Blue Dirt
Blue Dirt: Commercial Property Investing delivers expert insights and strategies for building and managing a successful commercial real estate portfolio. Whether you're a seasoned investor or just starting out, this podcast uncovers market trends, financing tips, and key investment principles to help you thrive in the industry.
Blue Dirt
Hurricane Prep: Protecting Your Commercial Real Estate Investment
Hurricane season poses an existential threat to commercial real estate investments, yet few property owners truly understand how to prepare their buildings or navigate the aftermath. This eye-opening episode delves into the hidden challenges hurricanes create beyond just physical damage.
Did you know that when a named storm forms anywhere in the Atlantic—not just hurricanes, but even tropical storms—insurance companies implement immediate moratoriums that prevent writing new policies? This critical timing issue has derailed countless property deals, turning potential profits into devastating losses when closings can't proceed. We explore this often-overlooked timing risk and how to plan your acquisitions accordingly.
Beyond insurance considerations, we uncover practical strategies for protecting your investment property. From understanding how water flows around your building during normal rainfall (a crucial yet simple diagnostic tool) to deploying innovative flood prevention technology like expandable "dam bags" and specialized barrier systems. These preparations aren't just theoretical—they're battle-tested approaches our team has implemented across multiple properties that have weathered serious storms.
The episode also tackles the critical post-storm period when vultures descend. We share hard-earned wisdom about distinguishing between legitimate restoration contractors and opportunistic companies that inflate damage assessments. You'll learn why building relationships with local service providers before disaster strikes pays dividends when you need rapid, trustworthy response.
Whether you're a seasoned investor with multiple properties or considering your first commercial real estate acquisition, this conversation delivers actionable insights that could save your investment when the next hurricane makes landfall. Subscribe now and prepare your properties before peak hurricane season arrives next month.
Learn more about Blue Commercial Properties on our website.
Welcome to Blue Dirt, the podcast that digs deep into the foundation of commercial real estate investing. Unlike most real estate shows that focus on dealmaking and market trends. Blue Dirt gets into the nuts and bolts of what truly builds long-term value the building itself. We break down how to spot deferred maintenance before it costs you, why a solid preventative maintenance program is a game changer and how triple net leases can maximize your investment returns. We'll also explore the importance of strong landlord-tenant relationships and how they drive stability and growth in your portfolio. Whether you're a seasoned investor or just getting started, blue Dirt gives you the practical knowledge to make smarter, more profitable decisions in commercial real estate. It's time to get your hands dirty and build value from the ground up. Let's dig in. Welcome to Blue Dirt, where even idiots can make a killing in commercial real estate.
Michael Carro:We are back with Mike Price, with Hub International Insurance, and today we're going to talk about the hurricane season. We are approaching September. September 15th is the peak of hurricane season in, certainly in Florida. We are in the Gulf Coast area, and so, mike, welcome to the program. Thanks, all right. So Don is fact checking, something that we talked about offline. He's usually wrong, so he won't really bring that up, okay.
Michael Carro:I'm usually wrong. So what we're going to talk about today is Don's going to talk a little bit about how to prepare your building for insurance. Mike is going to talk about the insurance industry, some of the history with hurricanes, and then we're going to also talk a little bit about if you have a property under contract and situations of how to either you better close quick or you better postpone. So let's kind of dive right in, mike. Let's, from your vantage point, let's talk about hurricanes in the insurance industry.
Mike Price:Yeah. So obviously that's the biggest thing we deal with here in Florida is hurricanes. That's what's going to drive the rate and the premium with all commercial residential properties, everything across the board. So we've seen some recent hurricanes in the last couple of years down in South Florida Irene or I should know these names. We're doing this quick.
Mike Price:So Adam was right. We go to say I was wrong. So that happened a year or two ago and we didn't quite see the effects of it on premium, mainly because those were more flood disasters. So that was rising water that hit like the Tampa area. So when those flood claims come, that's more of a FEMA issue. That's not affecting the wind and hail rates. Like we saw when Hurricane Sally came through. That affected, you know, roofs ripping off and properties leveling because of the wind. These are more flood related. So that's what drives the risk or the rate here in Florida. So as long as we keep getting quiet hurricane seasons, then we'll try to maintain this market. But we kind of spoke about it Whenever there is an active storm and the caveat is it's got to have a name to it. So if there is a named storm not just in the Gulf's, coming through the atlantic. Uh, the insurance carrier is going to a moratorium, so they will shut.
