Tree fell on rental - investing insurance money

3 Replies

A large tree (75 year old / 5 story Oak Tree) fell on a rental property a couple weeks ago and caused a lot of damage to one of our rental properties.  We've been working with insurance on the claim to fix this home.  The home was built in the 50's and homes in the neighborhood are starting to be torn down and new ones are being built ($1 million+).  Since this is an investment property, we would like to make sure we're making the most of our investment and the rebuild.  

My question is, at a certain dollar amount we get from the insurance company from our claim, we may not want to put that money back into a home built in the 50's, and instead, would like to tear down and build new construction and sell.  Are we allowed to do this?  I assume so, but don't know if it would change the amount we get from insurance for our claim or not.  I am also assuming this can be done because after Harvey (we're in Houston), several homes that were flooded were torn down and rebuilt.  

Any advice or suggestions would be appreciated.  Thank you!

@Alyssa Steinruck they cannot require you to fix the house. However, if you fail to fix it they can cancel you. That said - you and they need to come up with a number. What would it cost to repair? What are the rents lost? This is what they owe you. Once you have that number, then you decide if it is enough to get you started on your tear down (which can be expensive) and rebuild. 

If we end up using the money to tear down and build a new house, what happens to our mortgage during that time?  Our insurance includes loss of income; if we decide to tear down and rebuild, would we still be able to collect loss of income throughout the build?  Thank you!