Rental property insurance claim

[Jose Cervantes]

Hello everyone

My name is Jose, I am a newer landlord in the Midwest. I have recently lost a triplex to a fire and it’s a new experience for me. None of my tenants were hurt thankfully and I am working on moving them into my other units. My question to anyone whose had a similar citation happened would be what if the best option for the insurance claim? I’m not entirely sure what my options are, rebuild, pay mortgage and keep the remainder ?

Im just looking for advice on what would be my best option do leverage my insurance payout.

I’d appreciate any advice. Thank you.

[Carol Kilpatrick]

Hi Jose, first, so sorry you are going thru this. Here are some thoughts and feel free to pm me for more.

1. -What was the origin and cause of loss, did the insurance company retain an origin and cause expert or is a well-known cause. Important because of 1) you want to be able to purchase insurance again and this will be on your record for three to fire years, so secure docs stating what happened and 2) Subrogation - if origin and cause is determined and money collected, not only may you get your deductible back, you're more likely to make it thru underwriting 
2. -40% burned is a lot if not just smoke damage - check with the building department in your jurisdiction, if it costs 50% or more to rebuild, they are likely to require a teardown and rebuild due to safety code
3. - Are you in an Agreed Value State - so where there is a fire and nothing to build on, i.e. teardown, will they give you the stated value. Different states have different rules, so consider that - case law matters to, for example in Georgia, there is verbiage similar to substantially damaged. 
4. -Use a contractor who focuses on Fire Restoration if not a teardown.
5. -If you have a mortgagee you have replacement cost, so yes, you absolutely have options to teardown and not rebuild, rebuild, pay off mortgage and get cash, and many offer options to buy somewhere else and use the replacement cost. Talk to your adjuster. 
6. -Ordinance and law - if you have this coverage and you should unless super new, it will cover additional costs to bring to code up to 10%, 25% or 50%. Just today spoke with a client who was forced to bring foundation up a full foot after hurricane, all from tree falling on house and changes in code.
7. -Financials - Fair rental value - what's the difference between continuing and non-continuing expenses. That one number. What is the cost to tear down (often 5% to 6%), clean lot and sell and buy another rental or rebuild.
8. Hope this helps!