Help please! Fourplex Unit insurance denial

[Nick Lee]

I bought a four unit property at auction and everything looked fine. The plan was to slowly rehab the property and rent out.

When one of our guys went to cut the lawn they reported a couple of the bricks at ground level appeared to have fallen into the basement. Before we could get somebody to fully investigation the property suffered further collapse of bricks into the basement causing it to lean over.

The insurance company are denying coverage due to "Earth movement" no quakes recorded in the area so I guess they mean from build up of water over the years. My contractor thinks that as no guttering is on the adjacent property, the water ends up right at the side of our foundation. Over time the force of this has caused the collapse. The incident happened after very heavy rains in the area.

To fix the problem would be 15k. To demo about 22k.

I bought the property for $1,500 at a commissioners sale.

It probably needs $60,000 spending on it to redo the entire property. We would expect rents at $450 a unit so about $1800 a month.

We are waiting on a second confirmation of denial from insurer, then they will release the report. 

Any advice would be greatly appreciated.