If you thought El Nino was bad, it came in super size, and the resulting extreme weather pattern could wreak havoc for investors who own or plan to own property in the eight states that lie in its path.
Super El Nino blast in already stressed insurance market
According to meteorologists, El Nino-Complex weather patterns caused by warming waters in the Pacific Ocean – could double this year, increasing the likelihood of extreme weather such as hurricanes, floods and storms in the Sunbelt, some of America’s most coveted new development and investment property locations.
newsweek Insurance costs could rise dramatically in anticipation of the arrival of Super El Nino, report says cash flow The states include:
- alabama
- Arizona
- Southern California
- Florida
- louisiana
- mississippi
- new mexico
- texas
Insurance rates have increased 46% in five years
Super El Nino couldn’t come at a worse time for homeowners and investors who have seen Insurance costs rise rapidly In recent years.
Los Angeles TimesAn online insurance comparison site, using data from Insurify, reports that the average US homeowner’s insurance premium is are projected The price is set to rise by a further 4% to around $3,057 in 2026 after rising 12% in 2025 and a whopping 46% since 2021, with extreme weather and reconstruction costs cited as key drivers.
home insurance prices, Times According to the report, both inflation and income growth were lagging behind. it tools for investors, cap rates and cash flow is was ruined.
Flood insurance, which averages around $1,100 nationwide through the federally supported National Flood Insurance Program (NFIP) administered by FEMA, rising to more than $2,000 in high-risk areas, is usually purchased separately. Although it is hit or miss Because the weather patterns remain unpredictable.
Natalie Lord, chief climate scientist at Fathom, a global flood risk intelligence provider, said: newsweek: :
“It’s hard to tell where the greatest risk is going to be until it actually happens. But I think He probably means some time In general, insurance premiums are increasing, this is likely to be seen in the markets of those states. more than the country’s average Premiums have increased to offset some of those losses (from El Nino). Problem will be Not all of those states are expected to suffer significant damage.
Investors’ costs in high-risk areas
Its effect is clearly visible in recent figures. newsweek reports that Arizona saw the fastest Increase in homeowner’s insurance costs Nationally, average premiums soared 94% between 2021 and 2025, while Florida, Texas and Louisiana also saw steep increases due to severe weather losses and rebuilding costs.
For homeowners who want to trade the snowy Sunbelt for the icy north and lower their cost of living, fidelity investment Calculated that the better approach does not extend to the total cost of living, which is equivalent to insurance costs for property owners.
Citing Bankrate data, Florida was the worst among all Sunbelt states, with the combined annual outlay for homeowners (based on a $300,000 home) and car insurance totaling $9,550.
For interested investors flip housesThe Rust Belt has eclipsed the Sunbelt, which has been hit hard by the “affordability economy,” with insurance costs no doubt playing a role as well. according to LuckUS housing is experiencing a historic “reversion to the mean”. Or to put it more bluntly: “Formerly hot metropolises have gone cool, and unsexy plodders are back in vogue.”
According to a report by first Street, Home values ​​will decline by $1.47 trillion by 2055 due to rising premiums, the insurance sector and buyers shying away from high-risk areas, according to a climate-risk research firm.
Choosing investments with insurance in mind is an increasing process
Selecting areas for investment while controlling insurance costs is becoming increasingly difficult as weather patterns affect the underwriting business. new York Times Last year it was reported that home insurance premiums had increased by more than 20% since 2017 due to underinsurance.
A basic cash flow calculation with today’s insurance rates
bankrateThe 2026 rankings show that Louisiana homeowners pay an average of $6,274 per year. This amounts to $523 per month, which is the highest state average in the country.
For a simple back-of-the-envelope cash flow calculation on a $300,000 property, this is equal to:
- monthly rent: $2,200 (from tenant)
- Other operating expenses (repairs, management, etc.): $400
- Mortgage payments (principal and interest): $1,000
- property taxes: $400
- Homeowner’s Insurance: $600 (about $7,200 per year, slightly above the statewide average of $6,274 but within the range for Orleans Parish)
- Total housing costs (mortgage, taxes, insurance): $2,000
- Insurance portion of housing cost: $600 ÷ $2,000 = 30%
So, in simple cash flow terms:
- Gross Fare: $2,200
- Operating Expenses (except mortgage, taxes and insurance): $400
- Net before mortgage, taxes and insurance: $1,800
- Subtract mortgage ($1,000), taxes ($400), and insurance ($600): $2,000
- Cash flow after all housing costs: $2,200 – $400 – $1,000 – $400 – $600 = $200
In any other market, a $1,000 mortgage payment and $2,200 of upcoming rent would be a “deal!” Would scream – assuming the neighborhood was halfway decent. However, to make Only $200 in monthly cash flow, which can easily be drained due to an unexpected repair Monthly expenses are a marginal deal, at best.
Should insurance climb above $600/month, that highly likely to be given With anticipated cost increases, this will further weaken the economics of ownership and investment.
If you want to calculate these numbers for a deal or for one of your properties, check out BiggerPockets’ Investment Calculator And get accurate reports in minutes.
final thoughts
These days the usual cash flow metrics are being impacted by rising costs, including purchase price, interest rates and, especially, insurance. What is often not taken into account in these cash flow equations is the financial stress tenants face amid the affordability crisis.
As deals increasingly languish, the possibility of missing a rental payment or two increases and the deal could suddenly turn into negative cash flow.
For investors, making the most money with the fewest doors has to be The safest way, simply because it minimizes the risk. Yes, Appreciation And leverage are great concepts in theory, but not in today’s market unless you have a lot of cash to absorb potential losses.
