Rough start to our first STR

[Nathan Leland]

My wife and I finally made the leap and closed escrow on our first STR home last Friday at 2:03pm, the Oak Fire started 7 minutes later, and (it appears) that the house burned down 24 hours later...we never got the keys. It is too soon to know definitively but there is enough evidence to suggest the worst. Once we can get access will assess and come up with a plan.

In the meantime, I would love to hear from anyone that faced a similar situation. What silver linings were found, etc...

Best,

Nathan

(here's a comp of where we were going with the entry (ignore the driveway)

[John Underwood]

Wow that is horrible!

Have you already contacted your insurance company? They should also cover loss of rents on your STR.

[Michael Baum]

So sorry to hear that @Nathan Leland. Like @John Underwood said, if you have short term rental insurance, they should cover the cost to rebuild plus lost revenue.

We use Proper, we would get a full rebuild accounting for rising costs plus up to 50k in lost revenue.

If you do it right, you could get get an improved place with more amenities. Think positive and get on the horn!

[Nathan Leland]

 The home is in an area that is not touched by private insurers but is covered by CA's Fair Plan. We don't /hav confirmation yet but should in the next few days and then the calls will begin. 

We are definitely solutions oriented so I am focused on how to move forward and meeting our STR goals. We purchased the property due to the acreage and our option to add a second dwelling in the future, a future that is sooner than we expected. More to come...

[John Teachout]

Wow, what a beginning. Hope it all works out in the end.

[Michael Baum]

Do you think it qualifies as commercial property? Is there an advantage vs personal?

[Sean Bramble]

@Nathan Leland I am so sorry to hear this .. what a nightmare. My heart goes out to you!

I was just looking at a property in a fire area in CA and had a long think about fire risk as a result. One thing I know from talking to insurance brokers is that after a large fire builders really jack up their prices, and if you aren’t ready to pay up you could wait awhile (years) to get started. Permits alone can take a long time. Not all fires are this bad though. I’m not sure what your policy specifics were, but realize that simply walking away could be a viable option (i.e., take the payout from your insurance, pay off your loan, and walk without rebuilding anything). Of course there is also rebuilding … this could also be a great opportunity to build an even better property. Just realize you have options. Best of luck to you as you navigate through what must be the administrative nightmare of a lifetime. All of us here are feeling for you!

[Collin H.]

I had a STR burn to the ground once. Depending on how many homes are affected by a fire disaster, the aftermath can be a big problem, as there can be great need to rebuild, with a fraction of contractors that are really required. Counties and municipalities can quickly become overloaded with permit requests, etc.

My biggest piece of advice is patience.  It can take a long time sort everything out.  My next piece of advice is to squeeze every penny you can from the insurer.  Unless you have actual replacement cost, you will find that your settlement is unlikely enough to cover a rebuild, simply due to the market imbalance that occurs after a disaster.  Mine came up about 40% short.

This is not a fun exercise.  Good luck to you.

[Nathan Leland]

Thanks @Collin H. , I hop it is not off by 40% but we are anticipated a gap given the high cost of materials, labor, and inflation. The irony is that we chose this property over another due to how quickly we could have had it on the market....oops. 

[Chris Levarek]

@Nathan Leland Owch. Are you saying the property didn't have insurance? Red flag #1 for a STR in my opinion. I wouldn't buy in the area if that box isn't checked. Always need STR insurance not only for property value but also for liability issues. Hindsight of course is 20/20 but the silver lining is you learn.

As an investor, it's best to buy with the utmost control to limit your risk. Assuming or handing off control to unknown parties (government) tends to lead to unknown risks.

Wish you the best. 

P.S. In one of our first ventures, we bought a 5 unit apartment and lost 3 full A/C units to theft the day after close. Weird right. Welcome to real estate. Insurance was the savor but it was a lesson!

[Bruce Woodruff]

As they say - you got lemons, go make some lemonade. Seriously, now you can rebuild exactly as you want to, add all the new cool features and fixtures. Really make this a desirable, one-of-a-kind STR!

[Nathan Leland]

Quote from @Chris Levarek:

@Nathan Leland Owch. Are you saying the property didn't have insurance? Red flag #1 for a STR in my opinion. I wouldn't buy in the area if that box isn't checked. Always need STR insurance not only for property value but also for liability issues. Hindsight of course is 20/20 but the silver lining is you learn.

As an investor, it's best to buy with the utmost control to limit your risk. Assuming or handing off control to unknown parties (government) tends to lead to unknown risks.

Wish you the best. 

P.S. In one of our first ventures, we bought a 5 unit apartment and lost 3 full A/C units to theft the day after close. Weird right. Welcome to real estate. Insurance was the savor but it was a lesson!

 Hi @Chris Levarek, no, we have insurance through California's Fair Plan (many times the only option in high-fire areas).

[Nathan Leland]

Confirmation came today, the only thing left standing are the steel deck supports. At least we know where we stand, onward and upward.

[Andrew Street]

There is silver lining in that you have a new opportunity to create a one of a kind experience. Airbnb wants unique experiences and properties that stand out, so you can make the property the way you want to now. How exciting!