My Airbnb Burnt Down! AirCover vs. STR Insurance Spotlight (Episode 357)

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[00:00:05] Sarah: Hello, listeners. Welcome back from another great episode. My name is Sarah Karakaian.

[00:00:09] Annette: I am Annette Grant. And together we’re–

[00:00:10] Both Annette & Sarah: Thanks for Visiting.

[00:00:12] Sarah: Let’s start this episode like we do every week, and that is sharing one of you, our amazing listeners, who’s using our hashtag, #STRShareSunday. We’ll share you here on the podcast, to our entire email list, of course, on Instagram on Sunday. Annette, who are we sharing this week?

[00:00:26] Annette: This week we are sharing @cancast_seaside. Again. That’s @can, C-A-N-C-A-S-T_seaside, and they’re hosting in New Jersey, Seaside Heights. And two things I want to point out about this property. Number one, at the very end of their highlights, they have their house journey, and I love it because I think they bought an empty lot and built from the ground up.

[00:00:53] And we normally see renovation projects in the Instagram feed, but I love that they actually showed the ground up new build, which is just as exciting. And then another thing that I love is, since this was a new build, you can tell that they were very intentional about– there’s multiple decks.

[00:01:11] There’s a rooftop balcony, which I think is absolutely lovely. So if you have the luxury of building from the ground up, if you haven’t yet, go to all of your competition in the area, scroll through those reviews, and see what people are loving and make sure to just stack the love on the property that you are building.

[00:01:32] But I love that they show their house journey, and I love that they have this triple decker, outdoor entertaining area on every level. It’s amazing. And they share it. It makes me want to stay there because, a, I know it’s brand new and clean. And I’m going to have all the views. So well done @cancast_seaside. So it’s never too early to start documenting your journey.

[00:01:55] Sarah: With that, we are going to have a very serious episode today, but it is essential that any short-term rental host or future host listens into this entire episode. Annette, I know there were several moments during our interview where you and I just looked at each other, like, what in the world?

[00:02:15] Annette: I had to take a little walk around afterwards because–

[00:02:18] Sarah: You did.

[00:02:19] Annette: It was emotional. But the one thing I want to share with everybody, I get my mind blown on every episode, I feel like. But Nick shared something that I’ve never thought about, ever. I feel very naïve for thinking that I’ve never thought about worst-case scenario and–

[00:02:38] Sarah: There’s one aspect about–

[00:02:40] Annette: I still can’t really even wrap my head around this potential financial obligation that I’ve thought the obligation would go away.

[00:02:56] Sarah: Nick, welcome to the show. We would love to kick off the episode with a little background about you and your family. How the heck did you get started in short-term rentals?

[00:03:05] Nicholas: Yeah, absolutely. My name’s Nick Libertin. Me and my wife both live in northeast Ohio, and we work in healthcare, and we’d wanted to get a vacation place for a long period of time. But obviously, it financially wasn’t feasible to just buy a place and let it sit there.

[00:03:29] So her family has a property in Boynton Beach, Florida, which is right near Fort Lauderdale and West Palm area. So we travel down there sometimes, and we were like, man, we should really do this. I think that we’d be good at it. My wife really has just a knack for interior design, and she I think is very just social and very hospitable.

[00:03:53] And so that’s how we came up with the idea. And so we went down to Fort Lauderdale in 2020, I believe, and just started looking at houses. And then once we got the bug, then we were like, all right, we’re doing this. So we purchased our first single family home. It was about 2,100 square, a mile and a half from the beach in Fort Lauderdale.

[00:04:12] And that’s how we got started in the Airbnb business or vacation rentals, whatever. And so we started that, and it went really well, to be honest. We were paying the bills. We were making money off of it. We had a place to go down once or twice a year with our kids. We have three kids no– six, six, and seven. The place looked cool.

[00:04:35] Annette: Ooh, Nick, you were busy. You were busy before 2020.

[00:04:38] Nicholas: Yeah. My wife’s, honestly, she takes the brunt of it. She is a saint, dealing with me and my craziness, and then the kids and just– yeah, it’s a lot. But it was our dream. We had a place to go down and that we could afford because we were renting it out. And the kids, like all day in the pool, would stay there. We could go down for spring break with my mom. So it was great. And that’s, I guess, how we got started, and we still have that property.

