Duplex Rental Fire - Likely Total Loss

[Steve M.]

Hey Guys ...

Hope all is well! I don't post as often anymore, but I still lurk and read quite a bit. Anyways, received word this morning that my Duplex Rental House had a fire last night. Later learned this afternoon that is likely a total loss (Roof Collapsing, gutted inside, walls falling in, etc...) Luckily, no one was harmed/injured. From initial reports, looks like an electrical/hvac issue and it started up near the furnace in the attic.

Wondering if anyone has dealt with their insurance on a complete loss before? This will be my first time.

The house was fully insured as a rental even including lost rental income.

Just looking for some guidance & support, and to see if anyone has ever been in these shoes :)

Thanks!

[Ed O.]

Had a total loss on a SFR 3 months ago. I was amazed at how quickly the costs added up.
At the end of this message, I'll post a copy of my fire notes. No promises on the organized delivery of them, but I tried to collect my thoughts to help others out (and as a reference) when they were in my spot. I didn't have access to a wealth of details when I had to handle my issue.
I would start by saying hold off on the public adjuster. See how close you are to a total loss. If you're close, you can probably negotiate with the adjuster to reach a total loss. See what this means to you as it specifically applies to yuor policy. I had a cash value policy and made one major mistake - it's detailed in the notes. Feel free to post here or pm me if you need further clarification.

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Fire @ rental
Draft 4

Confirm and ensure the welfare of the occupants.
Consider charities / other sources for assistance: Catholic charities, united way
Consider instructing tenants to only provide contact info to police and fire department.

Call the insurance company. Tell them to email you with a contact number and not to call you directly
Don't answer unknown calls.

Many people were calling offering environmental / clean up services as well as public adjusters looking for the job. Two of them waited for around 5 hours at the fire for me to get to the home.

If you enter the home, proceed with extreme caution. Subfloors may be compromised, overhead hazzards may be present. If you go on the roof, use the same care and caution.

Boarding up the home:
Secure the unit ASAP.
Measure up the windows and bring the measurements to depot/lowes and have them cut the boards
Consider painting boards to match the color of the exterior to minimize blight

Bring a REAL camera. Don't try and use the one on your cell phone. - it just isn't as capable.
A video camera would be good too.

Take a lot of pictures, especially of ALL electrical appliances (may be the cause). (suggested by attorney - often electrical devices are the cause)

The utilities should be turned off, by their respective companies. Verify this to be safe.The fire department ordered a shutoff due to the fire.

As a result, electric tools are worthless. Bring the battery powered ones (with a full charge) to assist in securing the home.
If you have a generator, it may be wise to bring it. Do not run the generator in the house - it puts off CO.

Bring a lockbox. Change the locks, install the lockbox for contractor / insurance adjuster access.

Use insulation in a can / great stuff to seal gaps where needed.

Best lighting option: bring a halogen light and long extension cord. Ask a neighbor if you can use their outlet (hopefully they have an exterior one).

Boarding up:
Use 2 types of screws: star and phillips to confuse would-be thugs from gaining entry.
You can board from the inside or out. If on the outside, take care to not steer rain water into the home

Consider disconnecting the A/C if in a high risk area.

Reflections:
Why did they have to bust out so many windows? (answer - to let out the smoke and see the inside of the home)
Rear door totally wasted.
It's really dark inside
Don't disturb the suspected areas where the fire may have begun.
Why did the fire department allow people (tenants) back in there after the fire?

Be prepared to remove guttering. We had damage to one, which would've dumped water right on a boarded up window. Removed the whole piece of guttering with a monkey bar.

Tools:
Monkey bar
Cordless drill, cordless circular saw
Phillips and star bits
monkey bar
phillips screwdriver
lockbox
camera
flashlight
broom and dustpan for glass cleanup
trash cans
paint roller / brush

Materials (as needed):
contractor bags
plywood
phillips and star screws
new locks
great stuff
tarp
caution tape
paint - close match to exterior (for boarded up windows)
paper / anything to cover up windows not boarded up (for privacy purposes)

Call all utilities to shut them down or confirm they're off.