Michael Carro:Now, a named storm, not necessarily a hurricane, correct. If it's a tropical storm or something even less than that, correct. Once it gets attributed a name as it comes off the coast of africa, as an example, the insurance market shuts down, correct. So what that means for us from an investing standpoint is, let's say you have a property under contract, especially you know we're in this, we're in this peak time right now. Depending on when you get to listen to this we are at, we're in mid August right now, and so we're in hurricane season. Our peak season is a month from today. September 15th is when we see the most activity. But if you have a property under contract and a named storm I used to think it was a named storm in the Gulf, but Mike just corrected us and if it's out in the Atlantic and you're ready to close, the insurance company will not write it. So unless you're paying cash and are willing to take that risk of that potential peril, you're not closing, correct.
Mike Price:And that's not even. They'll still keep it closed up until it passes and all the damage has been assessed too, if it's bad enough.
Michael Carro:Now, when it passes, are we talking about, if it wasn't even in your area?
Mike Price:So if it's so, if it's the way it works, is when you start seeing that spaghetti model, right, where's going? And they don't know where it's going to go. In Florida they shut it down for every county. They do it by county. Ok, you'll get one to say Duval County, escambia County. You know, miami-dade has been shut down Once that storm passes. Then they'll send out other emails this is carrier specific saying Escambia County moratorium has been lifted. So that means you can find business there. Okay, but if we get a direct hit and it tears up Escambia County, they're not going to lift that until damage can be assessed. Gotcha.
Michael Carro:Okay, great information. So in real estate we always use a term time kills deals. Well, we've had several situations. I have actually a good friend of mine. He was under contract to sell one of his condo units, uh, on the on pensacola beach for a pretty good number, a name storm uh came into the gulf. Well, it came into the gulf but it was already named. It got shut down. It that was ivan, okay, and uh and and it it stopped the sale and unfortunately, it ruined the sale and he never. He didn't sell it for years and then when he ended up selling it, it was for a significant loss where it would have was going to be a positive gain. So it this is a real time kills deals in real estate.
Michael Carro:And um, so, don't let it kill you. Yes, don't let it kill you. A lot of words of wisdom on this show can kill you. Yes, don't want to kill you. A lot of words of wisdom on this show, I could kill you, yeah. So, all right, don, from a property management standpoint, you guys, blue, does a great job at letting all the tenants know how to properly prepare. You send out mass notifications hey, here are some things that you can do. And then, internally, you send out and deploy your maintenance team to do several things to various properties. Walk us through the things that you can do and then, internally, you send out and deploy your maintenance team to do several things to various properties. Walk us through the things that you do to prepare buildings and what our listeners can do to prepare their own business.
Don Redhead:Probably one of the biggest things is just communicate. I mean, it's that can almost be set across the board for everything Really.
Michael Carro:Marriage. I've heard the same thing. Is that what they said?
Don Redhead:Yeah, just communicate, is that what? Your wife, yeah, okay marriage I've heard the same thing is that what they said?
Michael Carro:yeah, just communicate wife yeah, okay, whatever, uh, that's what adam says. Um, by the way, nobody knows adam, so they do. So now I'm going to tell you, because don has now referenced adam twice and you will never see him. Um, we could hope so. So adam is uh one of our marketing gurus. He's been around us for seven, eight years, now nine 10 years.
Michael Carro:He's just a very talented young man, has a wife and a beautiful daughter and, um, another kid on the way, another one on the way and uh, so we're very excited to have him behind the camera.
Don Redhead:So, yes, man behind the curtain. Um, so usually we'll do is send out an email to all tenants, really kind of towards the end of July. It just says, hey, here's the normal stuff, hurricane season is coming. Um, you know, here's what you should be prepared, all the very generic kind of broad stroke stuff. We'll typically have our preseason kind of meeting about that time, usually kind of end of July, and it's kind of dust off the book from last year. Hey, we maybe have some new properties, maybe we've made some modifications to some properties and we'll review our current checklist.
