Late last year, one of my rentals caught on fire and was totaled. I want to share with you the process of what to do as an investor if this ever happens to you.
After calling the insurance company, I got a check for 100% of the of the value on the insurance policy. My $1,000 deductible was not even deducted. It was for exactly what I had on the policy. Time frame involved was under 60 days. The house burnt on November 11th and the insurance check showed up the week of Christmas. The check paid off the house plus there was money left for my profit on the house. Here is a summary of my experience as a landlord with having a property destroyed by fire.
Major Lessons Learned
Lesson #1 – Make sure your property is not under insured.
Lesson #2 – Include the other buildings on the property also on the policy. For example, the unattached garage, you need to specify it or the insurance company will not cover it.
Hiring The Insurance Adjuster
Facebook friend Gary Soghomonian, strongly encouraged me to hire a Public Adjuster. A Public Adjuster is a company that will see that you get everything coming to you after a fire. They get paid 10% of what is collected and they can see that you get much more than you might expect. There are a couple key items:
First Important Key – is how you insured the house. Property are insured for full replacement value or actual cash value. If you do replacement value then that really opens up the door for you needing a Public Adjuster and getting more for the property. The other way is actual cash value which is the way my houses are insured. I save more on the annual insurance policy payment.
Second Important Key – is the detailed copy of your insurance policy. You see what you typically get is just a summary of your policy. Now on that summary there are some code letters. Those codes are defined on the detailed copy. I believe it is called the certified copy of your insurance policy. It is a little bit of a pain to get. The insurance company doesn't make it easy. I spent 25 minutes and numerous phone calls to the insurance company until they told me to ask my own insurance agent. Called him and he had never heard of it but he came through and is a super guy and even dropped it off at the office.
A Public Adjuster went through my certified copy and said all he could see is 5% for clean up (demolition) of the property. Good news is that when I got my pay off check, there was a note with it where the insurance company let me know that they would pay me the 5% demo once I had it done. 5% doesn't cover the total demo cost on this property so I'm going need to come up with roughly $600 to cover the difference. More good news is that the Public Adjusters that I talked to were great and very helpful. And there was no charge because my insurance coverage was actual cash value and the property was a low priced property.
About The Tenant & Property
Tenant has never called me to let me know the house they were living in burnt down. They moved in one year ago, paid rent on time until the month the house burnt down. Rent due on the 1st. House burnt on the 11th. Not saying they did it. The house was full of their furniture, etc. Just saying what happened.
The fire department was very informative but they couldn't find the cause of the fire. Their thought is that the two ladies that lived in the house were out of town for a few days and possibly someone they might have known broken into the house and caused the fire. But it is just a guess.
City orders came fast and were thick. The city detailed what was needed to do to bring the property up to code or demo it and gave me 30 days to do it.
Demo company will give you a written quote to demo & remove the house for one price and a higher price to also haul away the burnt stuff in the house like the refrigerator, furniture and every thing else. Money saving idea is to get someone to remove everything in the house before the demo and they can sell the metal and keep the money. Bottom-line is it cost me zip to get stuff removed and I save $$$ on the demo company.
The property was demoed on December 31st. They did fill in the basement hole with dirt.
This property also had an unattached garage that was not damaged. So I am currently making a decision on what to do with the property.
Options Are These…
A) Keep property and rent the garage.
B) Sell the property and someone gets a garage they can use or rent.
C) Rebuilding the house is not an option due to the area the property is located in.
D) Wonder if I can put a mobile home on it and also rent the garage.
Other Loose Ends After A Fire To Consider
Loose End #1 – Canceled insurance policy notice was received but the date was a couple of months out so no big thing.
Loose End #2 – Utilities need to be called immediately before the demo so they can grab their meters and make sure utilities are off.
Loose End #3 – Throw the property keys away. Pull folders, tenant & property, and move to sold file.
I am ELATED no one was hurt. I ended up with a little bit of work to coordinate what I needed to do to get things done and working with the Insurance Company, Public Adjuster, Fire Department, Utility Companies and Contractors. When it was all said and done, I got some profit from the house and ended up with a free and clear lot with a garage on it.