Tenants lie. If on a weekend, hold tight before proceeding with anything until you speak to the fire department to gain information about the fire. They said "cause unknown, the fd needs to investigate on monday. Called fd on monday and they said, "we don't need to investigate, it was an accidental kitchen fire."

-------------------------------moving forward----------------
Disconnect all electrical circuits except for any that run a foot or two from the electric box. Have two installed if there are none present. This should help accelerate the process of getting electricity back on at the home.

Tenant recieved the following support (partial list)
Red cross $130 debit card
Also paid for hotel @ $65 x 3
Red Cross also offered to fund $400 towards deposit for new residence
The school also provided financial assistance
United way offered referrals to local agencies, but no direct help
Referred tenant to contact catholic charities - known for being helpful
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Part 2 - no specific order

2 Big errors made:
Missed a spot where water accumulated in the basement (in a pile of clothes and junk that hid it very well) and is causing mildew issues
WAS NOT PRESENT FOR AN ELECTRIC TURN ON. This was major. The inspector, a former firefighter and totally unqualified in this role, was convinced that smoke traveled DOWN the stairs, into the basement, forward 8 feet and then made a 90 degree turn to the right, then went forward 10 more feet before turning right again and then traveled another 8 feet or so to get to the electric panel. The door on the panel was closed during the fire AND THERE IS ABSOLUTELY NO EVIDENCE OF SMOKE DAMAGE IN THE BASEMENT WHATSOEVER. He's condemned all of the breakers, including the 200 amp main, because he's too stupid to know that all breakers, new or used, look dusty. They come new off the shelf looking dirty and dusty. Because of his total stupidity, he's making me replace every single breaker in the box and further delaying electric service and dehumidifying to the home.
Lesson - schedule the inspection and be there. My situation had him "dropping in" and I missed him.

Also, should've immediately ordered a rolloff dumpster at 0 hrs after the fire and started demo on the spot, especially the water soaked areas. Perhaps a lease provision would make sense, allowing landlord to dispose of damaged property within 5-6 hours of a major fire. At 0 hours, a plan needs to be put in place to get the electric back on asap to run fans and dehumidifiers. This is equally important to the dumpster to prevent mold/mildew, etc.

All exit strategies back on the table. Selling the home may be impossible, as REOs are better deals than a cheap smoke damaged home.
1. Donate to Habitat
2. Donate to church
3. Donate to 1 or 2 w/ a small cash donation
4. Give away
5. Strip down and demo, sell the lot
6. Push it at a REIA
7. Promote it at the LL conference in STL
8. Rehab it - could be done easily if local, but not
9. MLS it and hope for minimal net

Get a copy of the fire report
Get a payoff for the existing loan - optional. I sent in funds in excess of the balance to pay it off and will get a reund back. A payoff can cost $25-50 - a rip off.
Fill out ins co docs asap to get claim closed out asap.

Have tenant sign permission to remove and dispose of stuff
Have them sign a liability release when returning their security deposit

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6/8 added
Cancel insurance on the structure, depending on your exit strategy, keep liability
Cancel prepaid utilities - trash, etc and get refund
Process ins. paperwork ASAP, get loan paid off ASAP as to not waste interest expense.
I got 3 months of lost rent.. huh? Thanks, never saw it coming!
I also got rent for may from section 8 (thanks) and the insurance company (thanks!)
the lawn still needs to be mowed
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6/20 added:
Sold the fire damaged home to plumbers for labor and 4 quarters. Created a great win-win deal.
The plumbers couldn't believe the deal they were getting.

More reflections:
Post fire, spent about 1k in labor and debris haul off fees. Debateable whether this was good use of funds, I think it was in hindsight. It put a little lipstick on the house, demoed out and removed a lot of the damage at the source of the fire, which made the rehab project less intimidating to the new buyer. I would again remove the debris, but I would use a more economical approach - getting a rolloff dumpster vs. a paid hauler from craigslist. The tenant left 90% of their possessions, mostly salvageable in the home.
Now that ownership has changed, collecting the money held hostage by the city will be hopefully the last piece of the puzzle.

