For many real estate investors, this scenario is their worst nightmare. What would happen if your rental property were to catch on fire? I don’t mean to alarm you, but it’s plausible. Whether it’s an electrical mishap, or due to negligent error on your tenant’s part, accidents happen.
Don’t let this possibility totally deter you from investing at all. Like anything else, the best thing you can do is prepare ahead of time so that should a fire occur, you’ll know how to react.
If there’s a fire at your property, the first thing you should do is check on your tenants. As a landlord, your first priority should be to make sure that the people who live in your rental property are safe and accounted for. After all, a real estate investment is just four walls and a roof.
The good news is you’ll have insurance on your rental property. Build insurance directly into your ROI formula, and you won’t need to worry about it. Even if your property burns to the ground, your insurance company will work closely with the fire department to determine what happened, and you will receive a check. Insurance companies typically move very quickly in these scenarios.
However, there’s one thing you must have prepared. Make sure you’ve documented all of the renovations that have taken place on your property. Be armed with photos and receipts proving the work that you’ve done. Chances are, you bought the property at less than market value, and spiffed it up. But if you can’t prove the quality of the property, you might lose out on the money you spent on rehab.
After the accident, the fire department will examine the site in order to identify the cause of the fire. If the cause of the accident was the tenant’s fault, they should be covered by renters insurance to reimburse them for their possessions. Your insurance company and the tenant’s will usually work together to decide the best mode of action.
Most importantly, don’t panic if your property catches on fire. Don’t let a setback totally derail you. Real estate is business, and in business there are obstacles.
Have you ever had a fire at one of your rental properties? We’d love to hear your experience. Come over to our YouTube channel and leave a comment!