Over the past few months, many of our Los Angeles Apartment Owner clients have reported receiving notices of non-renewals from their insurance companies.
What’s Happening?
- The cost of insurance is out of control and many carriers such as Allstate and State Farm have stopped writing policies entirely in California.
- Over the next few months one of the largest writers of apartments have started to send out non-renewal notices for apartments that were built prior to 1990.
- Many of our clients have reported recent annual insurance premiums as being 2x and even 3x the year prior.
What it Means?
- This is yet another blow for Los Angeles Apartment owners who have faced tremendous headwinds in the business over the past few years since the onset of the Pandemic.
- As expenses (such as maintenance and insurance) continue to rise exponentially, and with rent revenues staying fixed for the past few years, the apartment business has become less profitable from a Net Operating Income (NOI) and cash flow standpoint.
Long Term Owners Weigh Their Options
- The sheer volume of seemingly long term owners that I speak with on a daily basis who are now considering selling their properties is astounding. Many of them cite that the business no longer makes sense to them any more.
- The silver lining for longer term Los Angeles owners is that many of them have little to no debt on their properties, in addition to having a very low property tax basis thanks to Prop 13. In other words, most folks’ backs are not against the wall.
