76 sats \ 17 replies \ @carlosfandango 22 Mar \ parent \ on: When Money Dies In The 21st Century econ
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It’s not the broker fault. Same thing is happening in California.
Costs increase for insurance companies. Insurance companies raise prices. Customers and regulators complain. Insurance companies leave state. Prices go up for everyone. Cycle repeats
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Im not trying to be hateful, but insurance companies are there to make money.
Its like your bitcoin, would you sell it at 19k now?
That would be a losing proposition, so you would say no.
Insurance companies are doing the same.
If you cant afford the insurance, maybe it is time to sell and live in a new place?
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Agree. California is a third world state
I don’t blame insurance companies. I blame regulation in California.
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The coast is nice but expensive
A lot of it is desert.
Agriculture is still big.
Wine country is nice.
The nice places are expensive
Agreed. Same in Florida.
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We are meeting next week and some more carriers may choose to compete, but the simple answer I get is the increase in replacement costs. Many properties have bank lenders who are now insisting on all kinds of absurd, costly coverage. That's also a factor. In this crazy market I am forced to get second, third and fourth quotes, even though I have been dealing with my main broker for 30 years.
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My mom had trouble getting insurance last year for her multi unit property. The old insurance company left the state.
I think we are hitting a perfect storm in California.
Eventually every private insurer will leave the state and the only option is the government option
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It's particularly tough if there's a loan on the property. My discussion now is in Florida, but I'll probably face the same issues in the northeast in July. Frankly, there's little chance that these buildings can be profitable at this point, which means banks are in real trouble.
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I just got the finalized totals for this year. 260k. Less than last year, but that's only because I am going without wind (hurricane) insurance on a bunch of properties that don't have financing. Owners have been waiting 3 years for companies to pay on hurricane claims. They drag their feet, deny coverage, and kill time. Maybe they count on the dollar depreciating while they drag their feet.
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I remembered a funny story from last year.
The new insurance company appraised the property. Their appraisal was higher than the estimate my mom gave.
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Yes, because they are doing a replacement cost valuation. Market value is a whole different animal-the price a real live buyer will take it off your hands for.
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Is market price usually lower than replacement cost?
I guess it depends on the market
Your tone suggests yes
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For commercia real estate, market price is set by cap rate, which is really the percent return you can get for a given market based on the rents you are receiving. It usually ranges from 4-10 percent per year return, assuming you have no mortgage. Replacement cost, obviously, is the construction cost to build the building as it stands today. So, it varies depending on the market.
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