity. Because of insurance. Anyone have insight on what is/can/will change here?
Our B- Sunbelt property is managed by a top 10 national property manager and we participate in their group policy which has saved our asses on this deal. Our renewal just happened a couple weeks ago at ~$850/unit vs other quotes we received in the $1,400-$1,500/unit range (in-place at acquisition was $450/unit and we budgeted $650/unit). Our coverage includes assault & battery as well which was excluded on the other quotes we received. I think it makes sense to evaluate changing management companies if only to be able to join a large group policy.
Not talking B- sunbelt. Talking class C Houston.
Like 100k units in Houston where the best insurance is 2300/unit
Are these actual properties you company is operating in Houston? Wouldn’t surprise me but this is about twice as much as I’ve been seeing. $2,500/u will decimate the Houston property markets.
Seems like a significant change needs to occur here. Narrative from CREFC Miami was that insurance costs are here to stay but buyers expectations are aligned with 500-700 per unit. 2024 could’ve been a rebound year for deal flow but seems we got another road block.
Are your properties high rise, mid rise, or garden? And what vintage? # of buildings in the complex matters - our garden deals are substantially cheaper than those that are a single building. Additionally, newer = cheaper insurance, but if you have older product with aluminum wiring, stab lok panels, old roofs/boilers, prior loss history, etc…. That’s how insurance runs up. I have not seen any garden deals over 1k/unit in the Boston MSA, and the midrise or high rise product has been 900s to low 1000s so either there’s something not checking the box on your deals, you’re in a flood zone, or your insurance broker isn’t very good
Welcome to the game, thanks for playing!
Insurance is and will remain through the roof. I mean, your laughable broker assumptions notwithstanding, I think that 1,500/unit is probably a best-case scenario in most places for older MF housing stock. Obviously brand new luxury rentals in an area with no major natural disaster possibility is a different story, but in the Northeast I doubt you see anything much under that number. We're seeing north of 2,000/unit even for well-managed affordable housing buildings in NYC.
Just had insurance come in at $1,300 / unit in what I thought was a relatively tame desert / SW market. Granted these were ~ 1,500 SQFT average units, so cost per unit is a bit of skewed metric, but still!
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