Fire in property - what are my options?

Question

Hello everyone,

Last month I was notified by management that one of my properties had a fire, probably started by tenant according to them and the police. I just received a healthy windfall for my troubles, and no one got hurt, so that's good.

What can I do with it? I was told fixing it up would be more than what I originally paid and I'm pretty sure I don't want to do that (wasn't seeing much income from this one anyway). Can I walk away somehow?

Thanks!

Mark Ronea · Answer

I'd recommend wholesaling it to another investor who wants to take on the rehab.

Rob K. · Answer

I knew someone that had a house in the inner city. While it was vacant, two bums moved in. The guy went to the house with two guns and kicked in the front door. The bums were sitting in the living room. He told them to pack up and get out. He said some other insulting things that I won't mention. He then said, "Don't you mother ------s even think about burning this house down!" He went back the next day and it was a burned out shell. He got his insurance check and left.

This was in a high arson area with lots of burned out buildings. He never heard anything from the city.

Depending where your property is will depend on how you handle it. I always wondered if I had a total loss, could I quit claim the property to a new LLC and then walk away? Eventually, the city would take the property for the unpaid taxes. I don't know what they could do in the meantime.

Mark Ronea · Answer

Where is the property located?

Jon Holdman · Answer

You still own the property.  The city (or county) isn't going to just let you abandon a partially burnt house.  They will give you notices of code violations and force you to do something with the property.  You may be able to demo whateve's left, clean up the mess and sell the lot.  But I don't think you'll easily get away with just walking away.

Sharon Rolel · Answer

Thanks Steve!

The check I got was for 35,000$, and I was around 22,500$ all in on the house 3 years ago. It wasn't bleeding cash, but it wasn't making a whole lot, and I've grown a lot in the past 3 years so I want to use the funds to get a better deal somewhere else.

I also have some paper losses (the rehab) I could try offset any gain with.

Unless I can see a better way to conclude this, I just want to walk away from the house (if possible in a responsible manner).

Steve Babiak · Answer

Some related reading:

http://www.biggerpockets.com/forums/51/topics/69801-fire-insurance-claim-and-taxes

http://www.biggerpockets.com/forums/52/topics/73607-house-is-on-fire?page=3