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Landlording ain't always fun... (photos of the FIRE included)
#1 Questions About BiggerPockets & Official Site Announcements Contributor
- Investor
- Maui, HI
So, this post is NOT meant to scare you, newbies. But... this is gonna freak you out :)
This tenant is in the process of being evicted. To make matters worse, he lit his kitchen on fire; accidentally, supposedly. Anyway... this is what I'm dealing with these days. This is the rental I've had the longest. Same tenant for 8 years, suddenly stopped paying and turned into satan.
Below are the "Before" and "After" photos. You'll know which is which...
#ThisIsWhyWeScreenTenants #ThisIsWhyWeHaveInsurance
I'll be writing a LONG post on this when it's all resolved. In the meantime... enjoy!
And here's today's photoshoot:
@Brandon Turner Bummer! We had a house burn down a little over 4 years ago now. It was a write off. Still, we got back in the saddle and kept on buying rental properties as I'm sure you'll do.
As you noted, the big lessons here are to regularly review your insurance and always screen tenants. I look forward to hearing the rest of the story in a future post.
Brandon Turner WOW!! I'm speechless! I just can't believe someone would do something as awful as that!
Brandon,
That's unfortunate.
Per your #ThisIsWhyWeBuyInsurance, I assume you are in good shape with coverage. Fire is a standard covered peril & Loss of Rents should be covered in your policy. Your issues should be limited to your deductible.
If you have any questions that you are not getting answered by your carrier, agent or restoration contractor, I would be happy to talk you through it.
J Darrin Gross
OMG! Looks like it was well taken care of and then something drastically changed. Hope you have good insurance and had your tenant get one, too. I'm following you on this matter and hope you and your wife are made whole.
Originally posted by @Jason Bott:
@Roy N. @Dana Whicker Arson is covered as long as it is not the owner of the property who started it:) "Intentional Acts" is an exclusion on all insurance policies.
@Bryan O. If the insurance company can prove the tenant was at fault, then they can seek reimbursement from the tenants renters policy.
But if the tenant did it intentionally, the renter's insurance wouldn't cover it either...right? Would the insurance company go after the tenant directly if it was set intentionally?
Brandon, this is part of life being a real estate investor/landlording/homeowner. I feel your pain. My dad's shop/house was burned down years ago, along with many other shopowners due to a kid playing with fire.
No matter how thorough we screen a tenant, background check and all, a normal nice guy can suddenly "snapped" due to life and financial stress. There goes his dream red sport car in his former bedroom, if the cause of the fire is intentional.
.
Sorry to hear that, that's crazy how something like that can happen all of a sudden with a tenant who stayed there for eight years with no previous issues. Would the tenant have had any motive to start the fire that you're aware of? As others have said, on a positive note at least you get to do a free renovation. If you can, let us know what happens to your insurance premium for the house after everything is over, I'm curious to know. By the way reading your story just made me look into adding 3-6 months of lost rent coverage to my insurance policy instead of the one month I currently have...
This has me thinking about my fire insurance on my rental. Sorry this happened, but this will be a great lesson to those of us learning from this website. Now I can start searching for articles pertaining to rental/fire insurance on here.
#2 Insurance Contributor
- Insurance Agent
- Nationwide
@Patty C. Great question. Looking at my post, I was not clear. @Brandon Turner you may want to know this.
Arson damage would be covered by Brandon's policy, but his insurance company will run into issues when subrogating (1 insurance company recovering funds from another insurers policy) the tenants renters policy.
I ran this past an underwriter who's program has 350,000 renters policies nationwide and this was his response.
"We have addressed this situation a number of times.
Arson, by definition, is a criminal act. No renters insurance policy HO4 policy that I know of will cover arson related losses.
Restitution for property owners and resident's personal property is realized through the criminal justice system. Basically, you get a judgement and go after them personally.
Renters policies cover negligence and accidental actions by residents. Our coverage would not kick in as arson is intentional."
