- Increased capital needs
- Disruption of cash flow
- Physical dangers to staff and residents
Preparing & Protecting Your Investments
There are a variety of steps real estate investors can take to preserve their assets and growth plans.
Investors should have emergency and business continuity plans laid out in advance. These documents will provide clear guidance in the havoc that can arise when a storm approaches or hits. It can relieve much of the stress, and deliver a completely different outcome, even in the case of a direct hit. This should include preparation steps in advance, what staff should do when a threat is on the horizon, and what to do immediately in the wake of a storm to preserve assets, and keep income coming in.
Even when not mandatory, insurance is needed. Consider that in the Houston area which was hit by Harvey in 2017, only around 15% of housing units had flood insurance according to FEMA. Property investors in storm prone areas should have basic property insurance, flood insurance, windstorm insurance, and business insurance. Renters should also have their own insurance.
Plans should include what staff should do to prepare properties and information, as well as accounting for time needed for them to protect their own homes and families. They should also be empowered to keep working through and after a storm. It is critical to screen and select contractors in advance as well. They will quickly be booked up and prices will rise in the wake of a storm. Make sure you have the best on call.
4 Capital Reserves
At a minimum investors should have 3-6 months’ of reserves per property. This can help cover repairs, as well as income gaps when tenants simply cannot pay, and you cannot collect. Having access to additional lines of credit for these times is smart as well.
5 Backups for Operations
With no power, water, food, and communications available in hurricane hit zones for weeks or months after a storm it is vital to have operational backups. Data needs to be backed up in the cloud and in diverse locations. Key personnel and staff should have access to laptops, phones, and finances to move locations and continue working as well.
6 Diverse Portfolios
If your entire portfolio was in Houston when Harvey hit, you could be wiped out. This makes it essential to hold a diverse portfolio in units and geographic locations. Have multiple single family homes and multifamily properties spread out across the country. Have some in Houston, in Indiana, in Florida, and other destinations so that everything is not hit at once.
Rental property financing can make all the difference in these scenarios. Having some smart debt on properties can reduce investor risk, provide more liquidity, and the fuel to expand portfolios faster. This may include; blanket mortgage loans, lines of credit, and more.