[00:05:11] Annette: And you were completely remote hosting because you’re from Ohio. Fort Lauderdale is definitely not a short drive. Were you nervous at all, you and Monica, when you started hosting? Was that part of the conversation of like, how are we going to do this remotely? Do you have somewhat boots on the ground there? How did you work that out?

[00:05:31] Nicholas: Yeah, so we did a lot of research. We listened to a lot of podcasts. We read a couple of books, and one of the books in particular actually was about long-term investing, but it was, how to do it remotely. And then also, we own a couple of multi-units here in Cleveland.

[00:05:50] And I was thinking to myself that we remotely manage those. I know we live in Cleveland, but when there’s a plumbing issue, we’re not driving to go fix the plumbing issue. We’re figuring out who can help fix it, and then do that. And then we’re very picture-oriented, video-oriented.

[00:06:06] So, hey, what’s the problem? Take a picture of it, for job completion purposes, but also so we have documentation of what’s going on and what needs fixed. So that, and then it sounded like from all these podcasts, your cleaner is everything as far as boots on the ground.

[00:06:24] And then as backups, she has some cousins down there. She has a very close family friend down there, so absolute worst-case scenario, we also had family down there. So I think with that in mind, we felt pretty comfortable giving it a go, if you will.

[00:06:42] Annette: I know listeners are going to want to know, what was the book that you read because we have a lot of studiers that listen to us?

[00:06:48] Nicholas: Yeah, absolutely. So I think it’s by, let’s see here, David Green, and I think it was the secrets to long-term or remote or long-term investing. He is the guy in BiggerPockets. So that’s the book that we read. Actually, I think what we got from that was more the purchasing of the property, like how to work the real estate agent out of state. 

[00:07:15] Nicholas: Obviously, because we were down there, we put in multiple offers on different properties, going through the inspection. That’s really what I think we got a lot out of from that book. Because I think almost all of his portfolios or most of it is out of state or not immediately near him.

[00:07:30] Annette: I want to touch on something you just said, because I think a lot of people glaze over it. So the first property that you ended up purchasing wasn’t the first one that you put an offer on. Correct? I think a lot of people like to tell just the highlight reel. But it sounds like maybe you had some other offers on a bunch of other properties before that first one fell through, or you actually got the first one.

[00:07:50] Nicholas: Yeah, that 100%. Talk about, a rough time to be in the buyer’s market. It was, is it May, 2020? Maybe June. It’s somewhere like right after COVID hit, and everyone’s moving to Florida, and everyone’s putting all cash off then too. Because interest rates are, I don’t know what they were, 2 or 3%, whatever. It was absurdly low.

[00:08:13] So it was a culmination. It was like a hurricane of just like buyers and not a lot of sellers. Yeah, so we had put multiple offers in. We felt pretty comfortable doing it because we had done it here in Cleveland, which the market was never as hot here in Cleveland, but just felt comfortable like, hey, we could put an offer on this place. There’s a finance or inspection contingency. So we were pretty loose with what we were putting offers on as long as we felt comfortable with the price.

[00:08:42] Annette: Great.

[00:08:42] Sarah: What happened next? So we have the Fort Lauderdale property. Everything’s going well. You’re even cash flowing, doing it remotely. What happened next for you?

[00:08:51] Nicholas: Yeah, so Fort Lauderdale I think my wife was really on board with that one because we both love the beach. Well, she doesn’t like the beach, but she likes the warm weather. And then it was her family. So there was a lot of positives for that one. So then I’ve always wanted a mountain house.

[00:09:08] My uncle had one and aunt, which we went to as a family a bunch. And I was, well, hey, this is going really well. We had a built-up cash reserves. We were doing everything by the book. We had our cash reserves. The rates were still low, and we were looking at places where we could buy a mountain house because that was one of the things that I really pushed more than she did.

[00:09:34] So I was like, something I always wanted. I think it’d be great to go hiking. It seemed like a lot of those markets were doing really well, like the Asheville’s, the Gatlinburg’s, Blue Ridge. I’m sure you guys have talked about all those. She reluctantly said yes. And as you’ll find out later in the podcast, probably getting some heat for that now. But yes, she was on board because I was on board. It was very nice of her.

[00:10:01] Sarah: That’s what makes a great partnership. You give and take a little bit. When was that purchase, the Blue Ridge purchase?

[00:10:10] Nicholas: So that would’ve been 2022, I think. It was almost just two years later, I think. So yeah, I’m recollecting because we got just taxes. So it would’ve been May 2022.