Don Redhead:The biggest thing that I have kind of realized was it's always about making sure drainage is is prepared. So if you're not familiar with your building, you know, go out and stand in the rain. I know you like doing with the new building we just got. I'll get videos where you know, go out and just stand there and watch how water actually flows around the property and how it interacts. You know it's going to tell you, with a small dosage, right, a hurricane is an extreme version or example of that. But if you see that, hey, this much water is really struggling to get out of here or it's struggling to leave the roof or whatever, right, it's time to make the adjustments now.
Don Redhead:So what a lot of times we'll go through, check clean. With commercial properties, flat roofs are very, very common. So we'll go through, clean all those gutters out. If we know a storm is even possible, uh, we'll just do that. It's just best practice. There can be leaves, debris, stuff like that that clogs the drains. Um, so that's the biggest thing that we typically find, um, which is just, you know, you would think duh right, but that's something that we've adjusted over the years. The other one I often think duh, duh, duh.
Don Redhead:So, and each one is really property specific, so telling how that water interacts with it.
Michael Carro:So you bring up something you know it's, it is really important. It sounds really goofy, but the biggest gully washer you have is that's the best time to get out there. Go out, see how the water flows off of your gutters. In fact, we made some modifications to this new property we just bought. We added some additional downspouts on the gutter system. You know we had to make a roof repair. You know it's a new building. This, this one, happens to be two stories. So you know, I'm checking out even the interior brick to seeing if there's any. What would you call it Weeping, weeping through through. You know, so the weeping on a building, uh, so we will go out and, uh, do what's called pointing you have a mason, mason, masonry. Yes, come through, a mason, mason, kind of come through and they'll, they'll, uh, repack it with some um, mortar each one is is based on, uh, the type it is.
Don Redhead:Have the mason do that. There's plenty. There's one building that we're dealing with right now that the whoever they hired probably not a real mason came through, repointed it, used the wrong type, um of mortar and it's and it's causing issues. So, um, and then you know, once you kind of see how the property interacts, there are so many new kind of cool, different tools that you can actually implement. As an example for this building. You know, we've made some adjustments to the way that the property interacts. This actually has a roll-up door in it and we built a CMU block wall. Which building is this? This building right here, the one that we're in? Oh, the one that we're in. So we have the roll up door and it has what? 18 inch, one foot high, uh, cmu block just around that door. We don't use it, but to prevent any water from rushing in, we also have what's called a dam door. They sell them online now. Uh, basically, it is a heavy duty door that has a almost like think of a, a uh.
Michael Carro:You know those dog doors that you have, a. Have a lever that puts uh or a child prevention type gate correct. It's the same type of thing with a um, uh, much more expensive, but yes, they are like 800 bucks.
Don Redhead:Yeah, they're pretty expensive, but they're. You know, they're nice, they're heavy duty. They have a mechanism that allows you to drive up the pressure and monitor it so you don't over pressurize it, but it uses a replaceable tube that can fill in the gaps between the doorframe. Those have been, those have been great Now, by the way each thing that you buy is essentially an insurance policy.
Michael Carro:You know, I mean that's how we look at it. I mean we hope to never use it. But if you, if you, if you need, if you, when you need it, you certainly can't buy it and have it shipped in really quickly because they're going to be out. Buy the stuff well in advance, plan in advance. We have a few buildings that you know, given their history, they might be prone to if there was a hurricane with a huge amount of water. We know which buildings are likely going to get some water intrusion. So those are the ones that we buy in advance, all these things, and then we have to just store them, yep and um one thing that is great.
Don Redhead:That is new. Ish, right, they have these new uh they're called dam bags. Uh, they're actually using the same material that a diaper uses, so they, they, they store flat. I mean they store, like you know, pieces of paper and once they get wet they swell up, so they're a much easily deployable type of a device. Some of the locations we've identified that we still want to use heavy duty sandbags, so we use those. Um one thing I'm kind of interested to see it should be in next week use those. Um. One thing I'm kind of interested to see, it should be in next week, beginning of next week, is these new um devices. If you can almost imagine a big L, uh, they're plastic.
Don Redhead:So we bought some of those for the front of the the Ruby slipper building, okay. So, uh, we're going to test those out. We'll build our own little pool right and in an isolated environment, and we'll flood it and see how they actually interact.