Hope this helps.
Ouch. Yeah we just had one of these too. In fact I just got off the phone to schedule getting a dumpster to the house to remove all the burnt out wreckage. Then comes the fire remediator. Thank goodness for insurance, right!
I've dealt with a few fires myself. Not fun. However your #ThisiIsWhyWeHaveInsurance tag is exactly correct. Because #ThisIsWhyWeScreen tag may be a bit optimistic. I don't know of any screening potential that can see 8 years down the road. :)
Thanks for all the good work you do here at Bigger Pockets.
Sorry for your troubles, Brandon. I hope everything works out in the end. Good luck with the rehab.
Roger
Hey Brandon: I'm SO sorry you're going through this! I hope your insurance covers everything. It's odd that such a long-time tenant would turn bad and I wonder what you might find out about anything that may have happened in his life. When you've had a chance to check out his court records you may find a clue and we would be interested to hear about that, if anything. Best of luck with the insurance; we look forward to seeing post-fire reno photos and knowing your life is back to normal.
Originally posted by @Roy N.:
As long as no one was hurt, the rest can be repaired.
Has the fire marshall identified the cause yet? If it does turn out to be arson, will that impact your insurance?
A property behind one of ours suffered a similar fate early in the spring, it turned out the tenant was cooking shatter when things exploded.
Hey Roy: Don't laugh but when I read "cooking shatter" I thought it might be a typo; had to Google it so now I know better. I guess I don't get out much LOL. Good question you asked about arson and I hope Brandon will have time to answer.
I thought I had it bad this month with the 12 vinyl windows that the tenant destroyed by screwing them shut. I have nothing to complain about compared to this.
DAMN!!! That is terrible brandon. Sorry to hear it, you must be stressed. Hopefully insurance handles it and you'll have a relatively new property in no time!
Originally posted by @Jason Bott:
@Patty C. Great question. Looking at my post, I was not clear. @Brandon Turner you may want to know this.
Arson damage would be covered by Brandon's policy, but his insurance company will run into issues when subrogating (1 insurance company recovering funds from another insurers policy) the tenants renters policy.
I ran this past an underwriter who's program has 350,000 renters policies nationwide and this was his response.
"We have addressed this situation a number of times.
Arson, by definition, is a criminal act. No renters insurance policy HO4 policy that I know of will cover arson related losses.
Restitution for property owners and resident's personal property is realized through the criminal justice system. Basically, you get a judgement and go after them personally.
Renters policies cover negligence and accidental actions by residents. Our coverage would not kick in as arson is intentional."Hope this helps.
I just put in a call to see how my insurance company would handle it. If they don't handle incidents stemming from "intentional acts" of others I've asked how they may be covered and how much it would cost. (Perhaps there are riders we can add to our policy.)
Accidents do happen so hopefully Brandon's incident was an accident.
#2 Insurance Contributor
- Insurance Agent
- Nationwide
@Patty C. just to be clear, your property policy WOULD cover an intentional act such as Arson. We are stating that the tenants renters policy would not pay out on behalf of the tenant (owner of the renters policy) because it is a criminal act. Instead, the tenant would be personally responsible for restitution to landlords insurance carrier.
Hopefully that is a clearer explanation.
Originally posted by @Jason Bott:
@Patty C. just to be clear, your property policy WOULD cover an intentional act such as Arson. We are stating that the tenants renters policy would not pay out on behalf of the tenant (owner of the renters policy) because it is a criminal act. Instead, the tenant would be personally responsible for restitution to landlords insurance carrier.
Hopefully that is a clearer explanation.
Thank you for the clarification, Jason.
You were right, it did freak me out!
The problem some landlords run into with insurance is they do not have replacement cost coverage. With a major fire, the landlord may have to come out of pocket to rebuild if they have less than replacement cost coverage. All landlords should carry replacement cost coverage in my opinion.
wow, unreal. looking fwd to the story