Rental property had a fire.

8 Replies

First off, yes everyone is ok.  One of the tenants does have some third degree burns but will be fine.  No other injuries so we are thankful for that.  That being said.

I recieved a call from my tenant Saturday morning informing me that the rental property has had a fire.  It was mostly contained to one bedroom but smoke damage is through out the house.  The property is now unihabitable and from what I can guess so far its going to be 6-8 weeks for the house to be restored and ready to rent again.

My question is what should I be prepared for that I haven't thought of.  I'm sure there is a landlord out there that has been through this and was hit by some suprise so any info that might sneak up on me would be great.

Thanks

I'm glad everyone is alive, I wouldn't call 3rd degree burns being ok though.  Luckily I have not personally had the experience of a property catching fire.  Do you know what the cause of the fire was?  This will likely be important information that your insurance would like to know about, also if the fire was caused by negligence on the owner's part (hopefully not) you could face a lawsuit especially because someone was seriously injured.

The fire was caused by a three year old boy and a lighter.  

First , 6 to 8 weeks is a very conservative timeframe , think more like 6 months . They will probably gut most of the house . Smoke damage is the problem . You will have to deal with the insurance company , that alone is a pain . Hopefully the tenants had renters insurance , you may be making a partial claim against them . tenants will have to find another place . As far as loss of rent ?   Dont know 

I would recommend you get police reports and or sworn tenant statements as to the cause to help make dealing with the insurance company a bit easier.

Robert,

Glad to hear everyone is OK! Now that you know who or what caused the fire, check with the tenants to see if they have renters insurance (all of my tenants must have before they move in), and then if not, you will need to file with your insurance company, and they will send an adjuster out to ascertain the damages and how much they will cover. You will need photos and a fire department report for them. Most leases have a clause that they rent will be abated if the property becomes uninhabitable. You should also be able to receive rental compensation from the insurance company for the amount of time that the tenants can not occupy the home if you have that in your policy. I always recommend looking at your policies every year

I went through a similar situation with a tenant caused fire in a two story house.  Received an email from the PM stating that there was a small grease fire in the kitchen. I assumed that the damage would be mainly drywall replacement and maybe new kitchen appliances.  When I received the pictures, I quickly found out that I had a much bigger problem at hands.  The roof had major holes in it and what hadn't been consumed by the fire was destroyed by water damage from the fire department.

Dealing with the insurance company took roughly 6 months and was a pain, but the house was finally declared a total loss.

Depending on how big the damage is, you might want to consider hiring a professional adjuster to deal with the insurance company.

I've had two fires in the 10 years. Oddly enough the first one was about 6 or so years ago and it was caused by a 5 year old with a lighter. Fire damage was minimal. But smoke and the fire dept damage was considerable.  Second one was a really strange one. Junction box in crawl against a bathroom wall (exterior wall of the house no less). There wasn't even an outlet in the bathroom on that wall.

In terms of what to be prepared for.
1) Hopefully you have loss of rent coverages for 6 mos on the house. But you should be prepared to possibly have to wait before you get any of that money until after the claim is settled. I think state farm might have sent me a monthly payment? But I know on this last one, I didn't get any of the lost rent until after the tenants moved back in.  

2) Expect a restoration company or many to hit you up for the work. Don't sign anything with them yet. Here is your chance to negotiate the claim and turn this into a positive. Have them agree to put in the estimate with the insurance for all the work that is needed.  And then tell the restoration company you're going to pull a couple of the items out.

You'll be shocked at the rates these restoration companies get the insurance companies to pay for. But some things like painting can be pulled out and then you can do the work yourself and get paid that amount to do it.

Definitely an opportunity there.

3) Figure out what the tenant is going to do in the meantime. If they had renter's insurance, their insurance will likely pay for them to be put up in a long term rental place like Extended Stay or something. If not, then I believe your insurance might cover that.  But you'll want to know if they intend on moving back or not.

4) Lastly, what you think will take 6 to 8 weeks might take a significantly longer period of time so be careful. You'll be surprised at how long some of this stuff will be drawn out. This is no longer a typical rehab where you tell your contractor what to do and he does it. The restoration company is going to spend several weeks putting together a crazy detailed estimate - down to the nail almost.

And then it has to be approved. And then maybe there's some back and forth.

One thing to note is to know whether you have full replacement coverage or not. And/or if you have to code replacement. i.e. If you don't have full replacement then they basically depreciate the items over their estimate useful life and will only pay your what that remaining life might be worth.

i.e. if carpet 5 years and carpet is 3 years old, then they only pay you for 40% of the carpeting's replacement value.    

for code replacement, the village may require you to update certain things as part of the rehab if you were to have to tear out drywall (which is pretty typical with a bunch of smoke).  Which means when you tear out the drywall, the village will require you re-wire the house or that section of the house because its being opened up and isn't to code. There is coverage that will pay that updating to code cost. But typically that provision isn't standard so you might take a hit for that.

All in all, its a less stressful time for you then it is for the tenant - especially since the cause of the fire was the little kid. You're still making your money on the rent. You won't have any repair bills during this time or late rent. And you're going to get some really nice updates to the house too. 

The first fire was in the bedroom upstairs. Both bedrooms I had painted over paneling. Both got all new drywall and recessed lighting. It was great. :-)

Insurance companies are sensitive about fire alarms not installed. Now CO detector. Doors not fire resistant ...  I have heart investors lost insurance coverage ..... Hope it comes out OK for you,

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