Purchasing home insurance is always something you have to do but hope you never have to use. Sometimes it’s tempting to cut corners since you do rarely need to use it, but having the right coverage is very important. Follow us on this tale…
On October 24, 2015, we purchased a mixed use building in Rahway (1 commercial space and 2 2-bedroom apartments) for $90,000. With closing, holding, clean up and renovation costs, our all in total was $127,000. All of the spaces were occupied at the time of purchase and the tenants all remained for November, December and January. At the end of January, the tenant on the third floor vacated their apartment. We began renovations to this apartment shortly after.
In an effort to abate one of the items on the temporary CO, we had to repair the flat roof. We contracted with a roofer that we had worked with previously. On March 19, 2015, the roofer’s workers arrived to do the work without him to supervise. More importantly, they showed up without informing us that they would be working this day. It turned out to be a cold and windy day, not ideal conditions for using a blowtorch on a roof.
As the workers did not take proper precautions, we shortly received a phone call from the Rahway Fire Department that our building was on fire! We were very lucky that the fire department responded very quickly. FORTUNATELY, the third floor apartment was empty and the other residents and pets were able to be evacuated safely. Unfortunately, all of the residents were now displaced since the Fire Marshall condemned the building. This was mostly due to water damage as the fire damage was minimal and localized the the third floor.
Processing the Claim
We then began the insurance claims process began. We were glad to have had the proper insurance in place! The adjuster estimated our rebuild cost to be $208,000, minus $58,000 for depreciation. So, the net payout from the insurance claim was approximately $149,000, $150,000 less our $1,000 deductible.
Still Making a Profit
We proceeded to sell the building after the fire for $70,000, netting $65,000 after closing costs. We ended up making $87,000 on the property despite the fire and selling it for less than we initially bought it for. The right insurance coverage saved us monetary damage from the fire and assured that we still came out on top.