Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes
What are my options to get out from under an asset that had a major fire, where we had no insurance?
This asset (now a liability) is owned under a self directed ROTH IRA.
I know there may be follow on negative consequences to just walking away from something like this (for instance does Des Moines drop the hammer on us in other ways, for instance scrutiny with our other rental properties) ----
I'm exploring giving this property and lot away but I'm guessing Habitat for Humanity only wants it if it can be built on and if the burned house is already cleared.
Another contact said something about QUIT CLAIMING the house to an out of state LLC.
@Jim Goebel First, I'm so sorry you are going through this. I own a restoration company and flip fire damaged properties. I've dealt with numerous homeowners some of whom thought they didn't have options, but we were able to discover some. There are a lot of factors in play--mortgage balance, house value, extent of damage, insurance settlement, etc. @Rene Owczarski has given several ideas above, but the best choice for you depends on the specifics of your situation. If you can sell and come out even or ahead, that is the best option. If you have the cash to rebuild, eventually you will recoop if you hold it long enough. Walking away is an option, but I see it as a last resort.
As for @Greg M.s comment 🙄 The bigger pockets community is not simply "people on the internet" Many are attorneys, tax professional, realtors, insurance agent, experienced investors and in my case, someone who has dealt with this very situation many time. Yes, obviously, check the legalities and tax implications of a plan before you execute--goes without saying.
I wish you the best. Please let me know if there are any specific questions I can help with.
That’s rough. I am not sure if you get any deductions on your taxes for the donation but you could always ask them. Also anything will sell for the right price to the right person. People buy crappy houses all the time and often demo them to rebuild so I don’t see this as any different. Just start the bid low and you may be surprised what someone will pay for it.
@Jim Goebel Some options I can think of: 1) Do nothing, don't pay utilities/taxes/water/sewer/etc, and ignore the notices/lawsuits from the City of Des Moines. Eventually it'll go to tax sale and someone might buy the tax cert, and in two years they might take title (but no guarantee's this will happen.) Also with this option, this home will eventually get flagged as part of the City's "Blitz on Blight", and the City of Des Moines will sue you to either rebuild the home or knock down the house. If the City has to knock it down, they'll attach the demo bill as a special assessment to the parcel, which typically run $20-30k. 2) Get a real estate agent, and put it up for sale "as-is, where-is". And this can be someone else's problem. You might find a buyer, you might not. But inventory is low in DSM right now, so maybe a rehabber will buy it. 3) Reach out to a local wholesaler, and have them find a buyer for you. 4) Bite the bullet and rebuild. You might have to bring in a structural engineer, to determine the extent of the damage, and how to shore up the structure. Might be worth a rebuild, but you'll need a sharp pencil to calculate all your costs. 5) Donate the home to a non-profit. Maybe a local non-profit that deals with real estate would take it off your hands. But you'll need to do a lot of leg work with them, to make that happen.
Side note, have you looked into getting a Builder's Risk or Liability/Fire Only policy on your empty homes in the future? Because they are a lot cheaper than you might think.
I've got a Builder's Risk Policy from Foremost Insurance thru my agent, with about $40k in coverage for a vacant home being remodeled, and it's about $286 every 6-months. But I also got a quote from my agent on a 6-month term from Diamond State Insurance for a $300k in General Liability and $50k in Fire Damage on a vacant home, and it's $100 for a 6-month term, but that covers only a single home. If I wanted it on two vacant homes (which I thought about) for the same term and coverage amounts spanning the two homes, it's $280 for the two homes.
Just DM me, if you want my Insurance Agents contact info, or want to talk options. Good luck.
Don't take advice from people on the internet about something as major as this. You need to talk to an attorney and tax professional. And while you're at it, find a good insurance agent. Assuming MASSIVE liability to save a couple hundred dollars is just plain dumb.
@Jim Goebel First, I'm so sorry you are going through this. I own a restoration company and flip fire damaged properties. I've dealt with numerous homeowners some of whom thought they didn't have options, but we were able to discover some. There are a lot of factors in play--mortgage balance, house value, extent of damage, insurance settlement, etc. @Rene Owczarski has given several ideas above, but the best choice for you depends on the specifics of your situation. If you can sell and come out even or ahead, that is the best option. If you have the cash to rebuild, eventually you will recoop if you hold it long enough. Walking away is an option, but I see it as a last resort.
As for @Greg M.s comment 🙄 The bigger pockets community is not simply "people on the internet" Many are attorneys, tax professional, realtors, insurance agent, experienced investors and in my case, someone who has dealt with this very situation many time. Yes, obviously, check the legalities and tax implications of a plan before you execute--goes without saying.
I wish you the best. Please let me know if there are any specific questions I can help with.
As for @Greg M.s comment 🙄 The bigger pockets community is not simply "people on the internet" Many are attorneys, tax professional, realtors, insurance agent, experienced investors and in my case, someone who has dealt with this very situation many time. Yes, obviously, check the legalities and tax implications of a plan before you execute--goes without saying.
They may be an attorney, but they are not your attorney. They may be a tax professional, but they are not your tax professional... If they give bad advice, they aren't on the hook. Their E&O insurance isn't going to make the OP whole. Free advice is great and it is absolutely worth what you paid, but OP is looking at potentially a massive liability that could haunt him for many years. He needs an attorney that is versed in the laws of Des Moines, not someone who had a similar situation in another city/state.
@Greg M. He appears to be asking for ideas & advice--there's not legal question here. If you don't think this is appropriate, why are you on BP? Thanks kind of the point of the forums.
@Jim Goebel I know a land lord who gave one away. What if you advertised for free on marketplace or other third party sources? Maybe quit claim it and do a bill of sale out lining you have no future obligation. Might be worth a try. It’s crazy what people will take fir free.
@Greg M. He appears to be asking for ideas & advice--there's not legal question here. If you don't think this is appropriate, why are you on BP? Thanks kind of the point of the forums.
I'm on BP to exchange knowledge. And based on my knowledge, it is my opinion that OP should hire a local real estate attorney that is well versed with Des Moines, IA laws regarding things like property abandonment and a CPA that can clearly explain the tax consequences of whatever path the OP takes.
You seem to think that he should take the advice of strangers over the internet because they post on BP and may be knowledgeable. I believe that given the potential MASSIVE negative outcome this could have for OP, he needs local professionals to help him get through this.