June RIA Roundup: Home Insurance Chaos, Interest Rate Cuts, & A Big Move
The RIA Roundup is a monthly real estate newsletter with the latest stories, data, and insights curated especially for rental property investors.
In this issue:
Lead Story: Home Insurance Reckoning
Portfolio Updates
In Other News…
Final Thoughts: Moving (On)
Lead Story: The Chaos in Home Insurance
When I went to review my home insurance policy for our Florida condo last fall, I learned that my insurer was pulling out of Florida — and in fact, not a SINGLE private insurer would underwrite a new policy for me.
Gotta say I was pretty surprised by that! We’re miles from the coast, we’re on the second floor of a building — and remember that condo policies don’t even insure the structure itself. This would just be to insure the value of my belongings “inside the four walls” of my condo. And yet, no private insurer was interested in my business.
So what did I do? I ended up getting a policy from the state-backed insurance entity “of last resort”, at a price nearly double what I was paying before.
This is a small window into much larger forces currently at work in the home insurance industry, which is facing a reckoning due to the inexorably increasing costs of insurance claims related to severe weather and wildfires. This reckoning is rippling out from the obvious places (Florida, California) and is now impacting homeowners all over the country.
Rental property investors will not be immune.
In my latest blog article, I dig into what’s happening with home insurance, why it’s happening, and where the impacts are most severe. I also share some important takeaways and strategies for rental property investors — what you should know, what you should do differently, and what it means for where and how you invest.
Also on the RIA blog this month:
Portfolio Reports: My 25 rental properties in Memphis produced $11,585 in cash flow in May, bringing my total to over $44,000 for the year. Check out all the details in the May Monthly Portfolio Report.
A new “Property Spotlight”: You can now take a close look at Property #3, which I purchased in May 2019. This marked the beginning of a period of rapid acquisitions around the time I left my corporate career. I review the house, the deal, and all the numbers — including the annual performance of the property in the five years since my purchase.
An oldie but a goodie: Worried about higher interest rates? I get it. But there are still ways to make money as a rental property investor despite higher interest rates.
My picks from around the web this month:
I appeared on a recent episode of the House Money Media podcast to discuss my rental property investing model. My segment starts at 25:40.
Chad Carson talks about how “boring is sexy” in real estate investing (a message I’ve been preaching for years) and how to think about leverage and cash flow given today’s higher interest rates.
Katie Gatti talks about whether the life coaching industry keeps its promises – she even hired one to find out. (My take: life coaches are mostly mostly new-age blabber, but rental property coaches are the real deal! ;-)
Index fund investing is continuing to grow in popularity. Some people worry that this is distorting the market and could even be a bubble. (Gasp!) This fascinating article explores the potential risks of this “set it and forget it” style of investing. I’m not sure I was convinced those risks are real, but it’s a great read nonetheless
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In Other News…
Photo Quiz!
Why were these three images in the news recently? Keep reading for the answers…
Real Estate & Business, Domestic News
Home sales fall to a new low. Home sales continued to ebb, but the decrease was not drastic. And with inventory remaining low due to the lock-in effect, home prices are stable or rising in most markets.
Interest rate cuts begin in Canada and Europe. Central banks in Canada and Europe cut interest rates for the first time since the pandemic, beginning to roll back the rate increases that were used to dampen inflation in the past several years. Market-watchers expect the Fed to do the same later this year, especially in light of the encouraging inflation numbers reported in May. We’re waiting, Jerome!
A new stock exchange in Texas may be coming. Investors including BlackRock and Citadel Securities are backing the effort to create a new stock exchange to compete with the New York Stock Exchange and Nasdaq. They say it will be more “CEO-friendly”, allowing companies to avoid compliance requirements of the existing exchanges, including standards for board diversity. Some are calling it the “anti-woke” exchange. (Sigh.)
Port of Baltimore fully reopens. It took several months, but the last hulking pieces of the collapsed Francis Scott Key Bridge were removed, and the port resumed normal shipping activities.
Car dealerships are the latest to face disruptive hacks. It seems no business is immune from the impact of cybercriminals: the software company that is used by many car dealerships across the country to run their operations was hacked, causing a frantic search to locate paper order forms. The hack is expected to be resolved soon, likely as a result of a ransom being paid to the hackers.
International News, Science & Technology
Modi claims third term in India, but loses majority. The election results in the world’s largest democracy secured a win and another 5-year term for Prime Minister Narendra Modi, but they were nonetheless a setback because his party must now rely on coalition partners to govern. The vote was a surprise, and likely points to frustration in India over economic condition’s and Modi’s polarizing brand of leadership.
NASA launches astronauts aboard Starliner to the ISS. This was the first crewed mission of the Boeing-designed vehicle, which has faced years of costly delays. Unfortunately, the return of the two astronauts to Earth was delayed due to a few technical issues, but is expected in early July. (And you thought YOUR flight delays were inconvenient!) Along with SpaceX’s Crew Dragon, NASA now has two options to ferry astronauts to the International Space Station in low Earth orbit.
The astronaut who took the iconic “Earthrise” image dies (B). Bill Anders took the famous photo in 1968 as part of the Apollo 8 mission, providing a perspective-shifting view of the Earth that we had never before seen, and sparking the environmental movement. He died in the crash of a small plane that he was piloting alone. (At age 90! He apparently never lost his adventurous spirit.)
