Recently I purchased a 4 family multi in Providence, RI and I have been listening to Biggerpockets podcasts and reading people's stories like I am addicted. The property I purchased was at a good price because if the units are fully rented even below market, could generate 800+ cash flow a month and other properties in the area was selling at 10-20% higher. However, as I was still trying to turn around 2 of the units with carry-over tenant in the other 2, a water pipe burst due to the Northeast freezing storms. The burst happened on the top unit so all the units below, including the 2 rented, had significant water damage (ceiling caved in).
I am still in the process of dealing with the property management, insurance and tenants.. I am quite anxious how everything will go. This is my first investment property so it's a pretty good slap in the face.
However, I am hopeful and I am still very excited about real-estate in the long run. Every guest on the podcasts say persistence is the most important thing to succeed. At a time like this, I am very thankful for Biggerpockets to bring this community together and giving me the encouragement to keep going in real-estate.
I know there are a lot of success stories on here but it would be great to talk about some of the lessons too. Let me know if you have had a similar experience or if you have any suggestions. I'd love to hear!
Robert, I purchased a five family this summer and had a very similar experience. A pipe burst and there is extensive water and electrical damage. I am still getting estimates as more damage is discovered. I am curious to hear what suggestions you get about lessons learned.
Just for future reference, shut the water off when vacant in the winter if it freezes in your area.
I just had to go turn water on for the appraiser of an under contract sale. She said, "You're smart!" Then I turned it off again and bled it a little at the tub.
Sorry you guys are facing this.
Hey Kate and Steve, Thanks for sharing your experiences and suggestions. Good to hear from you guys! I will update this post as I go. Yeah it's a bit of murky for me right now. I am not too sure how (and when!) the insurance company will judge the amount they will pay and after that, how I would work with my property manager on doing the work. I am sure property managers handle things differently too.. I have heard the core-four and I just found some good contractors but how to manage the interactions between each other is quite another story!
@Robert Chen Yes, the podcast guests are right, it definitely takes persistence (grit) to succeed in this business.
Think about it this way, over the course of your real estate career there will be good times, bad times, very good times, and a few very bad times. You just happened to get a bad/very bad one from the start, but it won't always be this bad, and someday you'll find yourself telling this story (maybe even laughing) to a new real estate investor who's thinking about buying her/his first property.
You can always try to minimize the odds by researching things and being proactive (e.g., servicing your heating systems in the fall to reduce no heat calls in the winter), but you can only much too.
When they say "it's a numbers game", they don't just mean income and expenses. It's also about trying to tilt the odds of good things more in your favor and bad things less in your favor, through education and establishing/improving processes.
Good luck and keep us updated on your journey of course!
It's unfortunate that you had this issue come up this early in your real estate journey. Don't let it get you down!
One thing I would strongly recommend is to contact a public adjuster. The goal of the insurance company's adjuster is to payout as little as possible. Although a public adjuster will charge a fee, they can review your situation and see if they can get you more money than what the insurance company would offer. I know a few people who have had insurance claims and have done well with a public adjuster. PM me and I can provide contact details for one.
Sorry to hear about this happening to your property. I too, have pipe freezing issues in my rental property in East Providence. It seems that the previous owner has replaced the copper pipe that runs along the exterior of the house to PEX. This doesn't prevent the water from freezing (Even in an insulated cavity space), however, it does allow expansion and haven't had a burst in the time that I've owned this house (about 3 years). Since you are going through remodeling, maybe this is something that you can do for preventative measures?
@Robert Chen its like a flat tire - you got it out of the way and now you're good with bad luck for a while! Keep trucking - if it were easy EVERYONE would do it...
Thanks for everyone's support and sympathy. Just a little update since the pipe-burst that happened 1 month ago. The insurance payout is still pending. The day after the pipe-burst I contacted a public adjuster and he took on the case. So far, I think this is the right move as at the minimum he is taking care of putting together a full list of damages and also dealing with all calls and meetings with the insurance company. I also got a restorer that the public adjuster suggested so that they can work together better.
Things I have learned so far:
A public adjuster should be consulted as you start a rental business. Although hopefully you won't be dealing with them too much, they are very knowledgeable about exactly what to look out for in the insurance paperwork and also what type of insurance is common and available. I got my landlord policy as a Actual-Cash-Value because the insurance company says it was their corporate policy to do ACV for landlord policies. However, after talking to the adjuster, I find out that there are many other companies that do Replacement for landlord as well and I would have been much better covered in this situation.
It will be OK. Although the week after the incident was a nightmare of stress and worry, now it has become an opportunity for improvement.The restorer needed to take the walls and ceilings down anyways so I might as well improve the property now to offer better housing for the next tenant.
Even though I am not out of the hole yet but I am optimistic. I will provide more updates as things come and as I learn throughout this experience!
Alright, probably the last post here. 2 months after the initial incident, looks like insurance is finally settled and the check will be out soon. Thanks for everyone's feedback and also suggestion to use a public adjuster. It worked out great. The payout will cover 80% of the cost to repair so it's not that bad. Plus I will get some new flooring, walls and ceiling so it's a small renovation at a large discount.
Another thing I learned was that your mortgage company is actually also on the check that insurance will write. Make sure you contact the mortgage company as well when something like this happens. Often the lender will have policies regarding how the repair is to be handled. For example mine would had to over see the repairs (check contractor license, inspection throughout work progress..) if the assessed damage is more than 20K. Thank god for me it wasn't that much so the mortgage company will just sign the check so that I can cash it.
From the frantic first couple of days to now, definitely a lot more appreciation for real estate investing and ever more excited to keep going!
@Robert Chen Do you mind me asking if your insurance broker was helpful at all during this process, if your property manager was, or if you had to navigate the process by yourself?
@Fan Bi Not at all. Insurance broker doesn't deal with this at all. Which ever insurance company you actually have will assign their own adjuster to appraise what the cost of repairs would be. Property manager got there to turn off the water and fix the burst pipe with his plumber. After that I got the public adjuster who suggested a water remediation company that I used. Throughout this I basically had to coordinate a lot of things. Public adjuster helped deal with all the insurance company things but coordinating the remediation and the repairs I had to do myself. I don't have enough leverage with my property manager to take care of the property.
Sounds like you learned a lot of helpful info right out of the gate. Congrats ... and I'm sorry that happened! I had a similar thing with a nasty eviction almost immediately after closing following by a nasty reno - and while it could cripple and discourage some I tried to take it day by day, lean-in to it and try and take away the knowledge. That way when it happens again (and I'm sure it will) it won't feel as scary, it won't be as time-consuming and thus not as stressful.
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