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Global Investors Podcast
GI93: Understanding, Reducing and Eliminating Flood Insurance with Brad Hubbard
March 31, 2021
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Brad Hubbard is a Professional Engineer, Certified Floodplain Manager, the author of the book Flood Money and has appeared on NBC, CBS, Bay News 9, and performed over 20 radio and podcast interviews.

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Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Brad Hubbard. His company, National Flood Experts, was created from 20 years’ experience in civil engineering, and as a licensed insurance agent Brad specializes in reclassifying high-risk flood zone properties into low risk, which has saved his clients over $10 million in annual flood insurance premiums. So thank you so much for being on the show. Brad,

Brad:
Thanks Charles. Glad to be here.

Charles:
So what was your what was your background prior to starting National Flood Experts?

Brad:
Yeah, so my degree is in civil engineering and I worked in civil engineering for about 12 years doing site design, civil site and roadway until I sort of grew to hate it. After about 10 years of it, I just didn’t really enjoy the engineering world anymore. And ended up working for my wife’s cousin who had an insurance brokerage. And he basically, he was like, Brad, you’re good with numbers are good with people. Why don’t you try an insurance? So went over there and sold insurance for him for a couple of years. And after a little bit of time, I realized that most insurance agents don’t really like flood insurance. So I ended up doing a lot of the flood insurance for his company and started to put my engineering hat back on. I looked at these properties and, you know, you’ve got the lenders saying they need to have flood insurance on this property and I’m looking at it going why? And so I started making some calls to FEMA asking around and their answer was, well, if you know a professional engineer, they can do this and this and this. And I was like, well, I’m a professional engineer. And you know, for the first few clients, it’s like, Hey, three days later I had them out of the flood zone. They’re no longer required to carry flood insurance. And that sort of started the ball rolling on this entire thing. And that was about eight years ago.

Charles:
Okay. So can you tell us exactly what you guys do? So we’ll go through like the process later on, but what is a typical, what is a typical service and process for you kind of involve, I guess you’d say

Brad:
Sure. You know, what, what we do the way I kind of describe it is it’s it’s flood insurance consulting from an engineering perspective. So we try to first see if any property that we’re looking at should be required to carry flood insurance. Are the maps correct in this area? If that is correct then what we’ll try to do is, okay, so it is correct. These, they should be required to carry flood insurance. Are they paying the right rate? Are there things that they can do to maybe bring those rates down a little bit? Was it rated incorrectly? Is there, you know, are there any other options here? So it’s flood insurance consulting firm, you know, really an engineering perspective.

Charles:
So how do you determine the true risk of flooding on a investor’s property?

Brad:
Sure. We, you know, we use a lot of FEMAs data. You know, FEMA has spent hundreds of millions of dollars mapping the entire country for prospective floods. And, you know, the private world has really gotten into there much more in the last 10 years as well. So there’s a lot of good data out there. So what we try to do is really take a look at the building from a flood risk standpoint. How has it elevated? How has it constructed, what other things are here that may or may not impact the flood? So will from anything from sending one of our surveyors out to do what we call our flood expert survey to just looking at any information, you know, some existing information, if they’ve got elevation surveys, topographic surveys, and we try to really understand what’s going to happen here as it relates to flooding and ultimately flood insurance costs for the clients.

Charles:
Okay. So what do you how do you prepare properties for future flood events? If someone already owns a property?

Brad:
Sure. You know, there are things you can do. You know, what we really focus on here is more the financial aspect of it. It, you know, try to try to save these investors as much money as possible on a year to year basis, increase that NOI cause flood insurance, depending on where you are. It can be a huge hit to, you know, it’s the actual income you’re making on a property, but if you’ve got a building and you are concerned with it flooding on the commercial side, they’ve got what they called it. It’s called dry flood proofing. And basically, you know, for lack of a better way, it’s, it’s like hurricane shutters for flood. So, you know, they’ve got flood proof, doors and panels that you can add to any kind of an opening you have on the building, whether it’s a door or storefront class, things like that that will impede water from coming into the property. And they also, you know, give you benefits on your flood insurance premiums for having that. But those are really the, the main options when you’ve got a building it’s there, it’s been there for 60 years, unless you want to knock it down. Those are the best options out there right now for, for trying to prevent getting water and, you know, damaging those buildings that you own.

