squatter set fire to home and caused extensive damage and I’m unsure how to proceed

squatter set fire to home and caused extensive damage and I’m unsure how to proceed

Investor · Brooklyn, NY · Member since 2016 · 50 posts · 25 votes

I recently had a squatter set fire to one of my single family rentals in Kansas City, (“East Community Team South” neighborhood). The incident was an angry response on their part because I had the property manager board up the house. Anyway, I am trying to figure out what to do. The damage is extensive so much that it’s more than what insurance can cover. I do feel like selling it will be best but how can I market it to one who is willing to buy it? How do you suggest is best to go about dealing with this situation ? I have to admit I’m stuck/at a loss and I don’t feel I know the best course of action. Should I talk to a pro advisor for best advice? It’s intense and complicated as I’m out of state. Are there resources I can go to? My property manager is lackadaisical and seems to not want to help. This is the 3rd PM I’ve had and while I want a new one I feel the good ones are hard to come by, but I’m definitely open to referrals. It’s a bind that I know I can figure out if a have just a bit of the right guidance. Your thoughts are greatly appreciated!

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Kevin Drouillard:

Fire the PM. They clearly aren't doing you any favors.

File an insurance claim. If the house is worth $300,000 but insurance will only pay $150,000, that should still be enough to renovate and then sell. Unless you're in a real D-class property, you will typically be better off renovating and then selling.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    I'm curious as to why insurance won't cover it. Was the property underinsured?  I'd start by talking to your insurance company.  Talk to a local realtor and get their feedback as well.  If your PM isn't stepping up, then I'd definitely sell either before or after you get it fixed.

  • Kansas City MO · Member since 2014 · 357 posts · 349 votes
    3y

    So sorry to hear this happened to you. I would talk to some wholesalers or investor friendly agents and see what you might be able to get for it.  I have seen houses in all kinds of conditions (animal hoarder houses or mold damage or fire etc etc)  for sale (usually off market & directed to an investor buyers list) and there is an investor market for fixer uppers and houses in bad condition or for just the raw land for a rebuild. I can give you some names of people to reach out to that might be able to help you sell it.  Just send me a message.

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Kevin Drouillard:

    Fire the PM. They clearly aren't doing you any favors.

    File an insurance claim. If the house is worth $300,000 but insurance will only pay $150,000, that should still be enough to renovate and then sell. Unless you're in a real D-class property, you will typically be better off renovating and then selling.

    The DIY Landlord Book4.7248 Reviews
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    @Kevin Drouillard If you're on your 3rd PMC, then you obviously don't have a good screening process. Or is the property in a Class D area and none of the good PMCs want to manage there?

    What info did the insurance company come back with? Usually, they would send an adjustor to generate an estimate of how much repairs would cost and what they would cover.

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  • Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Kevin Drouillard:

    I recently had a squatter set fire to one of my single family rentals in Kansas City, (“East Community Team South” neighborhood). The incident was an angry response on their part because I had the property manager board up the house. Anyway, I am trying to figure out what to do. The damage is extensive so much that it’s more than what insurance can cover. I do feel like selling it will be best but how can I market it to one who is willing to buy it? How do you suggest is best to go about dealing with this situation ? I have to admit I’m stuck/at a loss and I don’t feel I know the best course of action. Should I talk to a pro advisor for best advice? It’s intense and complicated as I’m out of state. Are there resources I can go to? My property manager is lackadaisical and seems to not want to help. This is the 3rd PM I’ve had and while I want a new one I feel the good ones are hard to come by, but I’m definitely open to referrals. It’s a bind that I know I can figure out if a have just a bit of the right guidance. Your thoughts are greatly appreciated!


     Ok so what is the issue, file a claim, get it repaired and move forward ? Why are you confused ?

  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y

    What will insurance give you? How bad is the fire damage? If it's a tear down you'd be selling cheap. The area is not great so I'd definitely sell whether that's As Is or do rehab work. Be careful of where you invest in KC, the cheap properties are not worth it because you deal with issues like this

  • Real Estate Agent · Kansas City · Member since 2023 · 35 posts · 34 votes
    3y

    Hi Kevin, this is an unfortunate situation, Caleb is right be careful where you to choose to purchase your rental properties. Sounds like you need a new PM as well, as they are the ones that found this tenant for you and now they aren't helping you deal with the problem that tenant created. 

    I sent you a message. 