[00:10:22] Annette: And Blue Ridge is going well for you when you open it up? Before we get into the depth of the story, between Fort Lauderdale and Blue Ridge, what was the biggest difference between a mountain house and the beach house?

[00:10:34] Nicholas: This is a great question because this is something I grossly underestimated. And more or less just like a city market or an urban market versus a rural, undeveloped market. For example, you purchased the house. You’re like, okay, we need high-speed internet for our guest.

[00:10:53] There’s no internet. And you’re like, what? There’s no internet? Are you serious? So we had to get Starlink, and then ship that, figure out how to install it. Well, first of all, you have to weigh the different options, which there’s not many. There’s, I think, Biostats, some of these other ones, which are really expensive and not very fast, like dial-up speed basically. 

[00:11:20] So we got to get Starlink, and then just getting contractors. You’re in Fort Lauderdale, and Miami’s right there, West Palm’s, right there. Fort Lauderdale’s a big city. There’s a plethora of contractors for everything. In Blue Ridge, there’s like one guy that does that one thing, and he only works Monday through Wednesday.

[00:11:38] Sarah: Right.

[00:11:40] Nicholas: So it was a learning process. I would say those were the two biggest issues, the internet and really finding reliable, good contractors. We had someone that installed a chandelier that left halfway through. So we had to get someone else to do it. Yeah, that was definitely a challenge at first.

[00:11:59] Annette: So let’s get into the fateful day. Can you walk us through the guest reservation, how everything went down the day of the fire?

[00:12:11] Nicholas: Yeah, absolutely. I like to think that we’re very, very responsible hosts. So my wife, she screens everyone before they stay at either of our properties. We have, I think it’s a 4.98 star, and we’re over 100 reviews. We have cameras in the front yard. We have noise monitoring devices. We have all these things. We have fire safe, everything. We get the chimney inspected.

[00:12:42] So we’ll start, I guess, with that. But the day of right, it would’ve been January 4th, 2024. And it was crazy because we just came off a pretty big high. 2023 was a great year. Revenue was good. The property seemed to be going well. 

[00:12:58] We had really good relationships with our cleaners and people that we work with in both sites. It was just going really well, and then an extremely devastating couple of weeks. Monica’s very close family friend died, and she was actually about to board the plane to Florida to go to the funeral. And then we just got a flurry of calls and texts.

[00:13:22] So I’m in a meeting, I think, via Zoom. I get five texts that just says 911, 911. Monica’s getting calls, and she’s like, what is going on down there? And then our cleaner, who I would actually say we are very close family friends with, when we go up there, we invite them to dinner. We text about non-business stuff and call each other all the time. 

[00:13:46] They’re just great people. They had gone to the site. They were cleaning another cabin, and they just saw smoke coming from our cabin, and then they went down there just to check things out, and it was just entirely engulfed in flames, the whole thing, a total loss. 

[00:13:59] Yeah. I think, the fire, they estimated, required some absurd amount of gallons of water. It was like 100,000 gallons of water to put out. Thank God no one was hurt. No animals were hurt. No people were hurt. But our neighbor, some of his shrubbery got burned, and his house almost got burned down. 

[00:14:28] When you guys talk about these things on these podcasts, I thought that’s why it was important to tell our story because imagine the absolute worst thing happening, and this was it. We were crying. Our cleaners were crying. You’re like, what do you even do? Do I even go down there? What do I even do if I go down there? Do I have to cancel work? It was terrible.

[00:14:50] Annette: And who was the first person? Was it the cleaner is the first person that had contact with you to let you know what was going on?

[00:14:58] Nicholas: Yeah, yeah. They were around. It would’ve been either our cleaner or our neighbor. Our video camera footage started to go out, which it honestly isn’t that atypical because it’s a satellite. So about once a week, our video footage goes out, and it started to go out, I forget what timeframe.

[00:15:19] And we didn’t think much of it. And then our neighbor is the one that actually had called us. But honestly, I’m not sure who it was. It was either our neighbor or our cleaner. But yeah, the cleaners are the one that were actually there because our neighbor obviously just was looking the video footage.

[00:15:35] Sarah: Who called for the Fire Department, and how did that all go down?

