How Insurance Rates May Change Minneapolis Duplex Values

My insurance broker reached out the other day to discuss the policies on my duplexes and triplex. Given that he had bad news, I applaud him for doing so.

It seems my insurance policies are going up anywhere from 44% to 45%.  Yes, I had claims; over three years ago.

On top of that, my property taxes went up anywhere from 15-17% as well.

Between the two, it will change my annual expenses by nearly $3000 per year. To offset that as a housing provider, that means rent needs to go up on each unit $125 per month. And that’s before any increases in maintenance, trash, water or sewer expenses.

The question is, can I get that much more? I don’t know.

I also thought about how I also needed to change the expenses I populate the cash flow worksheet I use for Minneapolis and St Paul buyers and sellers. As a Realtor of more than two decades, I also know whether it’s a duplex or a house, a property has to make financial sense for a buyer.

Higher expenses ultimately mean the buyer will likely not be able to pay have to change the price point they’re able to afford. That impacts all of us when it comes to what the property is worth.

As housing providers, there are things we can do to cut our expenses. For example, installing low-flow shower heads and toilets may help the water bill. Disputing the tax assessors valuation of our properties may be another (let me know if you need help). And, of course, finding an insurance broker who will aggressively look for a more affordable policy or counsel us on the amount of our deductibles may help too.

Those efforts may result in some savings. However, they may not be enough to skip a rent increase or avoid a price reduction on the market.

After all, people buy an investment property for one of two reasons; for a more affordable place to live and/or to build long term wealth. If the numbers don’t work, why buy it at all?