Charles:
I imagine you consult with new developers. How do you design or how do you consult with developers on designing future projects that lower the risk of flood events?

Brad:
Sure. Yeah, what we do in that kind of a scenario is our number one goal is build it in a way that will make flood insurance, either a not required or B be as cheap as possible for the longterm. One mistake that we see a lot with developers, you know, you’re, you’re coming in, you want to build a building, you want to build it. You want to get your permits to code as cheap as possible, right. You’re trying to, and you’ll see them try to cut corners on filter and things like that where maybe they’ll save 20, 30, $50,000 on the construction costs, but it’ll cost them longterm. So what we really try to do is build for the long-term flood impacts. What are 10 years of flood insurance going to look like on this building? What if you raise the average elevation around the outside of the building? What if you brought the building up an extra six inches higher than code is saying, but you know, that’s going to knock your flood insurance costs down by 40%. So we really try to look at it as not as much of a, how much is it going to cost to construct it? What, what are your tenure’s costs going to be of operating it? And how can we get that number down as far as possible?

Charles:
I want to circle back to, as you were talking about the FEMA maps. And I know when we initially had met a couple of years ago, and you were saying that a lot of this information is outdated, and then you were also saying another thing. Well, yeah. Is that, I mean, how do you work without data map naps then and information?

Brad:
Well, I mean, you know, like you said, the, the maps are outdated, even a brand new map that is coming, you know, like there you are here in Pinellas County, you guys are getting new flood maps here this year, most likely in talking with, you know, flood plain managers and stuff, that data is already eight years old. You know, the data that they’re putting out right now, just because that process takes so long to go through. So you’ve got, you know, survey data from 2012, 2013 that they’re using the, create these new maps and, you know, just the process of everything. It’s 2021, and you’ve almost got 10 year old data in there. And that’s for a brand new map. If you’re looking in some of the areas where you’ve got a map from 1998, you know, 1982, I mean, there, there are some significantly old maps out there. And especially here in Florida, the amount of construction and development that’s happened it’s not the same scenario. You know, nothing looks like it did even 10 years ago, much less 20 or so. So the maps and the maps when they’re done, they’re done on a very macro basis, right. They’re trying to figure out how the water is going to impact this entire area. And what we do is look really, really specifically property by property and even structure by structure. How’s it gonna impact this building right here on this property? So that’s where we find the errors and that mapping is just it’s. They do a great job. They really do. It’s just, it’s such a massive task. It’s impossible to be accurate on you know, building by building basis. Okay.

Charles:
Yeah, I would imagine so I, I just, I imagine a lot of that stuff has been updated when you’re in different counties and it kinda leads you to having to put together the puzzle of what you can do and how you can help your client.

Brad:
Yeah. You know, Pinellas County has a lot of money. If you think about a lot of the counties, smaller counties, smaller municipalities that don’t have the money to put into flood studies. Right. You’re just operating with bad data. Yeah.

Charles:
So I I’ve been down in Florida for nearly 10 years and flood insurance was not something that we really utilize when in real estate up North. And can you explain flood insurance and just an overview of how it works and, you know, it’s, it’s different how it differs from property insurance and what property, just give a little overview to listeners that might not be aware and have flood insurance in there.

Brad:
Yeah. So basically flood insurance is just like every other insurance would be in there to ensure you in the event of a flood. It is not included on most property insurance policy. So if you’ve got a commercial building and you know, mid state, New York, you’re probably not going to have flood insurance on it. You’re not going to be covered for flood insurance where flood insurance comes into play as any time that you you have a loan, especially a federally backed loan, which is pretty much everything out there right now that lender is going to require that you carry flood insurance. On top of all the other insurances you’re carrying, obviously you’ve got your hurricane, your fire, all that kind of stuff. They also require flood. The difference with flood is 90 plus percent of all the flood policies out there are written through FEMA, you know, a federal backed program. So you’ve got government insurance which leads to all sorts of problems. But so if you have any kind of a property that you have federal federally backed loan on, they’re going to require that you carry flood insurance on it. That’s the real basics of it in this standards are getting more and more strict that we’ve seen with Fannie and Freddie recently that they’re requiring not just the base policy of the 250 or 500,000, but they want full replacement costs for your $20 million building. Even if it’s a high rise, they still want full replacement costs. They want business income loss all of that on top of your typical flood insurance policy. So it can get to be very expensive.

