Requiring Renters Insurance from multihousingnews.com

In the article “Owner Beware,” by Keat Foong (originally posted on multihousingnews.com), we learn that apartment companies are increasingly requiring residents to obtain renters insurance. According to a survey of apartment companies conducted by the National Multi Housing Council (NMHC), 66 percent of lessor respondents required renters insurance, which is up from 44 percent in 2009, and in 2008 only 24 percent required the insurance.

Large apartment companies like Greystar seem to be the driving force behind the policy. “We consider [requiring renters insurance] an industry best practice that eventually will become an industry standard,” says Michael Greene, senior director of business operations at Greystar.

There are a variety of reasons why apartment companies are beginning to implement renters insurance more, the most important benefit being the owner’s ability to recover damages. If a resident happens to damage the property the apartment company’s master insurance may cover the cost, but there’s the possibility of a deductible and raised rates.  With renters insurance the landlord would simply recover the costs from the resident’s insurance company. Landlords are also protected in the event that there is a theft or loss that a tenant blames on the property owner.

Coverage under a renters insurance policy usually covers damage caused by smoke, fire, explosions, and water. The typical policy has three fundamental components of coverage: Liability coverage, personal possession coverage and external living expenses coverage.

Although landlords are increasingly electing to require tenants to carry renters insurance, there are often state statutory limits on the amount of control a lessor can exercise over the resulting insurance purchase transaction.  Under most states’ laws, apartment companies are not allowed to requireresidents to use a particular insurance company. However, the landlords are allowed to provide a list of insurance companies as an option to residents. Indeed, landlords may identify favored insurance companies with which they have agreements for lower rates and pre-approval. Such arrangements offer incentives for both the landlord and tenant.

As the requirement of renters insurance becomes more common in the apartment marketplace, there appears to be little pushback by renters. In fact, it is reported now that residents have begun to not only accept, but almost expect the requirement.

Are foreclosures over?

The U.S.housing market is beginning to show signs that it has turned a corner. According to the latest home price report from Trulia, asking home prices were up 5.1% in 2012. This is a big turnaround after falling 4.3% in 2011. Las Vegas and Seattle topped 2012’s biggest turnaround markets according to the report. The report also mentions that nationally, rents rose 5.2% year-over-year, with Houston, TX and Oakland, CA experiencing the largest percent change in rents. According to data from Realty Trac the crisis may not be over and opportunities exist for investors of single family homes, since the rental market may get better in 2013, at least in some areas.

Let's look at the 12 leading States with largest number of foreclosure filings in November 2012:

In Washington State 1 in every 756 homes received a foreclosure notice  in November 2012, this is up 45.37% from a year before.

Wisconsin  has the same ratio of new foreclosure filings but this reflects a 21.70% down from the previous year. Indiana had 1 in every 684 homes, up 31.14% from the previous year, Michigan 1 in every 621, down 47.04%, Georgia 1 in 494 down 32.9% and Arizona 1 in 468 which is down 43.51% from 2011. Then you see Ohio with 1 in every 458 homes, up 9.96%, South Carolina 1 in 455, up 16.68% and California 1 in 430, down 50.08% but still a lot of filings. 

Nevada had 1 in every 390 homes which is actually down 53.82%, Illinois 1 in 392, which is up 9.05%.

Then we get to the State of Florida where we operate. Florida showed 1 foreclosure filing in November 2012 for every 304 homes, which is actually up 19.7% from November 2011. Especially in South Florida we have seen a lower inventory of single family homes and therefore some positive trend and prices. International private investors plus many domestic institutional investors moving to increase their single family rental portfolios, may be the driving force, but still high unemployment and an economy with many unsolved problems may hurt our local market and trends may change. It is difficult to quantify the shadow inventory of single family homes held by financial institutions and somewhere in the foreclosure process but it is there and these new foreclosure filings are also there and a sign of possible problems for our Florida market. Of course South Florida may be the area with the best positive influence but still something that opportunistic investors should take into account and move fast in their investment decisions.

Our particular view is that the train has left the station but there is still a chance to catch it, investors still have an opportunity, and it may greater than many think, to acquire quality residential real estate for their rental portfolios and Florida is a key State with a bright future. The time to act is now when there are still opportunities out there as the numbers show.