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Tornadoes in Dallas this week

April 7, 2012

It looks like the storms we had in Dallas earlier this week made national news. All of our rentals received no damage, everyone is safe, and – it is the 7th and all rents have been accounted for.

The exact number of tornadoes is still in question, but sounds like almost a dozen touched down across the area. The closest serious damage to one of my rentals was around 25 miles. Tornadoes are certainly a threat in this part of the country. It made me think about what the process would be if I did have significant storm damage to one of my rentals.

So I called my insurance company. I know I am covered for the property damage and lost rent and would probably make out great with an updated home and may not even be out my deductible. The tricky part is around the loss of use and managing your tenants during this period. What exactly is the process here? My insurance agent was vague even when I pushed for the details.

Let’s assume the tornado took off the roof and half of the kitchen. The property is obviously unlivable. According to my agent, my Loss of Use coverage will allow me to collect my rent from the insurance company during the rebuild. So therefore, I assume I would not be charging my tenants rent. So they are on their own to find someplace to live. Ideally, they could live with family for the weeks or even month(s) it might take to rebuild. What if they don’t have family and they have to move into a hotel or something – I assume my tenants would pay for this as they are not paying rent? An extended hotel stay will be quite a bit more expensive than their rent. What about utilities or other costs not covered by insurance?

If the house burned to the ground then my lease gets me out of obligations and they would probably just move somewhere else anyways. I would not mind this as I am getting lost rent and I would be raising my rent in the newly built home anyway. I realize I am rubbing the crystal ball and playing “What If?”, but has anyone had a catastrophic loss and how exactly did it work when it comes to the above issues?

http://www.cnn.com/2012/04/05/us/texas-weather/index.html?iref=allsearch

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