[00:15:40] Nicholas: So I think our cleaner did. And then it’s a very rural fire department. First and foremost, thank you to them because I think a lot of them are volunteer firefighters. They came up there, and they put out the fire. They obviously risked their life.

[00:15:55] It was a massive fire. If anyone’s interested in the show notes, I can show you pictures. Because it was a wood cabin. So once any fire hits anything, it’s just entirely engulfed in flames.

[00:16:10] Annette: What time of day was this, Nick?

[00:16:13] Nicholas: So this would’ve been midday, somewhere between 11:30 and 2:30.

[00:16:19] Annette: And it was a weekday?

[00:16:21] Nicholas: I don’t know. I’d have to look back, January 4th. I don’t know. I was on a work call, so I would assume it was a weekday. Yeah.

[00:16:28] Annette: And the guests, was this the middle of their reservation?

[00:16:32] Nicholas: It was.

[00:16:34] Annette: When did you have initial contact with the guests that were staying at– not initial contact, but after the fire. Did you get to chat with them on the phone? How did that kind of contact go down with them, and then also Airbnb? Can you talk us through that interaction there?

[00:16:53] Nicholas: Yeah, absolutely. So we called the guests immediately when we had heard from Shane and Jordan, which are our cleaner. By the way, if anyone is in the Blue Ridge area and needs a handyman, or contractors, or cleaners, they are phenomenal. Their name’s Jordan and Shane Warren, and obviously they’re hurting because we were a big part of their business. We could maybe, I don’t know, put in the show notes or something.

[00:17:16] Sarah: Yeah.

[00:17:17] Both Annette & Sarah: Absolutely.

[00:17:17] Nicholas: Yeah. I don’t even know where I was. Oh, yeah, so we called the guests. It was a very brief conversation. Mostly for legality reasons. I think that they were guarded because I think Jordan and Shane had called him first. And they really said, oh, there was nothing that we did that would’ve caused the fire. 

[00:17:34] It was a bizarre interaction, is what I would say. It was very brief. I just wanted to make sure that they were okay and that their animals were okay. And then, really, we haven’t had contact with them since.

[00:17:57] Annette: Did you have a fireplace in the home?

[00:18:01] Nicholas: Yeah. As part of the story, we could tell you the facts, or do you want to go through the interaction with Airbnb?

[00:18:09] Sarah: Yeah. Why don’t you share with us the facts that you’re able to share, and then take us into what happened next both with Airbnb, since I’m assuming that they booked through Airbnb and then–

[00:18:22] Annette: I’m sure you’re comfortable.

[00:18:23] Sarah: I’m sure that’ll unfurl a bunch of other questions, but why don’t you start there?

[00:18:26] Nicholas: Yeah, I’m sure it will. I guess the first thing, I’m going to preface this with I don’t want to vilify Airbnb. We still have one of our listings on there. I think it’s a great platform for screening tenants. I think it is the most popular platform. So I think that you have to have it in your wheelhouse if you’re going to rent your property out.

[00:18:48] And for the most part, for some of these minor issues, I feel like they’re pretty responsive. We haven’t had an issue, really, up to this point with anything with Airbnb. So I do want to preface everything with that. So here were the facts of the events preceding the fire from, I believe, the fire report that was done by our cause of origin specialists.

[00:19:05] So in case anyone wonders, when your house burns down in flames, you have lots of cause of origin specialists, which is basically these people that try to figure out what happened. That that’s what their job is. They’re very good at it. 

[00:19:19] Here were the objective– there’s a lot of subjective things that I’d like to say, but the objective things were that there was a conversation between our cleaner and the guest that their 8-year-old son was poking coals at the fire, which we do have, I guess I should start, a fireplace enclosed in the back porch.

[00:19:39] So it’s one of those where it’s covered in stone. We had a crate. We had the chimney inspected. We have all the fire safe precautions. We were OCD about that stuff, but I guess the questionable cause of origin, although it was never conclusively reached that that was the cause.

[00:20:03] So anyway, just prior to them going on a hike, the son was, I guess, poking coal in the fire. Apparently, they were “cool,” but that was the story that they had given our cleaners. Some of the neighbors had said that they had maybe heard some noises later in the evening, the night prior, pretty late, like 2:00 or 3:00 in the morning.

[00:20:24] And that was all hearsay though. But at 11:30 AM, we have video footage of them leaving the property. They were going on a hike, and then by 2:30, we start seeing signs of smoke coming from the house from our neighbor’s camera. So by that time, you could presume that the house was pretty well in flames. 

