Welcome to the 5 Minute Prime Podcast. Quick actionable tips to master personal finance and real estate investing. In just five minutes a day, we'll help you build wealth and achieve financial freedom. Hey Prime Investors, Martin Maxwell here. Welcome back to the 5-Minute Prime Podcast. You've been waiting for Florida to come to you. And here it is: a rental in Punta Gorda, listed 10% under what it would have cleared last year. You start running the numbers. Then you open the insurance quote. And it's double what the seller's been paying. Today's a scenario. Stick with me. There's a pause coming where you make the call. Here's the deal. Turnkey single family, B neighborhood, Punta Gorda, $285,000, tenant in place, good shape. And on our own data, Punta Gorda is the single worst declining metro in the whole state, down almost 10% year over year. That's the print that makes a patient buyer sit up. Maybe this is the floor. The seller's performa reads clean. Rent, $2,300 a month, $27.6 a year. Expenses around $11,000. Taxes, insurance, maintenance, vacancy. Net operating income, $16.4. On $285, that's a $5.75 cap. Not a screamer, but for a turnkey house, 10% off its peak in a market that might be bottoming, you reach for the mortgage calculator. You'd put 25% down, $71,000 of your own cash, and borrow the rest at $6.5%. And then you do the one thing most buyers skip. You get your own insurance quote. The seller's been paying $2,900, a policy that's simply below market, grandfathered from before the last storm cycle. Your quote, new buyer, current risk, Charlotte County, $6,200. More than double. And that's wind only. On a canal street, floods a separate policy on top. Watch what that one line does. Insurance goes from $2,900 to $6,200. NOI drops from $1,640 to $1,310. And the cap rate falls from 5.75 all the way to 4.6. Now hold that next to your loan, and here's where almost everybody gets it wrong. You're borrowing at 6.5. But 6.5 is the interest rate. It is not what the debt costs you. 30-year money, principal and interest on the whole balance every year runs 7.6% of that loan. That's the loan constant. That's the real price of the money. So the house earns 4.6, the debt costs 7.6. That's not thin, that's inverted. And be precise here because two things get slurred together constantly and they are not the same sentence. The first is negative leverage, borrowing that drags your return below what the house yields on its own. Two ways to check it, two clocks. The cash clock, cap against the loan constant, 4.6 against 7.6 fails. Your cash on cash lands at negative 4.4%. You'd do better paying cash. The wealth clock, cap against the interest rate, 4.6 against 6.5, fails too. Even crediting yourself every dollar of principal you pay down, your total return is negative 1%. Most deals fail one clock and pass the other. That gap is what seduces people. This one fails both. The second sentence is separate. Does money actually leave your account? Here, yes. $13.1 of income against 16.2 of debt service. $3,100 a year out of your checking. $260 a month just to hold it. Negative leverage and negative cash flow are two different claims. This deal earns both. The 10% discount didn't make it a deal. It made it a bet. So you're at the table. Three options. Option A. Buy it at $285 and fund the shortfall. $260 a month, out of pocket, indefinitely. You're early on the floor to floor. You believe price and premium both come back. Option B, walk. Buying a 4.6 cap against a 7.6 constant is a market timing bet, not an investment. Option C, reprice and mitigate, in that order. Offer the number where it pencils on the quote you already have. Then go work the premium down. Hit pause, pick one. What would you do? Okay, here's how I'd think about it. First, the discount and the insurance are two different line items, and the price cut only touches one. The market already repriced for the average buyer's premium. The seller still isn't rebating yours. Hurricane risk sets that number, not his sticker. So option A, the honest case. Buy the floor, fund the shortfall out of reserves, refinance the six and a half down to a five next year, and then it cash flows. That's a real thesis. And I've said it before, negative leverage is defensible when you're forcing value you control. But hear what that license buys you. It buys the cash clock. It never covered a deal whose wealth clock is red too. That isn't leverage hurting you. That's the asset not earning enough at any price of money. And what would you control here? The refi rides on rates you don't set. The recovery rides on a market you don't move. You're waiting on both. You're not making them. There's exactly one lever that's genuinely yours. The same one that broke the deal. The insurance. That $6,200 is one quote. Shop it. Citizens against the private carriers. And order a wind mitigation inspection. Hip roof, post-2002 code, impact-rated windows, any one of those pulls a Florida premium down 20, 30, 40%. Get $6,200 toward $4,300, and you just made $1,900 a year of NOI. Value you forced, not a recovery you waited on. Which is why the answer is C. And the order is the whole thing. Reprice to where it breaks even on the quote you actually have, the $6,200 in your inbox, not a better one you haven't earned. Call it $230,000. Then work the premium down, and that $1,900 is yours, sitting on top of a deal that already broke even without it. Flip the order, and you've paid the seller today in his price for work you haven't done. Don't buy your own labor at retail. And if you already own in Florida, this isn't a sell signal. It's a renewal quote warning. Shop the carrier and pull the wind mit before your policy resets. That same $1900 a year is sitting there for you too. So if you take one line out of Florida with you, take this one. In Florida, the carrying cost is the deal. Underwrite it first, or it underwrites you. So your challenge, this week, on any Florida deal you're eyeing, quote your own insurance before you fall for a dollar of discount. Shop it, pull a winmit inspection, and rerun the cap rate on the number you can actually get, not the sellers. Then do the part almost nobody does. Hold that cap rate against what the money actually costs. The loan constant, not the rate. Run it on our house, repriced, $230. Insurance shopped, win mit pulled, everything gone right. $15,000 of NOI. Does it cash flow? Yes. About $160 a month. Take the win, the money finally moves the right way. Now look at what you're getting paid. Cash on cash, three point three percent. On a house that yields six and a half all by itself. The debt cut your cash return in half. The cash clock is still red after 19% off the sticker and every dollar you clod back from the carrier. And the wealth clock? A six point five two cap against a six point five oh note. You clear it by two basis points. That's a rounding error, held up by nothing but your amortization schedule. Then run our own screen, the plus five rule. The tenure sits at 4.56%. So green is a nine and a half cap and red is anything under seven and a half. This deal, fixed and floored and negotiated to the bone, comes in at 6.5. Red. You did every single thing right, and the answer is still no. That's not a failure. That's the screen working. One phone call and one inspection to find out this deal was never there. Cheapest tuition in the business. Florida isn't closed to you. This kind of deal is stabilized. Turnkey. Bought at market on bank money. In a state where the carrying cost moves faster than the rent. The deals that still work are the ones where you make the income instead of inheriting it, or where you inherit the seller's 3% note instead of borrowing at 6.5%. Those change the math. 10 grand off the sticker doesn't. The full write up, all three options with the math, is linked right there in the show notes. Go read it, then tell me which call you'd make.