Protecting the growth of your portfolio

Logan Ransley: Hey everyone and welcome back to the Profitable Rental Podcast by Landlord Studio, where we explore the six building blocks of real estate profitability — all about helping you to maximize and grow your rental portfolio. I'm Logan Ransley, co-founder of Landlord Studio. We're a property management and accounting software designed for small to medium-sized landlords who are growing their rental portfolio and want to start to automate a lot of the day-to-day jobs, including the accounting and management side of the business.

In today's episode we want to explore the importance of insurance — landlord insurance particularly — when it comes to scaling your portfolio, and what investors need to know in order to ensure that their portfolio is protected against unforeseen circumstances. To help us dive into this topic today we've got a special guest, Max McClure from Steadily. Max is Chief Underwriting Officer at Steadily, an insurance company that has successfully disrupted the insurance industry over the last few years, particularly in the landlord space. Welcome Max, how's it going?

Max McClure: Thanks Logan for inviting me. Hello everyone. Look forward to the lively discussion on insurance — not your typical conversation you want to have early in the morning, but hopefully everybody's got their coffee and is ready to go.

Logan: I always ask my guests their favorite quote. It helps set the scene about who you are and what's important to you. What's your favorite quote and why?

Max: My favorite quote is from a Charles Dickens novel: "Have a heart that never hardens, a temper that never tires, and a touch that never hurts." What I really like about that quote is you can apply it to many different aspects of your life — whether it's leadership, whether it's as a husband, as a father, as a son, as a friend. I think that quote is a really good guide to a lot of different aspects of life.

Logan: I like it. Charles Dickens — good author. Love to dive into Steadily a little bit. Give us a 30-second pitch or an overview of who Steadily is, what your team does, and why it's important especially for landlords that are growing their rental portfolio.

Max: Steadily is focused exclusively on insurance for landlords and rental property owners. The industry has largely been stagnant for the past 30 to 40 years and is in desperate need of more speed, automation, and ease of use. All of the founders of Steadily were landlords before founding it and saw the gap in the market. They had seen how the industry had made a lot of progress on auto and on homeowners insurance and saw the need for that to extend into rental properties. So that's what we're focused on — being the best direct landlord insurance provider in the world.

Logan: I see you've done a recent raise as well and are scaling the team up — congratulations on that. It's exciting to see the space being disrupted and streamlined, particularly for landlords that have had bad experiences with insurance companies before. I want to dive into how Steadily approaches the space. How does leveraging technology help provide a really customized, personalized experience to secure the best deals for landlords, and how has that been an important part of Steadily's growth and business model?

Max: I'll start by explaining my role at Steadily. As you mentioned, I'm the Chief Underwriting Officer, which is a big fancy term for keeping Steadily profitable. My job is to make sure that we're selecting the right risks, the right homes, and pricing them correctly. The great thing about a technology company like Steadily is that it not only leads to a great customer experience but also to much better price segmentation. What price segmentation means is that we're able to customize the price of our insurance to a much more granular degree than the incumbents — the people that have been in the space for a long time.

The reason we're able to do that is because of the technology and the caliber of engineering talent we have in-house. We have all these different partnerships with property management companies, systems, and vendors that traditional insurance companies would probably struggle to integrate with, but we're not only able to bring that into our own systems — we're able to price on it too. That is a huge differentiator for us and has led to a very competitively priced product that helped us finish raising our Series B in the last couple of months. We're very proud of that.

Logan: Amazing. How does Steadily's approach differ from current industry players? What's the experience that a landlord could expect going through the process of getting landlord insurance from Steadily compared to what they're typically familiar with?

Max: We are obsessed with the idea of exceptionally fast, white-glove treatment when you're coming to buy insurance from Steadily. When you compare getting a quote from Steadily in two minutes or less to companies that have been in this space for decades — it can literally take days, and in some cases if you've got multiple rental properties, weeks to get quotes. With Steadily you're talking minutes, and you have help immediately available if you need it to walk through your quote and discuss coverages. That is the principal differentiator for us.

Logan: As landlords are thinking about insurance and their portfolio grows, how important is it to incorporate landlord insurance into their planning? What are some of the benefits, and why is it so important to consider whether you're maintaining your current portfolio or looking to grow over time?

Max: All real estate investors know that insurance is going to be an expense when they're looking at whether or not to invest in a rental property. All investors are used to asking, "How risky is this purchase?" — that's a general question every real estate investor asks themselves. You have to have a similar conversation with yourself on insurance: How good of insurance do I want to buy? How high of a deductible do I want? It'll save me money, but I may be out of pocket if an event happens like a hail storm or a fire. So you have to ask yourself what your risk tolerance is for insurance. Once you decide on that, you'll generally be able to get a range of what it's going to cost — that's going to be pretty intuitive to most investors.

What's less intuitive is where the industry is headed. I'll nerd out on you for a second — forgive me. We are in what's called a hard insurance market, which means that premiums are rising across the board. If you've been looking at rental properties over the last few months and priced out insurance, we are in an environment where rates are increasing pretty rapidly. It doesn't really matter where you are, though it's more exacerbated in places like California, Florida, and Texas. But generally speaking, the market is moving up. If I was a real estate investor actively looking for something, I would be factoring in rates going up probably 30 to 40% over the next couple of years.

Logan: That sort of goes into the whole economic shift, particularly around mortgage rates and interest rates going up. How does insurance play a role when it comes to mortgages, and how does it affect the relationship between real estate investors and their lenders?