Michael Carro:So because I'm more. I'm more thinking people are going to walk by and steal these things. What? We're not going to leave them out there? Well, you are going to leave them out there during the storm? Yes, so if the people are out there.
Don Redhead:If you're out there, please don't take them. Please don't take them in the middle of the storm or like last time we had sally.
Michael Carro:I will tell you what we do a good job of for you people um. We have camera systems on all of our properties and in growing.
Don Redhead:And you know, one thing that's cool is we started deploying these ones that use, uh, cellular and solar, so you can just put them up everywhere, yeah, um, so those are really good for construction, so you, damn steelers.
Don Redhead:Yes, the damn bag steelers uh, but no, that uh, and I almost wish I could show a photo of it. But, uh, maybe I'll take a photo once we do it and could show it another episode. Um, so it's each property is different. Um, like I said, there's some that we use physically large, heavy sandbags just because we know the way that the water rushes across that property. We're nervous with some of these more rising water dam bags and it's just go out, check how the property interacts with the water and come up with a plan.
Michael Carro:There's a lot of resources, so water Number one. Water Roof. A lot of resources, so water number one. Water roof situation leaks, gutters making sure all that's clear.
Don Redhead:I love gutter guards. If you don't have gutter guards on your property, just put them on Right, it's insane to me.
Michael Carro:But also we have some properties like behind us where the water is going to flow, and so you also have to go check the flow. So you've you've now checked your building, making sure that those obstructions are clear, but we have the one building that the water goes through a parking lot, into a culvert under into a culvert and then it goes another block and, like I told you last week, one of those is it's not on our property, but it's still a choke point.
Michael Carro:It's filled with leaves for about eight feet and it needs to be cleared up. So, even though it's not our property, don's crew will go in clear that way. But even those things, it doesn't matter if it's not on your property, go take care of it, because it will affect your property.
Don Redhead:Another thing is having good documentation, and what I mean documentation is pre and post right, so we'll go out Fortunately we do monthly visits at minimum and taking photos of the property, so you already have that kind of historical reference that insurance groups love that. The other thing is actually making sure you have all of your records. Most of our records are kept in cloud format, so we're not super worried about that, but you may keep your insurance policy. Stuff like that is always good to protect and just communicate with the tenants. They're going to be your best friend in terms of preparing the property A lot of times. They're going to be your best friend, um, in terms of preparing the property. A lot of times. They're gonna, you know, move stuff off off the floor.
Michael Carro:Well, they're gonna. They're not gonna know so, but this is where you guys do a good job of, so don will give them a checklist, hey, especially if there's a storm coming, you know, anytime one enters that's named.
Don Redhead:We send yeah, we send the pre-season, we send the peak season, we send anytime there's a storm. We send emails all the time about this.
Michael Carro:But within those emails are our suggestions right, yeah, you know if, especially if one is looks like it's coming our way, so it's not just when it comes off the coast of africa.
Don Redhead:That's typically not when you do it, yeah, and last year there was one that was like off mexico that just turned there for a while. Then it shot up.
Michael Carro:I don't think it caused any sickness, so but but you'll say, uh, maybe, uh, turn off power. You'll also give them guidance on, hey, if a storm passes, how to turn power back on things like that gas.
Don Redhead:Yep, walk through some of those uh techniques, uh it depends on really the, the individual and the level of which they, they care, I mean, and depending on where the property is. If we are, if the property we have is is literally in the flood zone area, uh, it is going to be best case to go there. Turn off the main breaker, turn off the gas, uh, at the different units, um, put things up up and certainly take computers off the floor all that stuff off the floor.
Don Redhead:Fortunately, now we mostly use tablets and laptops, um, but that kind of stuff just to protect the space from reentering what. What can also happen, um is uh turning off the power to to the space, and if you don't do that sometime, kicking the power back on um will cause issues with the HVAC. So if you're able to uh turn off power I mean there's also concerns with that where you're just you know the space is not being conditioned, there's humidity, um. So you just got to weigh the pros and cons and what you feel comfortable with. If you got one building, I would do it, just things to consider.
Michael Carro:So, mike, switching back to you, so Don touched on a lot of things. What are things that you think are really beneficial? A lot of things he said that really relate directly to the insurance, especially the pre and post photos and things like that what are really helpful for you. If somebody were to get hit with a disaster, how should they, what should their next steps be from an insurance standpoint?
