Dealing with Natural Disasters – Multi-family Real Estate

On question seven here, investor asks, you know, these Gulf states are always getting hit with storms. I think we were just reminded about that. A couple few weeks ago, we’ve actually got some properties in Biloxi. Kyle and I are in some projects not with each other. So we have bring a wide range of responses to this question. And we let you talk about garden place to let you take that one. But, sure, as far as like insurance goes, you know, this is why it’s nice to not be a little landlord, what’s your little State Farm Allstate Insurance, right, we have big kid insurance here, for commercial assets were insured for the loss rents. And when we have a claim, we hire a claims person to fight on our behalf. And they get compensated based on how much the claim is. 

So a lot of times, I’ve actually had like two fires, and we’re full building has burned down twice. And the initial settlement that they gave us was like a third of what we actually ended up with, which goes the show why these claims adjuster guys are just totally worth it. And on a bigger project like this, we have the scales and the means to, you know, the working capital or pay them to get them going to fight or claim for us to get everything that we’re worth. I feel like, yeah, there’s administrative headache, for sure, we may have to pull some money out of our reserve capital. 

But at the end of the day, most times and not like, come out ahead. I’ve gotten like a brand new roof, put on a apartment building one time, which I thought was totally unfair, but hey, I’m gonna take it, I’m gonna take that I got a brand new building built on that one, we negotiated just a lump sum payment to go build something entirely new. I think the only problem is like, it just takes a while. Maybe Carl, you can talk about the garden, place the treat and submit to just kind of work. Yeah.


Unfortunately, you’re working with these big insurance companies. But at the end of the day, you’re also still working with people in human error can still creep in every now and then, which is what happened to us at garden place. So it, you know, we had a big tree that fell. Fortunately, nobody was hurt. There were some high winds in the area, and the tree just fell down. And this is Huntsville. So it’s not like near the Gulf or anything else, you know, they might have, you know, some tornadoes every now and then. But it’s definitely not in Tornado Alley, like in Dallas, or Oklahoma or Kansas or something like that. 

But anyways, it took this was almost a year ago, now we are we are about to finally took 11 units offline, we are finally wrapping up the last four units, but it took forever because the insurance company, just something so simple. They were sending the check. The first the first check, which is where we pay the contractor deposit, they were sending it to the wrong address. So how it was a never changed on their part, I don’t know. But they sent the check three different times over the course of like, you know, three months. And we were just at a loss. But But I do you know, I live here in the Gulf states. Hurricanes is just something that we deal with. You know, it’s not any different than if you’re in California, excuse me, California, and you have to deal with with wildfires. Or if you’re in, you know, Tornado Alley, like I just mentioned, you know, there’s a ton of obviously great assets in the Dallas area. Dallas sees tornadoes on, you know, annual basis, you know, every now and then there’s at least two or three big tornado storms that come through the Dallas area, you know, between the spring and the summer, it’s not uncommon there. And same thing with Oklahoma and Kansas. 

So you know, and then a way up north, you’ve got these crazy blizzards and everything else that can just, you know, take a toll on your property itself, just from the the bitter winters that they have up north. So, you know, it’s like anything else, we each area of the country has their own natural disaster. 

So you just make sure you have the right insurance that is going to cover you like Lane said we have lost rents, which means that for every month, that goes by that, you know, in our case, those 11 units are offline, we’re actually getting paid by the insurance company, the average of those rents, you know, the average for like, I think it was like the last six or nine months, whatever the average rent was for that specific unit. That’s the amount that they give us. So we’re covered there. So yes, it’s never a good situation. I would say to have to file a claim, especially on you know, when you’re talking about fires, I mean, because, you know, at the end of day we are talking about displacing people and having the final alternative housing for them. And then a lot of cases when we have a fire or down units in general. So, you know, we’re certainly sensitive to that. 

But to not, you know, we don’t want to downplay it by any means. But from an investor perspective and a risk profile, we’re covered. And we’re going to take the right amount of insurance out there, you know, I think people often forget that our our number one biggest investor on every single deal is our lender. Our lender is going to have certain parameters and certain guidelines and certain requirements from an insurance perspective that they’re going to require us to do. And Fannie and Freddie is notorious for that. And just having you know, additional coverages and things like that, that, you know, a normal traditional insurance agent is going to say, hey, look, you know, yes, you can take that type of coverage. It’s, it’s cost more, it’s just more of conservative, you know, it’s I’ve had multiple insurance brokers tell me that type of make those type of comments. So you know, they’re gonna require us, so we’re going to be fully covered there.

Yeah. And, and all that debacle is happening, we’re collecting loss rents. And the beauty of that is like, now these assets aren’t decaying on us. They’re not incurring expenses. We’re not having property management of these on top of that, and there’s a bit of a nice little Delta in there that we come out ahead.