How to Adapt and Pivot to the New Tariffs

Introduction

In my 35+ years of real estate investing, I’ve seen the market shift in every direction imaginable—booms, busts, bubbles, and rebounds. But one thing that’s become increasingly clear in the last few years is that tariffs—those government-imposed taxes on imported goods—are starting to cut deeper into our bottom lines as investors.

Let’s talk about how tariffs are quietly (and not so quietly) driving up the costs of two things critical to any real estate investor: insurance and building materials.

Tariffs and Insurance: A Hidden Price Spike

At first glance, tariffs and insurance might seem unrelated. But here’s the connection: as tariffs drive up the cost of imported construction materials, the cost to rebuild properties after a loss rises too. Insurance companies, always calculating risk and replacement cost, have responded by raising premiums—especially for investment and commercial properties.

Throw in climate-related disasters, inflation, and tighter reinsurance markets, and you’ve got a perfect storm. In high-risk markets like Florida, California, and coastal regions, premiums are up 20-40% in just the past two years. That’s not a rounding error—that’s thousands off your cash flow every year.

Tariffs and Building Materials: The Cost of Construction is Climbing

Tariffs on key building imports like lumber, steel, aluminum, and even electrical components have made new builds and renovations dramatically more expensive. When the U.S. imposed tariffs on Canadian softwood lumber, prices shot up nearly 30% at one point. Even if you’re not building from the ground up, every time you renovate, repair storm damage, or reposition a property—you’re feeling it.

Worse yet, supply chain disruptions from international tensions (think China, Russia, or even shifting policies in Europe) mean delays and shortages. That translates into longer hold times and lower IRR if you’re flipping or redeveloping.

So What Can We Do? Here’s How to Defend Yourself

Now, I didn’t survive four recessions and a global pandemic in this business without learning how to pivot. Here’s how savvy investors can protect themselves in this new normal:

1. Run Your Numbers with Today’s Reality

Don’t rely on last year’s insurance quote or renovation estimate. Bake current rates into your underwriting. Add a 10-15% buffer for unexpected material or labor cost spikes. Better to over-prepare than under-deliver.

2. Bulk Buy and Store Key Materials

If you’re doing multiple projects, consider buying in bulk—especially on volatile items like plywood, copper piping, and drywall. I’ve seen investors save 20% just by locking in prices ahead of time and storing materials safely.

3. Work with Local Suppliers

Tariffs hit imported goods the hardest. That means working with local or regional suppliers can help you sidestep some of the added costs. Build relationships—sometimes even direct-from-manufacturer deals are possible.

4. Raise Your Insurance IQ

Work with brokers who understand the investment property space. Shop rates annually. Bundle policies. Consider higher deductibles to reduce premiums, especially if you’ve got a strong reserve fund. And always, always review the fine print on exclusions and replacement cost coverage.

5. Go Value-Add Where Materials Are Minimal

If construction costs are high, shift your strategy. Focus on cosmetic rehabs or management turnarounds where you’re improving operations, not just infrastructure. Better tenants, better NOI—without needing to replace every stud in the wall.

6. Consider New Markets

Some regions have lower insurance costs, fewer tariff-related construction issues, and better margins. Think Midwest, Southeast (non-coastal), and parts of the Rust Belt. I’ve pivoted successfully in and out of markets many times—follow the math, not the headlines.

Final Thoughts

Tariffs are here, and they’re not leaving anytime soon. As real estate investors, we don’t get to control macroeconomic policy—but we do control how we respond.

As I always say: flexibility is the most valuable asset an investor can own.

Stay sharp. Stay informed. And remember—the winners in this business aren’t always the biggest players. They’re the ones who adapt the fastest

Author

Daniel Borrero Jr.

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