Rental Properties Offer a Lucrative Niche for Insurance

By Diana Matalka | November 7, 2011

Dark clouds continue to hang over the U.S. housing market with prices still well below their peak and foreclosures high in many parts of the country.

But there is a silver lining — great bargains on rental properties. Whether the buyers are experienced landlords looking to expand their properties or first-time investors looking for alternatives to the stock market, they’ll find that low housing prices and foreclosures mean they can find properties at the right price.

For insurance agents, this trend is more than just an interesting footnote. It provides an opportunity to carve out a specialty selling rental/landlord property insurance. Like many types of specialty insurance, the key to building this book of business is networking.

While agents may think about realtors as an important first stop for networking — and they are — it’s important to go further. There are many other professionals involved in buying, selling and managing rental properties, including financial advisors, lenders, escrow offices and professional associations.

Financial Advisors

Begin your networking with financial advisors, professionals who include financial managers, investment advisors and money managers. All provide expert investment advice and these days, with continued fluctuations in the stock markets, more and more are steering their clients towards rental properties as an investment that has a good chance of appreciating over the long term. They often point out a 401(k) account can be used for a real estate investment.

Look for those financial advisors who are highly qualified with credentials to match: Certified Financial Planners (CFP), Personal Financial Specialists (CPA/PFS) or Chartered Financial Consultants. Also, there are national professional associations (National Association of Personal Financial Advisors, National Association of Insurance and Financial Advisors or International Association of Registered Financial Consultants) that may have a chapter in your area that hosts networking events.

Of course, you don’t want to waste another professional’s time by seeking them out solely for your own gain. Understand their field, explain your value and make yourself available as a go-to expert on finding the right insurance fit for rental property owners.

Lenders

Since buyers of rental properties almost always need a mortgage, you can benefit by reaching out to lenders. In fact, many banks have their own financial advisory specialists who understand the investment potential of a rental property. Lenders are inherently as interested in protecting a property as the owner is, so you have an opportunity to make yourself available as a trusted expert on rental property insurance.

What do you need to know about connecting with lenders? To start, those who work in commercial and multi-family markets will be most relevant. As with financial advisors, look to professional credentials for cues; the National Associate of Mortgage Professionals certifies lenders on three levels, from least to most experienced: General Mortgage Associate (GMA), Certified Residential Mortgage Specialist (CRMS) and Certified Mortgage Consultant (CMC).

Beyond finding lenders at your local banks, you can connect with the Mortgage Bankers Association (www.mbaa.org), which has state and local associations that can be a valuable networking source.

Do your research. As any scan of news headlines can tell you, the mortgage industry is highly complex. Keep up-to-date on industry news and regulatory changes through professional association newsletters, major financial news outlets or a weekly Google Alerts e-mail. No matter how you go about it, you need to be known as a knowledgeable resource in order to gain traction selling rental property insurance.

Escrow Offices

Depending on state regulations, lenders may require property owners to open an escrow account for insurance and taxes. This means there is another outreach opportunity for you.

Not every state is an escrow state, so if you are on the east coast, you may not find an independent, licensed escrow company in your area. However, if you do reside in an escrow state — primarily the western states — you can look for licensed, bonded escrow agents or offices. Try networking through professional associations; for example, California agents may reach out to the Escrow Institute of California.

As with any industry, take the time to understand what escrow professionals do before you start handing out business cards. Fortunately, escrow accounts exist to handle insurance and taxes, so your input is relevant.

Property Owner Associations

You can also network with rental property owners. But rather than approaching the nearest building manager’s office, reach out to landlord associations, property owner associations and investor groups. These can offer valuable networking opportunities.

One place to start is the National Real Estate Investors Association (www.nationalreia.com), a federation made up of local associations or investment clubs throughout the United States. These include local investor associations, property owner associations, apartment associations and landlord associations on a national scale. You may also try the National Association of Residential Property Managers to reach landlords and other professionals involved in property management.

As more and more people choose to rent rather than buy a home, agents who establish themselves as rental property insurance experts stand to benefit. Networking with local realtors helps, but so does connecting with the many professionals who work with rental property throughout the purchase process. All can benefit from your expertise. Think outside the box and you may be able build a stronger — and more lucrative — network of connections.

About Diana Matalka

Matalka is the assistant vice president of property products at American Modern Insurance Group. She has worked in property insurance for 20 years specializing in the specialty dwelling market including hard to place homeowners and vacant dwellings. E-mail: dmatalka@amig.com.

From This Issue

Insurance Journal West November 7, 2011
November 7, 2011
Insurance Journal West Magazine

Top Commercial Lines Agencies, Habitational / Dwellings, Agents’ E&O Survey

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