Charles:
Now, is it? So if you’re dealing with FEMA insurance and I go to one, I’m getting property insurance for someone and they give me a quote for flood insurance. Is it going to be the same at the next place I go to, if it’s through FEMA or is it going to, or can differ?

Brad:
It can differ. So the theory is every agent can write it the exact same and give you the exact same policy. The, where the problem comes in with that is the actual underwriting of a flood policies. It’s very difficult. You know, it’s not a, it’s not a fire policy where they say, yep, your address is here. You’re a masonry building. Here’s your price with flood? There are 30 different variables from elevation certificates, from how the building is built from using things like grandfathering. You can get, you can go to five agents and get five different quotes. Even though that’s not the way the system is designed, it’s supposed to be designed in a way that everybody gets the same quote different people’s level of expertise in flood will give you different numbers each time.

Charles:
And one last thing on FEMA on the pricing, is it, you know, for Florida, I’ve heard, I’ve read that Florida’s paid in a lot more into FEMA insurance than other States in that like in, I think, I guess you say throughout the Southeast is how does that change? Is that going to change at any time in the future where they might dial back Florida flood policies or make it less expensive or we’re just still paying into it?

Brad:
Yeah. Like you said, you know, I call us a donor state, you know, have 35 or 37% of every single policy in the countries, in the state of Florida. But you know, we’ve really, haven’t had the major losses that other areas have had the Northeast with Sandy and Katrina over in Louisiana and even just your annual riverine flooding along the Mississippi and other rivers throughout the country. Florida doesn’t have a lot of that. So we’ve, you know, we’ve put in, I don’t remember the numbers. It’s been a couple of years since I’ve looked at it, but basically, you know, if we put in 10 billion, we’ve only had 3 billion in claims where a lot of the other States are flipped of that. You know, they’ve had 3 billion foot in and they’ve got 10 billion in claims. So yeah, we’re a donor state and that’s not changing, you know, all the new maps that I’ve seen. Everything is getting worse, not better across the country. And that’s not just Florida, it’s just climate change and with development and all that different stuff that just foresee the longterm impact of flood as being worse in five years than it is now. So unfortunately it’s only getting worse. You know, we’re a big peninsula sticking out in the water. So even though we haven’t had the claims, the possibility is there.

Charles:
Yeah. I’ve seen even it all parts of climate change I guess, have been affecting. And it’s, I mean, in our insurances on investment properties all across the United States, I mean, they’ve been consistently going up 10%. I mean, we underwrite now 10, 15% annual increases in insurance, which is crazy. Never would have done it before. It usually it was three or 4%, 10 years ago. And now I think that the insurance companies are actually buying the data from these companies that have this information saying that you know, this is it’s going to be a longterm thing coming, you know what I mean? Where it’s just going to be more and more expensive to insure property.

Brad:
Yeah. That’s, that’s been the trend I’ve noticed the same thing and, and flood is, is probably worse. It’s yeah, it’s no better that’s for sure.

Charles:
So Brad, when should an investor reach out to you and your company?

Brad:
Honestly, any time, you know, if we, I know that’s a, that’s a, a crap answer, but you know, if you’re, if you’re looking at acquiring a property that has some flood impact, let us take a look at it. You know, we can really help you make a decision that for go no-go on whether or not this makes sense. You know, we could look at it and say, flood insurance is going to triple over the next five years, runaway from this, or it’s the flip, you know, Hey, they’re paying a hundred thousand and flood insurance is property. You could pay nothing. You’ve just gained a hundred thousand in equity, you know, are your NOI right off the bat? If they own a property right now and, you know, flood insurance is part of it, let’s take a look at it. Let’s see if there’s anything that we can do to increase the value of that property. If you’re going into refinancing, you know, same thing, you know, if you can increase your NOI, that’s more cash. You can get out from the bank when you’re doing it. There’s, there’s not a bad time to reach out to us in that whole life cycle of owning a property in a flood zone.

Charles:
So what would be the process if someone says owns a property already whatever it might be apartment complex, larger, small, and they reach out to you. What, how does the process work after they make contact?