Arts & Culture, Sports, and All the Rest
The tallest building in the country could soon be in…Oklahoma (A). The city council in Oklahoma City voted to allow the proposed Legends Tower to be built up to 1,907 feet, a nod to the year that Oklahoma joined the union. This would surpass One World Trade Center in New York City, which stands at 1,776 feet.
Spanish phenom wins French Open. Carlos Alcaraz, the 21-year-old heir apparent to the post-Federer/Nadal/Djokovic era in mens tennis, won a 5-set final in Paris to claim his third grand slam title. On the womens side, Iga Swiatek took the title for the third consecutive year.
Once more, with feelings. After a series of recent releases that disappointed at the box office, Disney/Pixar is taking a victory lap after Inside Out 2 had a smashing opening weekend. (I saw it, and it was terrific – big-hearted and very funny, like the best Pixar films are.) It has since become the highest-grossing movie of the year so far.
Two sports icons die, one in baseball and one in basketball (C). The incomparable Willie Mays, a power-hitting center fielder whose outsize talent and exuberant style made him star on and off the field in the 60’s and 70’s, died at 93. In basketball, Jerry West died at 86. West shaped the NBA both as a standout player and later as an executive, and it is thought that his silhouette is the basis for the NBA logo.
Final Thoughts: Moving (On)
After graduating from college, I knew I wanted to live in New York City. It seemed like the only logical choice: it was the biggest, most dynamic city in the country (arguably the world), and I wanted access to all the amazing things it had to offer – food & cocktails, music, sports, business, culture, and more. At least for me, it was THE essential city, and still is.
It took me a few years, but by the age of 24, I was living full time in Manhattan. Now, after more than two decades there, I’m leaving.
And no, it’s not because New York has changed, or is in decline, or isn’t what it used to be, or migrants, or any of the other storylines you read about. These conceptions of New York are about as true as the idea that there’s a “crime wave” sweeping the country – which is to say, not true at all. (I wrote about this in last month’s essay.)
New York is still very much the center of it all, as it ever was. So why leave?
It turns out that you need and value different things in your mid-40’s than you did in your mid-20’s. While our love affair with the city hasn’t waned, the way we interact with it certainly has. We go out less, preferring to stay in most nights and cook our own food. Like many people our age, our social circles have contracted, while many of our closest friends of similar age have also left the city (or are planning to) for various reasons. We no longer participate in the volleyball league that used to occupy much of our free time and connect us to many friends in the city; we now spend more time golfing. (Volleyball, unlike golf, is a young person’s sport.)
This move also relates to our work situations, which – like our social lives – have changed completely in the last 5-10 years. My husband and I have both left office jobs in favor of running our own businesses, which is far more flexible and allows us to do most work remotely. (As a bonus, building our own businesses is often much more gratifying as well.) This added flexibility is what opened up the possibility several years ago of buying a winter condo in Florida, which we now thoroughly enjoy.
In total, there is less tethering us to the city than there used to be.
On the flip side, several of our very favorite people are in the DC area, including my brother and his family, and we don’t get to see them much. We deeply value the time we spend with them, and we know that having more of it would make us happier.
The sum of all these developments pointed to a simple solution that was once unthinkable: move, and leave NYC behind. (Mostly, anyway – my husband will keep an office in NYC, and visit regularly.) But come August, we’ll be residents of northern Virginia, about 20 minutes outside DC.
Our more flexible work arrangements allow for this, but just as important is the significant passive income we have from our rental properties. This income stream will continue to provide a sturdy backstop to our financial life, and give us choices that we would not otherwise have – including picking up and moving.
A big life change like this is always a bit disorienting. We’ve thought of ourselves as New Yorkers for over twenty years, and now we’ll be, um…Northern Virginians? Not sure I’ll get used to that.
But we’re also excited for new adventures. Smaller cities offer much more these days, and the place we’re moving offers at least some of the same perks we’re used to in New York. Mostly, though, we’re looking forward to a new rhythm in our days and weeks, to seeing them filled with different people and different activities than those we’re used to.
Ultimately, this is a continuation of the (for lack of a better term) “life optimization” that we embarked on more than 5 years ago in our work spheres, the goal of which is to engineer a life that allows us to spend our time, energy, and focus on what matters most to us.
It’s an ongoing project.
And a more urgent one than we tend to think. In the midst of our planning for this move, my father-in-law fell suddenly ill and died just weeks later, still a relatively young man. One component of grief is the reminder – unwelcome but instructive – that one day it will be our turn. The time we have is a precious, nonrenewable resource; using it with intention, spending it the way we choose, on the projects we value, with the people we love, is all that matters in the end.
As to the more prosaic buy vs. rent question: we’ll be renting an apartment in our new area. Like many New Yorkers, we’re very used to the “full service” lifestyle that large multi-family buildings provide, but there is also a strong financial incentive to rent. (The same was true in NYC, where we also rented.) It might seem strange that we own 25 rental homes in Memphis while paying rent to someone else for our own place, but we do it this way for one simple reason: it’s what the numbers tell us is optimal. I hope to write more about the financial side of this topic in the coming months.
So to my beloved city, where I worked, played, bought my first place, met my husband, got married, survived a pandemic, and lived an unforgettable life for two decades: it’s time to embrace a new chapter.
I’m moving (on)…for now.
Happy investing,
Eric
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
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