House caught on fire and insurance didn't pay!

[Boone Tyson]

Investment Info:

Single-family residence fix & flip investment in Mcallen.

Purchase price: $80,000
Cash invested: $40,000
Sale price: $104,000

Had it under contract to sale at 165K and it caught on fire on the day of closing! The money was en route to our account, we had already signed and had to stop the recording and the wire so that we didn't burn someone else's house down. After that, insurance wouldn't pay and we decided to lick our wounds and move on instead of trying to break even on it

What made you interested in investing in this type of deal?

Was a great flip. We were scheduled to clear about 35K and instead lost about 20K.

How did you find this deal and how did you negotiate it?

Wholesaler - paid what they wanted

How did you finance this deal?

LOC

How did you add value to the deal?

complete remodel and permitted extra living square footage.

What was the outcome?

Lost 20K

Lessons learned? Challenges?

Sometimes its better to take a loss and move on rather than letting ego make your decisions.
Get clear on what insurance is needed.
Know who you're in business with.

[Jay Hinrichs]

Originally posted by @Boone Tyson:

@Ruth Geller because of the vacancy. Our insurance agent directed us to a bad policy for a flip, but it’s my fault for not asking the right questions. It happened to be on the queue around the same time we had a hurricane locally so I think that played a role in the decision. There were a lot of denied claims locally.

there should be a blog on insurance.. this type of insurance denial happens to landlords quite frequently when they dont realize that their policy loses coverage if their house has been vacant more than ( 90 days is typical) and that you need a vacant home rider. 

Yes for flipping you need builders risk.