[00:20:44] Also, the weather report for that day showed that there were 20-mile per hour winds. If you can imagine, a fire, and wind, and obviously coals, things like that. And then the other evidence that the cause of origin kind of investigator had said is what were the alternatives, and the two big ones being electrical or gas.

[00:21:03] I think they ruled out gas or said it was highly unlikely. Electrical, they weren’t definitively able to rule out. However, we just bought the house a year or so prior, a year and a half ago, and got a full point electric inspection. I called the electrical company. There was no outages or excess energy that they had seen, and none of our neighbors had any electrical issues that day.

[00:21:33] Annette: Nick, who hires the cause-of-origin investigator? Is that insurance? Is it the city? Where does the cause-of-origin person come into play?

[00:21:42] Nicholas: Yeah, absolutely. So there’s a fire chief inspection. So for any one of these massive fires, there has to be a city or a state inspector that evaluates and really make sure there’s no criminal activity, which is concerning. So there’s that. You have like the state, or the city, or whoever’s in charge of doing more of the, I don’t know, regulatory stuff.

[00:22:10] They still look for cause of origin, but really, the cause-of-origin specialist is going to be through your insurance company. So my insurance was Proper. I called them because they obviously want to get to the bottom of what happened, for me, but also for them, to see if they have, basically, grounds to go after whoever. In our case, that’s who went out to the site. But then it also, AirCover had their own cause-of-origin investigator as well.

[00:22:41] Sarah: Got it. So what’s next?

[00:22:45] Nicholas: Yeah. Truth be told, when a house is entirely burnt down in flames, no one finds a cause of origin, because all of these cause-of-origin inspectors, they’re held to a certain standard. So like anyone else, like a doctor or a lawyer would be, they have to say, hey, with utmost certainty, this was the cause of origin of the fire.

[00:23:11] There was a toaster that is entirely burnt, or there was, I don’t know, something that they can– and a lot of times, the house is half burnt down or only a room is, so they’re able to definitively say that. But in our case, it was entirely engulfed in flames, and there was no left.

[00:23:32] So they inferred causality, but they basically said, we can’t definitively say what was the cause of origin. With that being said, you as the viewers and podcast hosts, what were the alternatives? You have someone leave at 11:30. Apparently the sun was poking coals just prior to leaving.

[00:23:57] By 2:30, it’s engulfed in flames, and then it was windy. And then you look at the other alternative causes. Well, was it electrical? Could be, but there was no electrical issues proceeding this, and we had an inspection. So you start going down the list, and you’re like, man. I’ll let the viewers and everyone else insinuate what they think was the cause. They certainly have my thoughts. Yeah.

[00:24:25] Sarah: Sure.

[00:24:26] Annette: I heard you say when you started to tell the story, there’s obviously shock involved. There were tears involved. And it sounded like you and your wife were not together at this time. So can you share with us, emotionally, what was going on?

[00:24:39] Did you guys end up going down? If this does happen, I know you’re like, what happens when your house burned down? Can you just share what those next steps are for you and your wife just consuming what’s happening on the property?

[00:24:55] Nicholas: Yeah, it was financially and emotionally devastating. I don’t know. We could probably go into insurance stuff later. I think that’s really important to learn from this. But we were both crying. She had to go to a funeral, and it was a very close friend, family friend of theirs.

[00:25:16] So I said, well, what do you want to do? Do you want to stay here? And then I was like, I’m not going to go down. We have kids. What am I going to do if I go down there? If there was something to fix, I would go down there. But this is just ashes.

[00:25:28] So we just decided to stay here and tried not to let it regulate our kids’ lives and took the kids to soccer practice or whatever, but I didn’t sleep for a couple weeks, but it affected our marriage too, inadvertently, because I really pushed to get this property. 

[00:25:49] I thought we were building our lives. And for a while, it was working that way, but then all of a sudden, you go from a property that’s cash flowing, where it seems like everything’s going well, and you don’t think things can go wrong, to not only are you not cash flowing, but you’re having to now pay a mortgage.

[00:26:11] And then all of these other things just start adding up. Okay, well you have to get the site cleaned up. Well, does insurance cover that? Okay, well, how much do they cover? Well, they don’t cover the full amounts for that. Okay, well, can you just sell the plot of land? Yeah, but plots of land don’t really sell for that much in that area.