  • Investor · Brooklyn, NY · Member since 2016 · 50 posts · 25 votes
    3y

    @Caleb Brown, insurance witll give me $56k, and the bids for repairs are coming out as $65k plus. Yes as you mentioned the area isn’t great. It was one of my starter investments that I had done a while ago and it has been a major oops on my part. I want to sell as is I know I’ll take a loss on it because of the loan. I need to be able to pay for the loss because of the due on sale clause. So that’s one of my main concerns 

  • Investor · Brooklyn, NY · Member since 2016 · 50 posts · 25 votes
    3y

    @Nathan Gesner yes it’s definitely in D class area. So at this point I will just sell it take the loss. I just need to come up with money to pay for the loan balance when I sell. But yes I’m ready to let it go. I just need to talk to the right people/investors. 

  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y
    Quote from @Kevin Drouillard:

    @Caleb Brown, insurance witll give me $56k, and the bids for repairs are coming out as $65k plus. Yes as you mentioned the area isn’t great. It was one of my starter investments that I had done a while ago and it has been a major oops on my part. I want to sell as is I know I’ll take a loss on it because of the loan. I need to be able to pay for the loss because of the due on sale clause. So that’s one of my main concerns 

    What do you owe on it? 
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Kevin Drouillard

    You can fight with insurance if the cost is greater, this is assuming you had properly insured it. There is also a deductible whixh you will have to pay but I would also go back to insurance on it

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  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Kevin Drouillard:

    @Caleb Brown, insurance witll give me $56k, and the bids for repairs are coming out as $65k plus. Yes as you mentioned the area isn’t great. It was one of my starter investments that I had done a while ago and it has been a major oops on my part. I want to sell as is I know I’ll take a loss on it because of the loan. I need to be able to pay for the loss because of the due on sale clause. So that’s one of my main concerns 


     how much the house is worthed or your neighbor comps ?
    you may want to hire public adjuster, since the claim seems so low.

    I had tree insurance falling that destroyed the garage only and my insurance reimbursement is three times than you, you really need to talk to adjuster that's on your side.

  • Homeowner · Member since 2019 · 36 posts · 12 votes
    3y

    @Kevin Drouillard There are a number of area investors and wholesalers that could be beneficial. If you will PM me the property address, I can run comps in the area and engage you with a few of them.  

  • Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
    3y

    @Carlos Ptriawan That won’t help if the property was underinsured. Unfortunately a lot owners do not keep adjusting their coverage limits as replacement costs go up.

  • Real Estate Broker · Phoenix, AZ · Member since 2013 · 749 posts · 399 votes
    3y

    @Kevin Drouillard DM me. I might be able to help. 

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Mark S.:

    @Carlos Ptriawan That won’t help if the property was underinsured. Unfortunately a lot owners do not keep adjusting their coverage limits as replacement costs go up.


     Ya we need to know his Schedule A limit.
    That's the first thing my adjuster ask me.

  • Investor · Brooklyn, NY · Member since 2016 · 50 posts · 25 votes
    3y

    @Mark S., @Carlos Ptriawan yes I didn’t keep up with insurance costs. It was underinsured. I honestly didn’t know I had to. This is definitely a learning experience as I wish I adjusted coverage limits so that I can get a better amount. 
    the bank/lender seems to want to control the insurance disbursements as well here. I will speak with them about it for clarification but they are telling me I have to get an inspection once “x% amount of work is completed” and then they’ll disburse a certain amount and I’m wondering “what if I end up selling it now and not even starting rehab?” But that’s something I’ll have to speak to them about further as this was said in an email.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y
    Quote from @Kevin Drouillard:

    @Mark S., @Carlos Ptriawan yes I didn’t keep up with insurance costs. It was underinsured. I honestly didn’t know I had to. This is definitely a learning experience as I wish I adjusted coverage limits so that I can get a better amount. 
    the bank/lender seems to want to control the insurance disbursements as well here. I will speak with them about it for clarification but they are telling me I have to get an inspection once “x% amount of work is completed” and then they’ll disburse a certain amount and I’m wondering “what if I end up selling it now and not even starting rehab?” But that’s something I’ll have to speak to them about further as this was said in an email.


     That is pretty normal.  It holds the builder accountable and prevents them from walking away with the money and not getting the job done.

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Kevin Drouillard:

    @Mark S., @Carlos Ptriawan yes I didn’t keep up with insurance costs. It was underinsured. I honestly didn’t know I had to. This is definitely a learning experience as I wish I adjusted coverage limits so that I can get a better amount. 
    the bank/lender seems to want to control the insurance disbursements as well here. I will speak with them about it for clarification but they are telling me I have to get an inspection once “x% amount of work is completed” and then they’ll disburse a certain amount and I’m wondering “what if I end up selling it now and not even starting rehab?” But that’s something I’ll have to speak to them about further as this was said in an email.


     that's every lender out there, either you borrow from chase/wellsfargo/other lender usually the way it work is they give you the first 40k ; and then the rest when you are done with 25% completion of the work. Yes they can do physical/virtual inspection.

    next time buying house really watch closely on your Schedule A insurance policy.

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