Mike Price:So, first things foremost, always get the pictures, so that's what they're going to want to see, especially if it's a large disaster that you might not get an adjuster out as much as quick as you would like, always get pictures of it. Always provide as much detail I suggest people write stuff down so the more you can have there we are. Detail, I suggest people write stuff down. So the more you can have there we are, the more you kind of have in front of you to remember from when it happened. Hey, this tree blew from here. This is about what time it happened. As much details as you can put down in the photos, the biggest thing and then get with your agent who can put you in touch with the right people to file the claim as soon as possible, because in the event of a large one.
Mike Price:you know you could be waiting a while, because even a large one you know you could be waiting a while.
Michael Carro:That's what we talked about with Ivan. So from your experience, let's assume I have a property and I have an issue. Let's just say I have a tree that comes through my roof, punctures it, you know, causes some damage, obviously on the outside, but also the water now. So I take these photos. But you know it's a pretty perilous time. Nobody is getting, the communication can be somewhat limited. So I've got my own chainsaw, I've got my own crew, I'm starting to clean up the property, I take the photos, like you told me, um, but I need to start mitigating my losses, right? So from a mitigation standpoint, I know what I would do. But what would you tell your your uh, uh, whole uh policy holders to do if it's within their ability?
Mike Price:It's in their ability. I mean you want to stop the loss and get as much you know, especially anything that's water damaged. You know carpet, you know anything like that that's causing it you know be worse than what it is. So mitigate that as much as possible. And one thing I do warn people and I know there's a lot of good companies out there too but if you call in some of these mitigation companies they're going to help you out. The first things they're going to ask you is you know you have insurance and they're going to start kind of running up the bill on certain things. So find someone you trust that can come in there and kind of stop the bleeding. You know, first and foremost, kind of mitigate what's happened.
Michael Carro:Some things that we've done is, you know, we had a restaurant that had apparel and they actually had probably about eight, eight inches of water and they felt it was fine. And they're like no, no, mike, we're good, and I remember that goes with Don Like, listen, come, come, let me show you something. We took them to. There was a it was a two tenant building took them to the backside of their wall and so do you see that drywall and how the water wicked up you because they just wanted to open up really fast. And we get that. Uh, we're a little bit fortunate that we, that don runs all of the construction crews for us, and so we're like, listen, we can have you closed in two weeks.
Michael Carro:But the problem is for me, even though they didn't want to close and they just kind of wanted to put their head in the sand regarding the issue, I told him. I said, listen, in a year or two years or three years, if we don't correct this problem, you're going to have mold in your building. You're going to blame me, the landlord, and I don't want that for you or your customers, and I certainly don't want that headache down the road when we can do it all right now. And they agreed down the road when we can do it all right now. And they agreed.
Michael Carro:So Don went in there. We took. All we did was we took out the first two feet of drywall. You now, you now got. You got that moisture exposed, so it has time to dry out. He put de-hues everywhere and within two weeks they were open back, open for business. They actually took an opportunity to do a little bit more of a rehab themselves, outside of the insurance issue or outside of the damage, because they were closed a couple weeks. But it's just better to do it right the first time.
Don Redhead:don't kick that can down, because moisture is very unforgiving yeah, and those, those groups like that, I mean, especially during a, a large event, there's, there's, they all come to town.
Michael Carro:So if you have the ability to find a good local, contact local is so important because when, when you need them, three years from now, everybody else is gone, the locals are still here. Yeah.
Don Redhead:So it and for ours, we have to always be artists, kind of unique, because we need, we want the local relationship. But sometimes, you know, we have to think that if you know a cat five comes through. We need capacity, we need giant generators here, we need the dehumidifying systems that run through the whole building. I mean we need, we need supplies, we need the whole thing to get is our biggest thing and and something we learned with the last one, and this is just just be careful Some groups like to Mike's point.
Don Redhead:They want to come in and just start running up the bill. Basically, the buildings destroyed. Well, what do you mean? There's only 18 inches or eight inches of water. I should just demo the whole building. I mean there's, there's people that literally talk like that. So you have to. You know our goal is to get the tents back open as quick as possible, but resolve the issue permanently, but not destroy the building to where they can't open quickly and we lose a tenant. So you have to, just like everything, you're walking that that tight line. So find the trustworthy group and then, on that same point, what is your opinion with the other people? That fly line. So find the the trustworthy group. And then, on that same point, what is your opinion with the other people that fly in right behind the mitigators is the public adjusters?