[00:26:27] And then who else also wants to have an uncleaned-up site. And then also, you got to get rid of the foundation, which is an extra cost because you can’t like just leave the foundation there. So you have to excavate it. Yeah. I don’t want to scare any listeners because we still like our vacation rentals and stuff, but it was–

[00:26:51] Annette: It was worst-case scenario. 

[00:26:53] Nicholas: It was. 

[00:26:54] Annette: You had worst-case scenario. I’m going to ask my ignorant questions right now. What does happen with the mortgage? The house isn’t there that, and you just have to continue to pay this? Or is there some sort of like, that insurance can cover that for you because there isn’t a property there?

[00:27:11] Where does insurance start to kick in for you? And I don’t know all of that you can share, but what were those next steps with insurance? I’m sure that’s the scurry immediately, is to get in contact with your insurance company and start that. 

[00:27:17] But those six things that you just said, like site cleanup, mortgage, the land, who was your trusted partner in this to walk you through this? Is it your agent? We’ve just had a public adjuster on with us. Can you share with us who was your confidant? Who was your consultant during all this?

[00:27:48] Nicholas: Yeah. So first of all, I would say that I appreciate– this is where I would say that a big shout out to you guys. And there’s a couple of other podcasts, another one I listen to, about this kind of stuff because, actually, I think it was about one year past the day we bought the house where I was listening to someone’s podcast and essentially it was like, hey, you need to make sure you have the right insurance.

[00:28:12] So we switched to short-term rental insurance on this property, and then also had the loss of business income writer, which you do not have that unless you have a massive nest egg or reserve. 

[00:28:21] So we had Proper, and I honestly can’t say enough about Proper throughout this entire– so anyone that doesn’t know what Proper Insurance is, they are insurance company that does do short-term rentals. His name’s Chad. I don’t know what his last name is. He was phenomenal. 

[00:28:36] I called him the day of. He was just like, listen, this is devastating. Here’s everything you’re entitled to. Just let me know when you want to have it. And so we had loss of revenue, income, excavation, cleanup. And then we had, I think it was three-fourths, the cost of the house. It was a big house. It was, I don’t know, seven or $800,000. It was a big cabin.

[00:29:11] But I guess this is a good learning point too to really look into what you’re signing when you’re signing these contracts. I didn’t look too much into some of this stuff, but for example, just look at your portfolio and say, hey, if X House burns down right now, or just the worst thing happens, hurricane, whatever, natural disaster, something happens with a guest, how am I covered? 

[00:29:40] Because, for example, you start looking at this stuff. Okay, well, how much is your loss of business revenue? Ours is capped. So it was probably $10,000 less than we made in 2023, which is still good money, and I think it’s going to help pay the mortgage. That’s good. But how much is it?

[00:30:00] They have caps on each of these things. We have an excavation cap of $10,000. So it costs $30,000 to excavate the property. It was just a massive cabin that burnt down, and it was like in the mountain.

[00:30:10] So these are things that either you need to have reserves for to bridge that delta or over-insured, I guess. It’s just stuff that, looking back, the things we did right, we got the right insurance. We got loss of business revenue, things like that. I would’ve looked more into what each of those caps are now that I’ve been through this.

[00:30:33] Annette: Nick, let’s stop right there, though, because you can help tons of other people that are listening. So you said one thing that if you could do it again, would review all of the caps, correct? You were saying excavation cap, the loss of business cap, all of those things you would’ve reviewed a lot more closely.

[00:30:53] Nicholas: Exactly. I think in our scenario, the loss of business revenue cap was pretty good. But I’m just imagining like, let’s just say you make $90,000 in a property per year, and you do that, and you have to pay X, Y, and Z, and all these– let’s say you have a pool or a hot tub, and I don’t know– all these things.

[00:31:15] And then all of a sudden something catastrophic happens and you’re out of commission for six months, and then your cap’s, I don’t know, 30 or $40,000 or something like that. I guess I would just say, think about these things because you always think, oh, worst-case scenario won’t happen.

[00:31:33] Well, I’m on this podcast right now, and it did happen. So it’s very real. Especially if you’re in, I would say, I don’t know, areas like mine. If you’re out West, I know that wildfires can be a thing. If you’re down South and you’re near a beach, hurricanes are a thing. Very real things that you should envision. What would happen if today this catastrophic thing happened? Do you have the reserves? Are you adequately insured? Yeah.

