In the United States, commercial real estate vacancies alone are at 19%. This is an all-time high in most cases.
In the wake of inflation, COVID-19, population restructuring thanks to work-from-home policies, changes in real estate needs, and rising rent costs, more properties are vacant than ever.
Your clients may be looking to invest in vacant properties. Whether they want to start a new business, manage vacant land, or something else, it’s important that you’re armed with the right vacant property investment tips.
That’s why we’ve assembled a guide to investment and vacant property risk management tips to help you assist your clients. Let’s get started!
Why Should Your Clients Invest in Vacant Property?
If you’re looking to write more business, consider whether you’re offering customized insurance solutions to clients who want to invest in vacant homes, land, or buildings.
Your clients may want to acquire new properties under market value. With many vacancies, the seller wants to ditch the property at any cost. Whether there’s been a change in their personal or professional life, or they’re simply looking to make some money, many sellers are willing to cut a deal.
When your clients buy vacant property, it’s easier to increase their value. Whether they are willing to make repairs or want to hang onto the property until it gains more value, a vacant property is a valuable investment.
Your clients may also be in unique financial situations themselves. Many vacant properties allow for “unconventional” purchase methods. Seller financing is a popular option.
If your clients have a poor credit score or a rocky financial history, vacant properties may be a fantastic, if unconventional, investment choice. If your clients are operating within a competitive market, it might be a great idea.
Make a Plan
When offering advice to your clients, it’s crucial they consider all eventualities. For starters, many clients will assume their unoccupied property will be covered by homeowners’ insurance.
This isn’t the case. Property must be occupied in order to take advantage of homeowners insurance. Of course, your clients can leverage this information.
Does the current owner of the unoccupied property have the right insurance? Or is this property a potential liability that they didn’t even know about? If not, they may be more willing to sell in order to offload a liability.
It’s also important to ensure that your clients have considered the work this investment will entail. Properties can accrue issues even while sitting unoccupied. Damaged windows, mice, bugs, vandalism, water damage, frozen pipes…the list goes on, depending on your local hazards.
It’s important to encourage your clients to think ahead. Part of that planning process is finding a property, to begin with! Investing in vacant properties isn’t the most popular real estate strategy.
Many potential investors don’t know all the benefits, so they ignore them. That’s why it’s important for your clients to take their time when hunting around.
When they do find the right investment, what’s the plan? How are they going to find the right insurance policy, tailored to their unique needs with maximum protection? That’s where you come in!
Why Does Insurance Matter?
As an insurance producer, it’s important to be able to pitch the value of your services. Some clients may assume they don’t need insurance if no one is occupying the property.
This isn’t true! It’s crucial that all properties are insured. What happens if there’s a fire, flood damage, squatters, or any other host of issues that tend to plague an unoccupied property?
If the unoccupied property is in a commercial space (such as a strip mall), repairs and liabilities may be split amongst the remaining tenants. This produces more risks.
Vacant properties produce a lot of gray areas. If you don’t write effective insurance policies for your clients, they may find themselves unprotected in one of their most vulnerable moments.
The right insurance producer is crucial to your client’s financial state, too. Remember how we said that vacant properties are great opportunities for clients with a poor financial history?
It’s also important to work with clients even if they’ve been canceled or denied insurance in the past. Clients with a past claims history shouldn’t be denied, either.
Even people who have usually assumed as ‘high-risk’ need coverage too. Policies without gaps or exclusions also need coverage.
As an insurance producer, it’s important to take a hands-on approach to learn about your client and their needs. Each policy should ensure maximum protection.
Creating the Right Policy
When managing a vacant property, it’s important that your clients engage in proper risk management. That’s why top investment tips include finding an insurance policy that’s right for them.
When you’re writing that perfect insurance policy, what should you consider? Make sure that, as an insurance producer, you are able to cover any of the following:
- Commercial properties
- Mixed-use buildings
- A variety of structures, such as sheds, pools, and outbuildings
- Single and multi-family dwellings
These structures can be exposed to a variety of risks, including floods, earthquakes, vandalism, wind, theft, vandalism, and so much more.
Policies should have coverage for the risks previously mentioned, with no volume commitment. Of course, these specifications for coverage should be customized to whatever your client needs.
It’s important to provide flexibility for time limits, too. Some clients may need coverage for anywhere from 1 month to several years.
Vacant Property Investment Tips for Success
When encouraging your clients with vacant property investment tips, it’s important to provide the best policy for them. This involves taking their unique circumstances into account, being willing to ensure traditionally high-risk clients, and providing coverage on their terms.
Being the best insurance producer you can requires flexibility and support and Prime is here to help offer that.
To learn more, check us out here. If you’d like to get a quote or contact us, call us at 800-257-5590. Or, you can email us at info@primeis.com. We look forward to hearing from you!
Authored by Rick J. Lindsey, CEO, President, and Chairman of Prime Insurance Company
Rick J. Lindsey hails from Salt Lake City, Utah. He began working in the mailroom of his father’s Salt Lake City insurance firm, getting his introduction to the business that became his lifelong career. Lindsey quickly rose through the ranks while working in nearly every imaginable insurance industry job. As an entrepreneur, specialty lines underwriter, claims specialist, risk manager, and a licensed surplus lines broker, Rick J. Lindsey is highly skilled in all levels of leadership and execution. As he progressed on his career path, Rick discovered an urgent need for insurers willing to write policies for high-risk individuals and businesses. He was frequently frustrated that he could not provide the liability protection these entities desperately needed to safeguard their assets. He also formed the belief that insurance companies acted too quickly to settle frivolous claims. Lindsey decided to try a different approach. He started an insurance company and became the newly formed entity’s CEO. This opportunity has enabled Rick to fill a void in the market and provide a valuable service to businesses, individuals, and insurance agents who write high-risk business. Read more…
