My rental burned down and now the insurance won’t pay, what can I do? 7 steps to avoid this problem

by | Real Estate Investing, Indy Anna, Uncategorized

My rental burned down and now the insurance won’t pay, what can I do?  7 steps to avoid this problem.

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This is a quick video I made about  a Hero’s experiment…

My rental burned down and now the insurance won’t pay, what can I do? 7 steps to avoid this problem

Indy Anna Explains:
– We just had a real “nightmare” scenario where an investor was about to flip his house and it burned down just days before closing and the insurance company won’t pay for it, what can be done?
– What real estate investors need to know about insurance and how one wrong move here could destroy your entire business, no joke!
– Plus I’ll show you the BEST seven ideas I got on how to make sure that this never, ever EVER happens to you!

So here’s what happened:
– I had assigned a deal to an investor, he bought it, closed it, did the work, got a buyer to re-sell it to and was about to close for a retail price of $210,000.
– Then just about 72 hours before closing there was a fire and the house is toast.
– The investor had insurance so we all assumed everything would be covered but NO the insurance company is refusing to pay for this.
– I’ve never seen this but I asked around and it looks like this has happened and does happen to investors so this is a problem for some people.
– I’m making this class to make sure this never happens to you or anybody you know so please pay attention and also let me know if there’s something I’m missing or anything you think should be added to help.

So what happened, how can the insurance company turn down a claim like this?  To find out I spoke with four realtors, two attorneys, at least 10 investors and a few insurance agents so that I could have a complete answer.
– As a real estate investor you need to be VERY clear and specific the use of the property and your insurance agent, realtor and/or attorney should get you the right policy but just in case you should know about the vacancy clause.
– So in this case my investor got a standard “Landlord’s Policy” and usually those state that the property can only be vacant for a specific time like 30, 60, 90 days or so.  In this case because of Covid the property was vacant for longer than that so the insurance company is trying to get out of paying.
– As a flipper/investor you want to have a “Builder’s Risk Policy” and also the terms of use of the property clearly outline and if something like Covid comes up your agent can create or add an addendum to the policy so that the company knows the situation.
– In researching this I also had another investor that had weather damage on a rental and the insurance company refused to pay for it because the tenant had two dogs instead of just one that was in the original lease four years ago crazy pants!

In this deal with the investor he paid me a $15,000 assignment fee and I went to return it because I felt so bad but Ronnie was NOT having it and just wanted to do the next deal so YAY for the winning attitude Ron!
– And Ron has a good income and good financials and I already have a good deal or two for him so he will be okay, but for a normal investor this one deal could’ve wiped them out entirely.
– That’s why I want to get to the bottom of it and make sure I have solid answer for you guys, so everybody I talked to said it is the insurance agent’s fault and the insurance agent says it is the law and there’s nothing he could’ve done about it.
– I don’t want to point fingers but to improve our Policies here we have to get clear on how to avoid this in the future.

I worked with a few people from different backgrounds of the industry to come up with these Policies and Checklist.  So here are SEVEN tips that should help you avoid this from ever happening to you:

1.)  Explain what you are doing.

Do NOT assume your insurance agent is on your side or is at fault first blame yourself and make sure you are asking the right questions and explaining the full situation to your agent about what is happening with the property.

2.)  Ask for referrals.

Instead of just getting an insurance agent, make sure you have your team in place working together.  You want your realtor, lenders, property managers, other investors, insurance agents, etc. to be familiar with real estate investments and be real estate investor specialized people.

3.)  Specify Investor Category.  

There are different policies for landlords, short term rentals, long term rentals, flips, rehab, new construction, assignment, partly owner-occupied, vacancy, multi-tenant, wholesaling, etc.  Make sure your agents know the differences and has written a policy for your specific use.

4.)  Give your agent and company a schedule.  

Make sure they know exactly what you plan on doing (work, rehab, tenant signings, etc.) and WHEN. This way on any given day of any given week they already know what is happening and your policy was written to protect you for the specific use you outlined.

5.)  Tell your insurance agent of any changes.  

If you are behind schedule, ahead of schedule, doing showings, signing tenants, etc. make sure the agent knows everything and any change in status and especially regarding things like vacancies.  

Even if it is an obvious change like with Covid, hurricanes, forest fires, etc. that would obviously impact your work or schedule you should still make sure the agents knows and any necessary adjustments are made.  Any vacancy clauses for example, should be updated.

6.)  As you market a property or sign a tenant update your agent.  

If people are coming in and out of the property or if there is a change in the previous “unoccupied” status and you are renting the property let them know.  Sometimes taking fees, security deposits or even just marketing a property may have to be within a timeline or it may trigger a need for an update on the policy or notification to the company.

7.)  Meet at the property and/or provide pictures.  

You can include these pictures with the schedule as well and it makes it crystal clear what you are doing with the property.  This is also helpful with your realtors so they can see the value changes and updated that they can emphasize as they market the home.

Thanks so much!  = )

Okay so that was the best 7 ideas that my people came up with to help you avoid this from even happening to you.

Make sure you stay here at BigReia.com and check out our EPIC page on 100 FREE ways to find motivated sellers and our other amazing training resources will help you become a Jedi and creating Income Ascension and Social Mobility and you will…

Make the Universe Smile.

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There is a great post and class on the 38 Ways to Buy Apartment Buildings Zero Down with Pet Policies, and here are some other helpful and EPIC posts... for starters as a real estate investor if you ever want to build a business that makes you 30 grand a month then you MUST do this...

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Thanks so much!  = )

Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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