My Investment Property Burned Down—What Now?!

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I want to paint a scenario for you. Whether you’re new to investing or a savvy investor, think through this for a second.

You’re sitting there on vacation. You’re enjoying the time of your life, but then you get a phone call. And on that morning that you get that phone call on your vacation, it’s the fire department from the city that all your investment properties are in.

The fire department says, “Hey! You know that property that you purchased and dumped a ton of money into?”

And get this, you’re in the middle of rehabbing. In fact, you’re almost done with the entire rehab—about ready to put it on the market.

But the fire department says, “Well, it just burned down—not to the ground but thoroughly burned down.”

What do you do? What do you do when you received that phone call?!

I’ll tell you what I did. I ran around looking for my homeowners insurance policy on my computer until I knew that I had homeowners insurance!

But in this business, you’re going to have a whole bunch of adversity that happens to you. It happens to everyone—eventually—in real estate investing.

Like I said, we were almost done with this particular property we’d bought. It’s in Seattle, Wash. Finishes were going up, we were getting ready to list it. But if you check out the video below… you can tell the finishes aren’t there anymore!

It’s gone. The fire wiped it all out.

And when somebody breaks into your house and sets it on fire, which is what happened here, there’s not much you can control. So, that’s adversity. That’s something that’s going to happen.

How to Mitigate Risk as a Real Estate Investor

I want to go over with you guys some tips and tricks that may be able to help mitigate some of these things in the future. Here’s what you can do as an investor, because no matter what you do, crap is always going to happen to you.

1. Plan for adversity and expect things to happen.

In this scenario, we had homeowners insurance. But what can you do to mitigate risk in other aspects?

Maybe it’s dealing with contractors. Do you have contracts in place to deal with your contractors and vendors?

Maybe it’s when it comes to buying properties and inspecting them. Do you get a homeowner inspection so that you can find out all the issues that are happening on the property before you buy? That way, you’re not surprised by anything after you buy it.

Maybe running solid comps and knowing the market before you buy a property. Those are all things you can do to help reduce or eliminate any confrontation or adversity that you might have on a project or investment property after you purchase it.

Related: Property Walk-Through: Illegal Marijuana Grow House Fix & Flip

2. Recognize what you can and cannot control.

Focus on what you can control, not what you can’t. The challenge is, you can get very emotional in the business—especially when your investment property burns down.

Think about it though. Can you change it? Can I get the fire out of the house? No, I’m not a firefighter. I can’t go back in time. I can’t stop the people who broke in.

Maybe we could’ve had security cameras, but even then, would that stop them? I don’t know.

So, what I can do is focus on what I can control. I can control filing the insurance claim. I can control cleaning the property up a bit. I can control what I’m going to do with the property, because I still own it.

I can control those things.

What am I going to do on this property? Well, I’m going to clean it up, which we did.

And now I’m going to put it back on the market and let the whole circle of real estate investing continue. I’ll let some other investor buy this thing from us and move on. They can fix it up.

We’ll take our insurance because we had it. We’ll sell the property, and we’ll move on with our lives. That’s what I can control.

I could also fix it up. I could control that, but I don’t want to. I’ve already spent seven months on this project, and I’m kind of done with it—especially after it burned down. Little bit of emotion there, but I’m done.

Related: Property Walk-Through: How to Budget a Rehab on a Hoarder Property

3. Deal with what “is” and not with what “isn’t.”

You have to look things squarely in the eye and know what you’re actually dealing with. Focusing on all the things that something “isn’t,” isn’t going to help you in this business.

What I mean by that is, whether it’s a property you bought that you know that you’re going to lose money on, you have to deal with it. Or whether it’s a contractor that doesn’t show up to the job—well, you still have the job. You’ve still got to get it finished.

Maybe it’s an offer on a house that you didn’t like. Maybe it’s that some employee of yours is not showing up. Maybe it’s that you’re running out of money; your finances aren’t as strong as they once were.

Who knows? There are so many things! Maybe your business partner’s not doing what they’re supposed to do.

You have to stare at it and know what you’re actually dealing with—and then go deal with it, not with what it isn’t.

And that’s the best thing I can tell you. Adversity is going to happen to you in this business, whether you’re brand new or have been crushing it for years.

For those of you guys who have been crushing it for years, you know exactly what I’m talking about here. And for those of you guys starting now, don’t be scared of any of this! We’ve all had to deal with it.

Hopefully, you never have to deal with a burnt down house though. This is something new. I’ve never had to deal with this before.

But this post was all about making the best of it—dealing with what “is.”

I hope this never happens to you! And I hope it never happens to me again either.

Has anything like this happened to you or an investor you know?  

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.