When you get into Real Estate, you assume certain risks. Your strategy must consider the mitigation of these risks. There will be acts of God, but it is up to you to avoid a lack of acting and to protect your and your investors' assets.
We have experienced multiple economic cycles (e.g., 2008 financial downturn) and different calamities (a fire at one of our condos, the flooding of another apartment with our neighbors' consequent flooding).
These few scars have taught us multiple valuable lessons.
Last week was a challenging one: Texas got struck with a snowstorm that created severe power outages leaving millions without power when it was most needed (temperatures went down to single digits).
Pipes and plumbing were expected to freeze, and homeowners and landlords tried their best to protect their homes by implementing the dripping faucet measure to prevent them from bursting.
Power outages for prolonged periods made the freezing inevitable, and when the worst of the cold started receding, the thawing came, and pipes began to burst to unprecedented levels.
By the end of the week, Texans were dealing with the aftermath: the pipe bursts did horrible damage to their personal belongings and properties.
Plumbers and General Contractors were overwhelmed as residents and landlords required emergency services, all at once, across the cities. We hear now that contractors are traveling from Colorado and Oklahoma to supply the extreme demand.
We wanted to stop and take a moment to share with our network four of the critical lessons we learned. In anticipation of what may be coming over the next few days and what to expect. Below a few highlights:
1. The importance of strong relationships (Know your A-Team)
It has always been clear to us that building relationships across your support network is valuable. We came out of last week's snowpocalypse with a renewed sense of its importance. Assembling a team (you know, like, and trust) is quite different from just hiring subcontractors.
Having a good relationship with your tenants proved useful; Communicating with them in advance (e.g., sending newsletters) and having them report issues asap. Also, them being able to shut off the water timely.
Many of our friends were not able to find immediate help from plumbers or handymen. Our trusted contractor and his team Smart Construction Concepts LLC, came to our aid the next morning and contained multiple water damages. Our tenants were able to stay in their homes, having wall patches all over but with full working utilities. Thank you, Luis and team!
Having our insurance broker on speed dial helped us act with promptitude. He provided valuable advice and guided us on how to document everything in anticipation of our insurance claim, which is more than amazing since he was dealing with his burst pipes. Thank you, Carl Tirador!
Building relationships with other homeowners, realtors, and property owners can also help. Our friend who owns multiple houses didn't have a plumber. When the crisis hit, no plumber took her calls, and she called us for help. We were able to refer her to our contractor, who also resolved her water emergencies.
2. Moving fast in times of crisis
Our first move was to thoroughly inspect the property and start renting air blowers, which cost about $120 per week but proved to be scarce a few hours later.
When possible, consider winterizing the property before the storm even begins: from buying inexpensive pipe insulators and placing them around the property to shutting the main water source and draining all pipes. Depending on the cold's severity, it could be better to reserve some water in bins for a day or two than dealing with pipe bursts and subsequent water damage.
3. Liability Management
Requiring your tenants to get renters insurance is as essential as getting your home insurance. It should be an obligation included in the lease contract. A long time ago, we included in our welcome packet a short explanation of how tenant’s insurance works. It has proven to be a tool to give clarity and avoid unnecessary conflict and headaches.
Not all home insurances are created equal. Having adequate liability coverage, balanced with the right deductible, is essential. But the devil is in the details. We invest in insurance and even have an umbrella policy on top. Our advice is don’t settle for the cheapest premium on the market. When the time comes to claim to your insurer, you could regret not choosing maybe a lower deductible, an extended coverage, a different type of insurance (flooding vs. water damage is an example that comes to mind). We are fortunate to have a close relationship with our insurance broker who helps us to navigate the nuances of insurance and holistically understand all the necessary details: https://agents.gooseheadinsurance.com/tx/dallas/1920-mckinney-ave
4. Know your pipes
The worst part of dealing with pipe bursts is finding the exact location of the rupture. You could destroy an entire bathroom or a whole bedroom, trying to find the leak and be able to contain the damage. Our property's floorplan proved useful when our General Contractor needed to open holes in the wall. After checking the blueprints, the team had a better understanding of what could be happening. The plumbers finally found all the pipe bursts in the units above where the leaks were showing.
Replacing copper for blue pex in new builds should be an investment to consider in the short-term.
Insulating outdoor faucets is fundamental. When you find a leak, we would recommend looking for the culprit in outdoor faucets. Inspect them before the winter hits, change their insulation if needed and keep them protected from the elements.
It should come without saying, but make sure your existing copper plumbing is behind the plywood. NOT IN BETWEEN IT AND THE CONCRETE OR BRICK WALL! In other words, check that your pipes are insulated from extreme weather. We found several offenders that created significant havoc at our properties.
Water damage statistics tell that pipe burst are a frequent and most probable liability to real estate investors. For some water Damage Statistics: water damage statistics
Conclusion:
Real Estate ventures are our passion, but the property management task that comes with it is not easy. It takes years of experience, mistakes, trial and error, an ecosystem of trusted contacts. Acting fast and with diligence is in the best interest to protect your valuable assets and take care of your tenants. To view more photos and videos of last week's incidents, click here. If you liked what you read and need our advice, don’t hesitate and send us an email at contact@boecam.com. We will do our best to answer your questions.
Excellent - thanks for sharing!!