Grappling Insurance

Rising insurance costs seem to be prevalent in every market, not just those in coastal regions.

Our broker smokes Marlboro reds inside her home office and rips phone calls all day- she’s a rare breed with a vast network, and we’re happy to have her in our corner.

Insurance isn’t terribly difficult to understand but navigating the space can be a bit more difficult.

With that said, here’s how we approach property related insurance:

1.) Source the best brokers in each market (90% of the battle)

Each shop typically has access to the same insurance products, but some take the extra step and source other programs/avenues to add value for their clients.

Find these brokerages.

The second somebody says “it is what it is” or takes 2 weeks to respond with a quote, start looking elsewhere.

2.) Tell Our Story

People can’t help you if they don’t know what you’re looking for or need.

We indicate that we’re local to the market, own X properties in the area, focus purely on multifamily, and hope to get quotes as fast as possible.

Early on, we send over a few sample listings/properties to get them priced out.

We then seek out differences in coverages, pricing, and insurers between each brokerage.

We can quickly determine who has access to the best policies and an entrenched network, all while staying up to date on pricing.

3.) Position Ourselves Well

At the end of the day, it’s on us as property owners to withstand increases to all operating costs, let alone insurance.

If a jump in your insurance premium wipes out your numbers, there were likely missteps along the way.

We underwrite annual increases to each operating expense to ensure we can withstand them, while still generating the yields we need to justify our effort.

Also, be cognizant of the location of the asset.

Within the same city, some neighborhoods get crushed by flooding while others don’t have to deal with it.

Insurance pricing will vary accordingly.

4.) Stay Tight

Always look to cut costs wherever you can (this isn’t to say policy coverages).

If your broker has good relationships, there can be opportunities to lean on them for better pricing.

Many people receive the annual renewal, gloss it over, sign it, and continue with their business.

We look to confirm that we’re receiving the best possible terms and pricing each go around.

It’s a mutual relationship, there’s give and take and it’s always worth inquiring about.

If they can’t save you money on the policy right now, they may know of a building fortification program that may in the future.

Seek out every input you can.

It all comes down to sourcing the best talent and then leveraging it to ultimately protect us and the assets we’ve worked so hard to acquire.

Guiding Principles for Broken Arrow Holding:

1.) Focus on supply constrained markets

2.) Underwrite and utilize leverage conservatively

3.) Don’t speculate on future interest rates, rents, or anything else we can’t control

4.) Target locations where we have a competitive advantage

5.) Execute quality work and do things the right way

6.) Hold good assets indefinitely and manage them diligently

Channeling Sam Zell

How an embedded sense of urgency contributes to your internal flywheel:

One of the prominent concepts in Sam Zell’s, “Am I Being Too Subtle” is the importance of moving quickly.

For us, this idea takes shape in several forms:

Communication:

We always seek to answer emails/calls/texts within a few minutes of receiving them.

Brokers:

Brokers hold the keys to opportunities, it’s crucial they know our story/menu and we take every call to stay around the hoop.

Need to be readily available to analyze deals, provide feedback, and do so within minutes of receipt.

Good things don’t hang around for long- we position ourselves to be at the top of the funnel and ready to act if need be.

Otherwise, we’ll be sifting through deals that 10 others already passed on.

Investors/Partners:

If somebody entrusts us with their hard-earned capital, there is no excuse to not return a call or field questions right away.

Capital is the life blood of any real estate business, and our network substantiates this need.

Steward every cent, operate with full transparency, and ensure direct lines of communication are established.

Permitting:

Even if typical timelines are 6 months, you better have a point of contact within the city office and be checking on the status of applications at least every 2 weeks.

The longer it takes to receive approvals, the more holding costs we’ll incur.

Goal is to have the city officials/inspectors know that somebody is monitoring this application and will be constantly circling back until they sign off (likely me).

Construction:

Most projects go awry during the construction phase.

To mitigate any hiccups- we create tight budgets/schedules, and tie payments to the completion of scheduled work.

We’ve worked with our contractors before and they understand we need quality work and to return assets back into commerce as fast as possible.

Once that final punch list is complete, sprint to close out permits or secure your certificate of occupancy.

Leasing:

Talented leasing agents are well worth the expense.

Potential tenants are likely sending the same request for other buildings, crucial that you’re quick to respond and can work around their schedule.

9pm leasing tour because the tenant works until 8? No problem.

Vacancy is a slow killer, shoot to have new leases signed before the existing tenant is moved out.

Property Management:

Our goal is to source good people for the nice units we provide and ultimately keep them for a while.

Keeping people happy requires a proactive approach and nobody likes to wait 4 days for something to be fixed.

The sense of urgency takes form in active management: maintenance requests are responded to within minutes, common areas/exteriors are cleaned on a bi-weekly basis, preventative maintenance is executed, etc.

48 hours of no responses is a recipe for anger.

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An embedded sense of urgency better positions you for future opportunities and contributes to the efficiency of your operations over time.