Insurance rates concern Strand investors

Investors are getting notice, through their condo association insurance, that premiums for coverage are jumping by as much as 700 percent. The insurance increases have put some investors in the red.

“The name of the game in investment rental real estate is cash flow, so when you look at decreasing rental rates [for short-term rentals] and increasing cost, it has a negative effect on investment,” said Tom Maeser, market analyst and president of the Fortune Academy of Real Estate.

• Internet sites have kept short-term rental rates low, and many investors pay between 45 to 55 percent of their income to their rental management company, Maeser said.

• Investors can’t raise long-term rental rents enough to cover the increased insurance costs.

Maeser said the Grand Strand’s largest investor group buys for rental income.

• “I’d hate to see us discouraging them from buying these properties, especially since we have 10,500 [condos] on the market,” Maeser said.

• “We’re not anywhere near attracting enough of those people to absorb the inventory we have right now.”

• If insurance relief doesn’t come to Strand homeowners, Maeser said the worst case scenario is “losing the investor market because they can’t cash flow these units, and they’ll go some place else.”

Maeser said he hopes investors will wait to see if the insurance market levels off in the next six months.

Source: Jenny Burns, The Sun News, Myrtle Beach