How Hail, Wind, and Reinsurance Changed the Math on Small Workforce Apartment Buildings
For years, the expense most likely to break a small apartment deal was property tax. Buyers learned to reassess it at the purchase price before believing any return.
Insurance now deserves the same treatment.
The seller's insurance premium, like the seller's tax bill, is not the buyer's cost.
What changed
Across much of the interior United States, not just the coasts, property insurance has become both more expensive and less predictable.
The Federal Reserve Bank of Dallas reported in April 2026 that the median Texas homeowner paid about 60 percent more for insurance in 2024 than in 2019, roughly double the national increase over the same period. It pointed to higher rebuilding costs, severe weather, and more expensive reinsurance, and noted that Amarillo and Dallas Fort Worth carry some of the highest insurance burdens in the state. The rate of increase slowed in 2025, but premiums did not go back down.
Apartment owners have seen the same pattern. A 2025 survey of apartment owners by the Federal Reserve Bank of Minneapolis, covering operators far from any hurricane coast, found premiums up 45 percent in a single year and deductibles rising even faster. One owner reported insurance growing from 6 percent of total operating expenses to a forecast 14 percent.
For a large, new property with a professional risk program, that is painful. For a 12 unit building from the 1960s, it can be the difference between positive and negative cash flow.
Why small buildings feel it most
- Older roofs and systems. Carriers price roof age, material, and condition heavily. A 20 year old roof in hail country can drive the premium, or make coverage hard to place at all.
- No scale. A 500 unit portfolio can negotiate. A single small building buys what the market offers.
- Higher deductibles. Wind and hail deductibles are increasingly set as a percentage of insured value, not a flat dollar amount. A 2 percent deductible on a $1.5 million building is $30,000 per event.
- Underinsured sellers. Some long time owners carry old policies, low limits, or coverage that would not satisfy a lender. Their expense line looks efficient because it is incomplete.
How we underwrite insurance now
We do not accept the seller's insurance number. We rebuild it.
- Get a real quote early. Before we finalize a price, we ask a broker to quote the actual building with the coverage a lender will require.
- Match the lender's requirements. Replacement cost, loss of rents, liability limits, and deductible caps can all change the premium.
- Price the roof. We ask roof age, material, and inspection history, and compare the cost of a new roof with the premium difference it would make.
- Model the deductible. We set aside reserves for at least one wind or hail deductible over the hold period, not just the annual premium.
- Check loss history. A loss run from the current carrier shows what the next carrier will see.
- Stress the number. We test debt coverage with insurance 25 percent above the quote. If the deal fails that test, it is too fragile.
What it means for price
When insurance rises by several hundred dollars per unit per year, value changes with it. On a small building, a $400 per unit increase across 20 units is $8,000 of lost income. At a 7 percent cap rate, that is more than $110,000 of value.
That is why we ask for insurance details before anything else in a negotiation. A seller who has already replaced the roof, installed impact resistant materials, or kept a clean loss history owns a more valuable building, and we are glad to recognize it.
Where this matters in our markets
Hail and severe storms are a fact of life across the Texas Panhandle and South Plains, much of the Dallas Fort Worth region, and the Colorado Front Range. The Arizona Sun Corridor has different risks, including monsoon wind and heat related wear. In every one of these markets, the right answer is the same: quote the real building, not the average.
Bring us the building with a new roof
Draymoor Ventures is seeking stabilized workforce multifamily properties of 4 to 70 units across the Texas Triangle, the Arizona Sun Corridor, and the Colorado Front Range, with a preference for smaller cities over the anchor metros. We are especially interested in well maintained properties with recent roofs, clean loss histories, and owners ready to share actual operating costs.
Share an opportunity: Steven@DraymoorVentures.com
Sources
- Federal Reserve Bank of Dallas, Southwest Economy, Mariam Yousuf, April 15, 2026. Texas homeowners paid about 60 percent more for insurance in 2024 than 2019; growth slowed to 4.3 percent in 2025. https://www.dallasfed.org/research/swe/2026/swe2609
- Multifamily Dive, New survey highlights insurance challenges for areas beyond the coasts, reporting a 2025 Federal Reserve Bank of Minneapolis survey of 35 apartment owners operating about 45,000 units. https://www.multifamilydive.com/news/insurance-premium-deductible-multifamily-operations/743293/