What happens if your property burns down?!

[Elijah Vo]

Hey gang, 

Spoiler...it didn't burn down entirely, but we had a fire in the Spring of 2021. Here's how we turned a negative into a positive...

The backstory...

My partners & I acquired a 267-unit portfolio in Fort Smith, AR at the end of 2020. At the time, it was a C- asset located in a great part of town...our plan was to infuse approx. $1M+ into the property's interiors & exteriors, push rents, reduce expenses, and increase the additional other income...our typical "value add" strategy.

For those who want a deeper dive into the capex, we had approx. $632k into the exteriors and a $388k into the interiors (reach out if you want more...)

Anyhow, we closed in Dec 2020 and immediately implemented our business plan. Things were going well, but late night in mid-March our property manager notified us that there was a grease fire in one of the 2nd floor units. Additionally, the fire activated the sprinklers and substantially damaged two more units downstairs (pictured below).

Luckily, the fire department arrived onsite under 5mins and extinguished the fire, so hats off to the real heroes who mitigated the damage and saved lives!

We reacted immediately...

Early the next morning we:

1. Hired contractors to secure and board up the units. They also worked on quotes for renovation.

2. Ensured the residents were ok and relocated them to different units.

3. Notified the insurance and walked through the process and next steps.

4. Notified the lender and let them know that there were no injuries, we were collecting repair estimates, and a claim was filed. 

5. After a few days and every was situated, we sent the investors an update.

Essentially, it was a total loss in the upstairs unit and significant water damage in the two bottom units. Luckily, the fire didn't reach into other units or the attic...thanks to fire fighters. The total cost of repair was approx. $50k and the insurance agreed to send $19k to start and the rest afterwards. 

After the renovation, we were able to increase the rents from $395 to $565 and collect back rent from the insurance for the down units. 

Overall...you've heard it 1,000 times but the team is everything. Your partners, the insurance, the contractors, your property manager...even the local community is critical to your success. Staying calm and surrounding yourself with a strong team won't stop obstacles, but it'll turn them into opportunities!

Take care and good luck on your journey,

Eli