On The Market

218: These “Subtle Risks” Could Have Astronomical Impacts on Real Estate Expenses w/John Sheffield

May 20, 2024

Real estate expert John Sheffield discusses the rising costs of owning property due to climate risks like hotter summers and natural disasters. He highlights the impact on expenses such as insurance, maintenance, and property taxes, urging investors to consider these factors when underwriting deals. Sheffield emphasizes the need to assess climate risks for informed property investments and adapt to the changing real estate landscape.

38:02

Creator website

Episode guests

John Sheffield

AI Summary

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Climate risk in real estate extends beyond traditional events like hurricanes, including increased insulation costs and higher electric bills due to climate changes.

Rising insurance premiums are a key concern for real estate investors, with high-risk states experiencing significant cost hikes due to hurricanes and wildfires.

Deep dives

Understanding Climate Risk in Real Estate Investing

Climate risk in real estate investing extends beyond traditional acute events like hurricanes and floods. It encompasses increasing costs such as insulation upgrades, higher electric bills due to warmer summers, and growing insurance premiums. Climate risk factors, including severe convective storms leading to hail damage, can drive up maintenance and insurance costs, impacting overall property ownership expenses.

Introduction

2min

Understanding Climate Risk Impact on Real Estate Expenses

5min

Impact of Hail Damage on Insurance and Real Estate

4min

Rising Maintenance Costs and Climate Risk Impacts on Real Estate Expenses

15min

Understanding Risks and Climate Impact on Real Estate Investments

5min

Navigating Climate Risks in Real Estate Expenses

6min

Benefits of Investing in Small Multifamily Properties and Small Multifamily Bootcamp Promotion

2min

Owning real estate could get expensive—yes, even more expensive than it already is today. Insurance prices, property taxes, maintenance costs, and more are going through the roof, and there isn’t much stopping these costs from jumping even more. What’s accelerating the rise in these upkeep costs? Hotter summers, colder winters, and more natural disasters. Growing climate risk is making real estate deals harder and harder to pencil, and even some safer areas to invest are seeing sizable pricing upticks.

John Sheffield from ICE brings us the latest data on the financial impacts of climate risk in this episode. When we say “climate risk,” we know what you’re thinking: hurricanes, tornadoes, and wildfires. But that doesn’t even scratch the surface of what’s causing real estate expenses to jump. Areas of the US with once-cool summers are now experiencing record-breaking heat, increasing hail damage is denting roofs and breaking windows, and flooding has become the norm. These subtle climate effects have huge implications for your bottom line. So, what should you do to secure the profit you’re looking for on your next property?

John hits on the expenses that are rising the most, the areas where home upkeep costs could almost mirror monthly mortgage payments, and what investors must do when underwriting their next deal to account for this massive jump in expenses.

In This Episode We Cover

The actual cost of climate risk and the expenses that are seeing the most significant pricing surges

Why even areas without hurricanes, fires, or tornadoes are still at significant risk

Property tax problems and underfunded local governments that could quickly raise taxes

Insurance underpricing that could lead to even more expensive home protection

Areas where home prices could drop as a result of inflated home expenses

Where to find and track climate data so you know where (and where not) to invest

And So Much More!

Links from the Show

Find an Agent

Find a Lender

BiggerPockets Forums