28 Feb INVESTORS’ CORNER: THE DANGER OF VACANT HOUSES
It is well-nigh impossible to impossible to be a Real Estate Investor for any length of time without owning a house that sits vacant at some point- be it between tenants, or after a rehab and while you’re waiting for it to sell (in a down market in Michigan, it was not uncommon for houses to have Birthdays on the market). However, there are some important and very real dangers to letting a house sit vacant that you should be aware of:
Insurance. Your insurance policy will almost certainly cover your property for a period of vacancy, but it is equally certain that said period will have a definite time limitation. Even the best of insurance companies stay profitable by ensuring that they do not pay every claim that is made, and each insurance claim is gone over with a fine-toothed comb to see if all conditions of the policy were met. Image the horror of having your property destroyed by a fire or flood, or having neighborhood kids or homeless people break in, hurt themselves in your property, and sue you- only to have your insurance company refuse coverage because the house had been vacant for longer than the listed period designed to allow for transition between occupants! You can buy vacant house insurance, but it is rarely sold because most folks are not aware of the existence of these policies, and due to the extremely high cost of this type of insurance.
Property Decay. We’ve all seen an abandoned house overgrown by moss, vines, and sometimes trees, home only to such intrepid animals as may have found their way inside. That may have taken 5-10 years, but every month your property sits vacant, it moves incrementally a percentage closer to that state. Nature will reclaim that which we do not tend well. Houses are designed for occupancy, and some of the many problems of vacant houses include lack of moving air, causing all manner of smells (most of us know what “vacant house” smells like), growth of bacteria and mold, and HVAC problems. Plumbing problems are common, tree roots and plants may even penetrate underground pipes. An insect infestation, be it fleas, ants, or more insidious occupants like carpenter ants, carpenter bees, and termites; can go from a minor problem to a huge problem without motion, circulation, and human care to arrest their growth.
Lowers Neighborhood Values. A house in disarray in a nice neighbor will bring down the value of other homes in the area. That’s the reason Home Owners Associations exist, to keep home values up for everyone.
Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at lou@MetrolinaREIA.org. For more information, visit www.MetrolinaREIA.org.