Mike Price:it's just like anything. There's some some bad apples and some good characters in there.
Don Redhead:Um, you talk about the people that are, but say say, say somebody does have an issue and they meet a public adjuster, I mean what? What should be? Should they communicate with you guys and just see where it lands first? I mean, what is your kind of opinion on because you can get talked into like you're saying a sly bad apple.
Mike Price:Well, you see it all the time, especially on the residential side where you know older person or someone that's not as educated, doesn't really know. They'll get someone knock on their door and say hey, I think you've got roof damage, let's file a claim and I can file it for you. Always avoid those types of people. If anyone comes like that, talk to your agent, you know. Let us kind of walk you through it, because what they're doing up there is you know, putting a hole in your roof.
Mike Price:You know everything's a little different situation. Act like there's damage, replacing it. They're going to charge you whatever your insurance might not cover the whole so well.
Michael Carro:like Mike said, there's pros and cons to everything. You know, if you have an insurance company that is not going to pay your claim, you know then that the public adjuster might be a good solution. We're lucky in the fact that we have good relationships with with our insurance carrier. We have a lot of loyalty to them, they have a lot of loyalty to us and they're going to fight for us. However, if, if I believe I have a legitimate claim and the insurance company denies me, I'm going to pull out every opportunity, whether it's a public adjuster or an attorney, to go to bat for me on my behalf. But let your insurance company be be the group that either supports you or denies you. And if they deny you, then then you probably have to go a different route. And if, if we do get denied, mike, what would you recommend that they do? As a public adjuster A good one? The right course of action, or what is the next step of action If the insurance carrier denies the claim?
Mike Price:I would put that more on finding an attorney that you trust to kind of guide you in that direction.
Michael Carro:And what type of attorney would handle something like this?
Mike Price:There's plenty of claim attorneys out there.
Michael Carro:Is it an insurance claim attorney? Insurance attorney? Okay, I didn't, I don't know.
Mike Price:I don't know the exact term either. If I'm being honest, it's one of, and things like that, yeah.
Don Redhead:Because, thinking back now as an example, when we got hit with Sally there were seven buildings that had damage, or seven properties. One was really five buildings and we only of all those we hired one public adjuster for one location because we were running into issues like that. It's just very complex at that location. But the rest were insurance company was very amenable, they worked with us, they did everything. They did what they said.
Michael Carro:I've had great success with insurance claims. It's rare but we do. But you know again, experience is the best teacher, experience is the best teacher. So if you, if you do the photographs, if you do everything, if you do the mitigation, I mean pronto, don't let things meander, don't let things get out of hand, because that water will turn to mold quickly. Attack, attack, attack. Be in front of all this.
Don Redhead:Don't let it's. It's really tough to not, especially when we had Sally hit. That was the first time really, cause we talked about I'd never lived through Ivan. Uh, if it was a lot of snow I would know what to do. But uh, don't let fear drive your decisions, cause that's what a lot of these bad apples will drive off of. They're out there just spreading a lot of fear. Just calm down and make an educated decision, so anything else.
Mike Price:I think that's it for me.
Michael Carro:Well, that wraps up another edition of the blue dirt podcast, where even idiots can make a killing in commercial real estate. We ask that you smash that subscribe button, like us share it. Smash, smash the button. That's the, that's the that's the term People are smashing it. They like it enough. Well, they need to smash it.
Don Redhead:Adam, third time I'm going to reference it. Do people smash these buttons? No, okay, he said no. At least I got one of the three wins.
Michael Carro:Is that old term? That's an episode. Thank you, that's a wrap for this episode of Blue Dirt. We're here to help you build smarter, invest wiser and create long-term value in commercial real estate, one solid foundation at a time. If you found today's insights useful, be sure to subscribe so you never miss an episode, and if you know somebody who could benefit from these discussions, share Blue Dirt with them. Got questions or topics you'd like us to cover? Reach out. We'd love to hear from you. Until next time, keep digging deep, stay sharp and remember real value is built from the ground up. See you on the next episode.
