Investor · NV and CA · Member since 2016 · 374 posts · 227 votes
This is an example of why you need reserves before buying a rental property. On Sept. 3rd, a drunk driver plowed through my single-family rental in Independence, MO. The link to the news clip is below. The news got everything right except the tenant was not the owner.
Luckily, no one was home. My insurance coverage is in effect, but there is a $2500 deductible. I can cover that because I saved. This isn't something that really can be anticipated, like buying a home with an old roof or old HVAC, but one needs to plan for it.
I'm posting this because I've never seen a post about someone going through an insurance claim. I'm sure I'll learn something along the way, and will update this thread once more is known.
Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
5y
@Caroline Gerardo is spot on. Insurance adjuster isn't your friend. But a public adjuster is. Find and hire one. They pay for themselves. Glad no one hurt and you have coverage. Probably all work out well in the end.
Rental Property Investor · Gilbert, AZ · Member since 2020 · 210 posts · 163 votes
5y
@Ryan Fox, ok good! I was confused by the $2500 deductible part, I thought you were having to pay the deductible on your home insurance policy which didn't make sense to me. That is definitely a wild story, it's good to hear that no one was hurt. That'll definitely be one of most memorable landlord stories to tell, I can't imagine getting that call from a tenant!
This really blows and I hope you get to a decent conclusion here. I've had a drunk driver plow through a 6x8 external rear porch roof support on one of my properties. I fixed it myself and didn't go through insurance.
Rental Property Investor · Nashville TN (nashville, tn) · Member since 2020 · 5 posts · 6 votes
5y
I 100% agree with @Scott M. get a public adjuster. My mother’s house was damaged by a tornado and our public adjuster got her almost triple the original amount. I would check that they are a member of NAPIA (National association of Public Insurance Adjusters) and also check references. Good luck!
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
5y
Ryan,
A couple things:
1. If you put the claim in through your company, they will pay you minus the deductible and will attempt to recover everthing from the drivers carrier in a process called Subrogation. Locally, that process takes about 18 months. The claim is put before an arbitrator who determines the percentage liable. If the drivers company is determined to be 90% liable, they will pay back your company 90% of the loss and your company will refund you 90% of the deductible.
2. If you hire a public adjuster, they are generally compensated by a percentage of the claim payment. That means that if the claim is $40,000 then you will net out less than that. They claim that they will recover more so you will net out with more.
3. If you are not local to the property, it may be worth hiring the public adjuster just to have them handle the adjuster visits, etc.
4. be sure to include the lost income in your claims.
Investor · NV and CA · Member since 2016 · 374 posts · 227 votes
4y
I wanted to update this thread to explain how things turned out.
Let me start at the beginning. I bought the property in October of 2020 for $109k. I financed it with no money down using my securities-backed line of credit. Since this was during COVID, I was able to lock in a seven-year fixed interest rate at 2.48%, interest only. The monthly interest payment is $220.
The tenant in place at the time rarely paid her rent of $900 / mo and was destroying the property.
When the drunk driver drove into the property in Sept. 2021, the tenant moved out. Someone stole all of the electrical wiring and plumbing in the property and I'm strongly suspicious it was her. I know for a fact that she stole the refrigerator.
Anyways, it cost about $107k to rehab and pay the carrying costs of the property. I received a little bit more than that from the insurance, after paying my public adjuster. It was a great suggestion that I hire a public adjuster. I was pretty lucky to pick a good contractor who did a really good job, unsupervised while I live in Nevada and the property is in Missouri. They even put in some upgrades that were within the budget.
The property took about six months to renovate and I now have a reliable tenant in there. The rent is $325 / mo higher than it was before. Property is now worth about $150k-155k.
Major lessons learned:
1) Sometimes the biggest disasters lead to the biggest upside.
2) I filed two insurance claims here - one for the property damage and one for the theft of electrical & plumbing. I probably should not have filed the theft claim. Filing too many claims leads to your insurance rates going up overall. Now, I'm seeing the premiums going up on most of my rentals. The theft claim was only worth $9,500 and that's an amount I could have paid out of pocket and still made good returns on this investment.
3) I spent a good amount of time dealing with the contractor handling issues that came up. On my rehabs out-of-state, I usually have an independent project manager handling these issues. I should have done that here. It is not my strength to make good design choices and it was difficult to make decisions on design choices. Also hard to keep track of the progress of a project from out of state.