Buying a distressed apartment with insurance policy

[Jonathan A.]

Hi. I would like to know my fellow CRE investors of what u think. We are in contract of this apartment building in Kansas City, MO. 6 units, needs a total rehab/rebuild. Fire sale. Previous owner claimed 150k from insurance policy which is insured for 650k. Total rehab/rebuilt cost is 253k. Seller agent states we might be able to claim depreciation cost possibly 150k, but mostly 50k total. Not sure how insurance claim/policy rules in Kansas City, MO. Should we proceed with this project?

[Derek Lacy]

Jonathan Arcay

It’s called reimbursable depreciation. It is payable only to the named insured on the policy. Once that named insured sells their interest it’s no longer payable. Insurance is non-transferable.