Six Things To Do Before Your House Burns Down

What were the things I wish I had done or considered before my house burned? What were the things that I was glad that I had done? Here are six of them.  They hold true for investment properties as well as your residence.

1.  If you do foundation work on your home, make sure it is rated for two stories if there is any chance that you'll be building upwards.  

By sheer luck, our foundation contractor recommended that instead of getting a $20K one story foundation, we do a $25K two story, since there really was nowhere else to expand on our lot.  Our neighbor's house burned at the same time ours did.  She was not able to build up because she couldn't afford the out-of-pocket cost of a whole new foundation on the spot, but we were good to go.

2.  Consider a property's setbacks when you purchase.

If you buy a property whose set backs are not up to current codes, realize that you may not be able to rebuild anything other than exactly what you lost, and even then you might get stuck in a long variance process.  

To get an "Administrative Use Permit" to build a second story without adequate setbacks, we had to get signatures from everyone whose property was next to ours on the sides, front, back, and kitty-corner approving our plan.  That was around 30 units in my neighborhood.  We had to remove a perfectly good window from the living room and opted for a $1K fire rated, non-opening ceramic window in the bathroom because no openings are allowed within three feet of the property line.  It's hard to make a case about  fire codes and set backs when your house just burned down because it was too close to your neighbor's house that was burning down.

3.  Make sure your policy covers you for two years of additional living expenses.  

Probably you were not planning on a massive rebuild before your house burned and will need some time to figure out what you want to do.  Probably you had not lined up a team of builders, architects, and other tradespeople to do the job before the fire and will need to find them, gather bids, and wait for them to become available.  And worst of all, if you live in a city like mine, you probably did not start the year long permit review process.

Building didn't begin until almost a year after our house burned.  That meant that although we could barely afford our mortgage at the time, we had the pleasure of paying the mortgage on the nonexistent house along with rent.  To deal with the expense, we moved out of the nice insurance-funded complex where we initially stayed and into a dumpy little apartment in a low-rent neighborhood.  It sucked and was avoidable.  Our neighbor's policy covered her for two years, so she got to stay in the nice complex where we started out.

4.  Develop an emergency network before the emergency.

When our house burned down we were on the other side of the country. We wished that we had had our neighbors' names and phone numbers, and they wished they'd had ours. No one knew how to reach us to let us know. Having a friend nearby with keys (not that they were useful on the boarded up door) was important when we did get the word. Having a friend who was a contractor to help us make sense of what was going to happen made a big difference in the first days. And luckiest for us and most challenging for many, having someone who can loan you a significant chunk of money until the insurance check comes through is essential to being able to rebuild if you don't have big reserves of your own. Insurance pays a small amount up front and only gives you the rest after the work is completed unless you work with their builder (not recommended) who they'll pay directly. In my experience contractors want to be paid upon receipt of invoices so they can buy the next round of materials and make payroll.  

5.  Get out your iPhone and take a video of every shelf, drawer, closet, nook, cranny, and surface of your home.  Now, go store that video in the Cloud somewhere.  While you're at it, send a backup of every digital file on every gadget you own to the Cloud too.

If it turns to dust, this will be what you use to recreate your inventory.  It sounds enlightened to say that if you can't remember it, you must not need it, until the reality of how expensive it is to replace every diddling scrap in your dwelling hits you.  You've got thousands of dollars worth of batteries and underpants and magazines, and you're paying every month to insure them.  Make sure you're able to get reimbursed.  Even if your unit is a rental, recorded details of your contents could make a difference in your claim.

6.  Thinking about locking in a fixed rate while they're still pretty low? There's no time like the present.

It turns out that banks don't lend much money for burned down houses.

Like everyone at the time we bought our house with a 5/15/80 where both the first and second mortgages were adjustable and figured we'd refinance when the turbo-appreciation of 2005 gave us the bonus 15% equity we needed like magic in a few months.  Since I know you're all in the future too, I won't belabor what happened to appreciation in the years that followed our rebuild, but lets just say the refi never happened, and I'm grateful that my ARM actually adjusted DOWNWARD.