LL board posts with good exit strategy ideas:

Free house (by Nicole [PA]) Posted on: Jun 18, 2012 5:56 AM Message: why not make a deal w/another investor - they take over everything and give you xx% when they sell it - that way you make something.

as for donating, see if your local vo-tech high school has a need - it could be a project house - not sure what they actually do with them or perhaps they work through a group like habitat for humanity.

--72.95.47.124

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Free house (by V [OH]) Posted on: Jun 18, 2012 6:41 AM Message: 2 things come to mind, your new warehouse while restoring - or a family member who wants a fixer-upper.

--68.76.121.239

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Free house (by J [IN]) Posted on: Jun 18, 2012 6:50 AM Message: Why not put it on EBAY. who knows you may sell it for more than you think. If not oh well someone will buy it for $10 and you still get rid of it.

--67.236.251.203

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Free house (by Roy [AL]) Posted on: Jun 18, 2012 7:42 AM Message: Why don't you fix it yourself? Did you have insurance on it?

--68.62.153.91

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Free house (by BRAD 20,000 [IN]) Posted on: Jun 18, 2012 7:50 AM Message: Boy Scouts or church. Donate it, get a receipt for it's retail value as is, they resell for whatever they can get.

OR...

do a Larry Goins $3,000 down, $250/month for 10 years.

--50.129.224.226

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Free house (by RR [WA]) Posted on: Jun 18, 2012 8:00 AM Message: Charity may not want it because it is a liability to them and they do not have the money or means or desire to fix it up. For them to liquidate it requires fix up or razing, both cost money. Vacant lot may not be worth much? Donating a non-running car is different because it can always be sold as scrap metal for $300-$500.

easiest option is sell dirt cheap to someone who plans to fix it themselves and live in it, they will get the most lax treatment from the local government re fixing the fire damage.

--24.18.152.244

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Free house (by Susan [OH]) Posted on: Jun 18, 2012 8:25 AM Message: Sometimes, fire depts. like to have them for "controlled" burns~

I've seen once a house that was given away, just for the hauling~

--174.100.12.210

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Free house (by Kevin [MO]) Posted on: Jun 18, 2012 10:22 AM Message: I'd say another investor is probably an easier route as charities are probably not set up for such transactions. You can then donate proceeds if so inclined. Habitat mostly does new construction, although there are some exceptions (just did a few rehabs in south city STL).

--128.252.35.132

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Free house (by DsP [MO]) Posted on: Jun 18, 2012 12:09 PM Message: Brad, how about I give it to your church and you goins it up, glamor shot and all. I don't think it would be easy to goins it & becuase of the smoke damage and firefighters damage (thanks a lot).

If these guys were getting a cat out of a tree, the just woulda run the tree over with their truck or cut it down at the stump.

--108.218.220.94

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Free house (by 574-Brad [IN]) Posted on: Jun 18, 2012 3:35 PM Message: I tend to think that no charity will want it either. Why do you think you can't Larry it?Have someone clean it up a bit (lipstick on a pig), and get a downpayment, then $250/month for 5 years? There is ALWAYS a handyman who knows for sure they can fix that up! That house even has good curb appeal.

--66.228.105.173

Form letter sent to church, got calls 30 minutes later and they looked seriously at taking.
Churches, contacts

Good morning. I have a bit of an odd situation on my hands that may be of benefit to your church. I recently had a fire at a home I own near your church and would like to donate it to a church or non profit, so that someone else may be helped by it. The home does have smoke damage and fire damage, but it appears to have no structural damage at all. By my estimates, it needs around 8 or 9,000 in materials to complete the needed repairs. It has a newer drain system and air conditioner (which has been professionally disconnected and is in storage at the moment.) Is this anything your organization would be interested in discussing further? If so, please call me any time at [REMOVED] or send me an email. If this is not of interest, thank you for your time and have a great day. -Ed

FORGOT - first come first served
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6.29.12 Update

based on flawed info from the insurance adjuster about how the city will release funds, the city now has informed me that they will only release funds when the home is demolished or 100% repaired after all inspections.
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!
this sucks.
Now I am at the mercy, total mercy of the people I sold it to. It could be 5 years to get the money. They are in no hurry to complete the work. I should've put a 2nd mortgage on the home 1 day after the fire, which would've been paid off by the insurance company.