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Commercial Real Estate Insurance: What You Should Know

by mgranizo-ohare on June 7, 2010

Most real estate investors know the importance of purchasing insurance for their commercial property.  The common risks they protect against are liability for slip and fall incidents and damage caused by fire or other hazards.  However, there are other key factors to consider when shopping for and reviewing insurance policies for your commercial real estate investment.

A. Proper Valuation- Often investors end up paying more on premiums because their policies insure the property up to the resell value rather than replacement value.  The replacement value is the cost to repair or replace the property at the time of the loss by using like kind and quality materials.  It is not the market value of the property.  In determining the replacement value of your property, industry standards are used such as construction class, square footage, year built etc… Be sure to insure your property to its proper replacement value. Insurance companies will never give you more to repair or replace the property than the replacement value at the time of a loss, so it doesn’t make sense to insure to an inflated market value.

B. Flood Insurance- If your property is in New York City, insuring it against flood damage may not be at the forefront of your mind.  However, with the numerous water main breaks throughout the City in the past five years, insuring against flood damage is key to protecting your investment. Remember, a flood can be caused by sources other than coastal waters and rivers.  Water main breaks are more common than you might think, and the cost to repair or replace damaged floors, walls and carpets, as well as the cost of mold remediation, can be quite expensive. Flood coverage is not [read more...]

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A recent report by the Urban Land Institute cites four demographic trends which will impact housing in a significant way:

1. Aging Baby Boomers (55 to 64 year olds) given the losses in their net worth, many will be compelled to continue to work and to remain in their suburban homes until real estate values recover.  Those with the ability to move will choose mixed-age living environments to fit their lifestyles.

2. Younger Baby Boomers (46 to 54 year olds) who currently are entering their prime earning years will lack home equity and as result will not be able to purchase second homes, as the older baby boomers may have been able.  Consequently, the second-home market will experience a decline in demand as we move forward.

3. Generation Y (younger than 45 year olds)  with 86 million members, they are not as interested in home ownership as their predecessors, rather they will more likely be renters by necessity or by choice.  Demand for rental units is anticipated for years ahead.

4. Immigrants (legal and illegal) with 40 million members prefer “multi-generational households.”  Provided they can afford it, they will likely choose to live in larger homes in areas with strong communities.

Evaluating the demographics of the location in which to invest is critical to a successful real estate investment.

[Data Source: Realtor.org, January 29, 2010]

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Citigroup to Sell Its Commercial Real Estate Portfolio

January 29, 2010

Seeking to reorient and stabilize, Citigroup is selling its Citi Propery Investors portfolio in order to focus on its retail and investment banking businesses.  Ironically, Joseph Azrack who helped build a $13 billion portfolio of commercial properties for the bank and which now has plummeted in value since his departure in 2008, is in the [...]

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A Bottom of the Commercial Real Estate Markets is Finally in Sight

January 29, 2010

According to Greg Genovese, president of securities at Thompson National Properties, the commercial real estate markets are nearing a bottom and “its a good opportunistic time to start investing in real estate.” He cautions investors to carefully assess where they are investing in, in what asset type as well as how much leverage they are [...]

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