Brad:
Sure. So what we’ll do is we’ll get as much data from them as they have. So we’ll take the flood declaration pages that they have any elevation certificates that they have. And we’ll start our internal review process, which is, you know, 13 different points that we look at to see what we can do for the property. If it’s something where we can get the map changed, we can take it from a high-risk to a lowered property. We’ll go into our contract with them, which will basically be in it. You know, we’re going to do this, we’re going to get moved from an a, to an X. And then when we’re successful, we build a clients. So we review everything for free. Our contracts are only based on the savings that we provide and it’s all a hundred percent guaranteed. So in some scenarios there where they’ll give us all that data, we’ll need to send one of our surveyors out and do our flood expert study on the site. Just to confirm some data gets a better data if they don’t have it. But that’s really the process is we take a look at everything. They have give them a proposed solution, go under contract and get it done.

Charles:
Can you give us a, I know you told me before about saving so much money on the complex in Texas, but can you give us a couple examples of some big wins that you’ve had for your class?

Brad:
Yeah, absolutely. Biggest one we had was recently up in Virginia. It was a company that owned four different apartment complexes in a couple of different towns there. We ended up saving them $185,000 a year in flood insurance across those three or four different properties. Around here recently, we’ve had some condos that we’ve been able to get the flood insurance dropped. We obviously, you know, you’ve got condos in the water. You’re not going to get rid of flood insurance, but we’ve gotten them up to like five years of a refund, $400,000 refund. And the association, obviously they were through the moon for that. Apartment complex is where we have our most successful working through some really big, crazy numbers at you where we’ve had that $30,000 a year, $80,000 a year of savings on flood insurance by getting it removed

Charles:
And say, for instance, that person then sold it or that group sells it after working with you. That is, I don’t want to say grandfathered or transferred, but that can now be brought to their insurer and show them, Hey, this is all, this is what we were doing before. And it, you know, it’s not just for that owner

Brad:
Correct Yeah. And anything that we do is it’s for the property. It is not tied to the ownership in any way. Nice though, when the property is sold, it transfers to the new owners and you know, anything that the previous one was doing, the next one can do it too.

Charles:
So what are the biggest mistakes or common mistakes that investors make in regards to insurance in general or flood insurance?

Brad:
Now, I really can’t speak to insurance in general, but with, with flood, I I’d say the biggest mistake that is made is, you know, kind of back to your comment earlier that any insurance agent can give you the same price on flood insurance. You know, so people, you know, the biggest mistake is doing nothing, just taking, you know, okay, I’m in a flood zone, I have to pay flood and here’s my bill pay it, right? Question that a little bit, send it to us. Let us take a look. Maybe you shouldn’t have to pay flood. Maybe the building is wrong on the elevation certificate. Maybe the flood zone when the building was constructed in 1979 was different. And you can grandfather back to that, doing nothing and just paying your bill is the biggest mistake. Because about 60% of the time, there’s something we can do. I mean, you’re talking well over half of the time, we can do something to have a cost savings that, you know, you do nothing and you just, you, you don’t even have the potential to get those savings. So that’s honestly, that’s the biggest mistake is just doing nothing interesting.

Charles:
Okay. Well, how can our listeners learn more about you and your company Brad.

Brad:
Easiest, you know, we’ve got our website, national flood experts.com. There’s some good information out there. We’re on social media Instagram and Facebook though. I’m terrible at those, but we’ve got people who work on them or just give us a call you know, phone numbers on our website who probably be on here too. But you know, we’d love to talk to you and see how we can help. That’s really what we just try to do is how can we help our clients.

Charles:
Okay. Perfect. Well, thanks so much for coming on. I’ll put all those links into the show notes and looking forward to connecting with you in the near future.

Brad:
Thanks Charles. Appreciate it.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

Announcer:
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Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

Links and Contact Information Mentioned In The Episode:

About Brad Hubbard

Brad Hubbard is a Professional Engineer, Certified Floodplain Manager, the author of the book Flood Money and has appeared on NBC, CBS, Bay News 9, and performed over 20 radio and podcast interviews.

His company, National Flood Experts, was created from 20 years’ experience in civil engineering covering 9 states, and as a licensed insurance agent in 15 states. Brad specializes in reclassifying high-risk flood zone properties into low risk, which has saved his clients over $10 million in annual flood insurance premiums, increasing the value of their properties by a cumulative total of over $150 million.

Brad has been consulted by Congress and FEMA for his opinions on Flood Insurance. Brad is married with two children, and is an avid runner.

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