Max: Generally speaking, if you're going to have a loan, your mortgage company is going to require you to have insurance — and not only that, they're going to require you to have a certain amount of insurance with a reputable, financially stable insurance company. Mortgage companies will verify that you bought insurance from somebody who has an acceptable financial stability rating, not some company that could go bankrupt in a year. They do their due diligence on the back end. Steadily is very financially stable and we've never run into an issue with ratings, but that is something to consider when you're buying insurance. If you have a too-good-to-be-true quote on insurance, that's sometimes a red flag that you may want to dig a little bit deeper.

Logan: Does it impact the type of entity structure you're in — say you're in an LLC, or you've got properties owned individually, S-corps, etc.? What does that process look like in terms of insurance covering those different entity structures?

Max: The long and short of it is: it's complicated, and it depends on what's going on inside that business entity. If you've got an LLC or a corporation that exclusively is the vehicle you use to invest in rental properties, generally that's going to be very straightforward. But if you're using a business entity to own your rental properties and it also operates, say, a computer dropship business where you're sending computers all over the country — there can be an issue there where you need to make sure you've got all the right coverages in place. Landlord insurance is not there to insure your business or the other operations of that entity. You really want to make sure you've discussed all those coverage gaps with an expert, because if there are a lot of different operations under that entity, you may need to buy other types of insurance too.

Logan: We've heard a lot about umbrella policies and how they weave into those different entities. For listeners who hear the term "umbrella policy" — how does that apply to their real estate business or portfolio?

Max: I'm a huge proponent of umbrella policies. I'll tell you a story that'll emphasize why. I have a friend of mine who owns some rental properties and he called me one day and said, "Hey Max, I drove up to my rental property on New Year's Eve and I saw my tenants shooting Roman candles onto my neighbor's roof." Roman candles are fireworks. He said, "What would happen if they had caught that house on fire and it burned down?" I said, "I don't know exactly what would have happened, but it wouldn't have been good." He said, "Can you look at my insurance?" I looked at it all and said, "You need an umbrella policy." He bought it that day.

Umbrella policies are not expensive and they give you a ton of extra protection. If you're a real estate investor and you've been on the fence about buying one, it's honestly a no-brainer. In depth: if you've got, say, $300,000, $500,000, or a million dollars of liability limits on your rental properties, an umbrella policy — whatever limit you purchase — sits on top of the liability you've already purchased and protects you to a greater degree from any sort of severe, catastrophic event. It's similar to public liability insurance in a company, but in this case it's related to rental properties.

Logan: Diving a little deeper — there are a lot of different types of insurance: tenant insurance, home insurance, rental insurance, landlord insurance. In the context of Steadily, what should landlords be considering when it comes to choosing the right policy for their rental property specifically?

Max: I'll do a quick summary of the basics of those three types of insurance and then get into some nuances. Homeowners insurance is intuitively to insure your house and your personal liability — not only what you do at your house but even what you do elsewhere (not in your car; that's car insurance), but it will insure you for certain things you do off your home, which is really important protection. Landlord insurance, which is what Steadily focuses on, tends to be more about liability for what happens on that premises — if somebody slips and falls, if there's a dog bite, those are the kinds of things a landlord policy will typically cover. Rental property insurance, or renters insurance, is more for tenants — whatever stuff the tenant has inside a home, there's typically personal property coverage for those objects, plus liability coverage for the tenant.

Steadily focuses on landlord rental property insurance, but we also have a specific product for landlords who occupy part of a home. If you're a landlord living in one unit of a triplex and renting out the other two, Steadily has a specific product that combines the elements of homeowners insurance with landlord insurance, so you get both protections you need — which is actually pretty rare in the market. If any of your customers have that dynamic, they should definitely reach out to Steadily because it's pretty unique.

Logan: As a sort of final question — going back to how Steadily is disrupting the insurance space — where is the industry going? What are some of the trends and innovations you've seen, or expect to see, in the field of landlord insurance over the next few years? And what are some exciting things Steadily is working on?

Max: One exciting thing about Steadily is that yes, we are very focused on landlord insurance, but once you're actually in this space there are so many subcategories of customers for whom today's solutions really aren't that great. The industry is saying there's one type of landlord, but we all know that's not the case. Some of the more nuanced work we're working on now — I'll give you an example — is around ADUs, additional dwelling units. There's a new thing going on in a lot of urban areas where a single lot is being divided so that there are multiple dwellings built on it, and there are also solutions where a condo association is created to facilitate this legally.

Steadily is actively working on a custom product for those types of ADUs, where you can have a landlord who owns one of those units on a parcel and there could be three to ten others owned by other people. In practice on the insurance side it gets kind of tricky on how we protect the interest of our insured, but we're working on that now. So if we have any customers in that situation, we have a product coming out for them.

Logan: Where can people find out more about Steadily and learn about the products you're offering?

Max: Steadily.com. You can come in and quote your properties yourself if you want to bind it and do it all on your own. If you want some expert help, you can use our chat feature or give us a call and a smiling face will take the call and help you.

Logan: Awesome. And also Steadily is available inside Landlord Studio as well — we surface that up when you add your properties and you can get an instant quote right inside the product, which makes the whole process a lot easier. That's it for today's episode of the Profitable Rental Podcast. Absolute privilege having you here, Max — really great to dive into the world of insurance and get some nuanced advice and insights about how this all works for landlords either scaling their portfolio or considering switching to landlord insurance. If you liked this episode, give it a like, give it a share, subscribe to our channel. We'll do a write-up on this as well and share some links to Steadily where you can check out their website and products. Follow us on social media at Landlord Studio on all platforms. We'll share more tips in the coming weeks on how to scale and make your rental portfolio more profitable. Stay tuned for the next episode of the Profitable Rental Podcast, and until next time, have a great week. Appreciate your time, Max.

Max: Thank you Logan, appreciate it.