[00:32:08] Sarah: What happens with the mortgage too, Nick? So we understand the loss of revenue, the excavation, but you’re still paying this mortgage. Could you change anything if you go back in time with how to handle this hefty mortgage that you are responsible for?

[00:32:23] Nicholas: Yeah, that was one of the things that I don’t know if you can change. If you have a mortgage on your properties, if you want to keep it, there’s a couple options. Through our mortgage company, they were great. We essentially sent a letter saying this was an extraordinary circumstance.

[00:32:44] All mortgage companies have extenuating circumstance like clauses where you can send in what happened, why temporarily are you going to be unable to pay your mortgage. And then it goes through– say your income, why this was catastrophic, that kind of stuff.

[00:33:02] It does hurt your credit score a bit. It’s not a crazy on your credit. I think it’s a soft credit pool, but it’s real. And then they can approve it or not approve it. So we fortunately got approved. So the first two or three months we were just paying out of pocket on this mortgage, on this property that didn’t exist, which sucked.

[00:33:21] Sarah: Yeah.

[00:33:21] Nicholas: But then we have, I think, a three to four-month, waiver right now. So that was very nice of them, to be honest. They didn’t have to do that. So now we have three to four months where we’re not paying a mortgage on that property, and then it’ll start a reset.

[00:33:34] Sarah: What is the plan then? And I want to make sure we leave time to get into AirCover, but what is the plan? Do you have one as of right now with what you want to do with the property? What path did you choose to take?

[00:33:46] Nicholas: Yeah. Unfortunately, I think our property at the time, there were lots of land in that area are not– you would lose money if you just sold the plow land essentially. So we walked through it. We were like, what are our options? Which also, again, just back to the devastation, we put money into this house. We furnished the house.

[00:34:08] This was like our baby. Everyone on this podcast has some interest in short-term rental. So it’s like all of these things, like the artwork, the hot tub, and just some of the stuff in the basement, the pool, it’s gone.

[00:34:24] But anyway, that finance, that money is just gone. You’re not getting that back. But then you start thinking like, well, okay, even if we get the insurance money, even if we sell the plot of land, we may still owe the mortgage company money, if a plot of land doesn’t sell for what you want it for.

[00:34:46] So then we’re like, we have to build, is what we came to the realization, which honestly, there was one other podcast I listened to. I think it was Avery Carl’s podcast, and someone said the same thing, really. It’s really hard to just sell a plot of land. You can do it, but you’re probably going to lose money. People just want to buy a house, most people. There’s more of a market for that.

[00:35:10] Sarah: Mm-hmm.

[00:35:12] Annette: So what I’m hearing is you’re still on the hook then for this. Is it a 30-year mortgage, I assume?

[00:35:18] Nicholas: Yeah, 100%.

[00:35:19] Annette: So whether the house is there or not, you’ll get a portion, let’s say, 75% of it to pay it down, but you’re still on the hook for this mortgage, even though the property isn’t there.

[00:35:30] Nicholas: Very much so. Yes. The little things too, back to making sure you’re adequately insured. Our furnishings, we had, I don’t know, let’s say, $80,000 worth of furnishings, like TVs. The place came with a hot tub. The previous owner was a phenomenal person. A lot of the beds were just custom-made woodwork, all gone. Back to my point, they have a cap on furnishings. So your furnishings cap was $30,000. That hurts.

[00:36:02] Annette: Right.

[00:36:03] Nicholas: The one other thing that I did want cover too, I know we’re on a time limit, but is just the relationship too with the neighbors and the community. We were painted as irresponsible hosts. Because even though the cause of origin wasn’t definitive, everyone could see the facts of the case and make their own insinuations.

[00:36:24] But I can tell you certainly the neighborhood did. We had neighbors that had come over for a drink previously when we would go up. We had a text chain of just– we’d joke around about things, and I feel ostracized.

[00:36:37] The HOA almost tried to ban short-term rentals, so a lot of the other owners weren’t a big fan of me or my wife. I think someone at some point said they were happy the house burnt down. It was brutal. So it ruined a couple of those relationships up there.

[00:36:55] It’s been, yeah, just back to that emotional distress point. I won’t hammer it too much, but it was really rough, so much so that we’re like, I don’t even know if we build. We’ll probably just sell it because we feel like some of those relationships have just been devastated to a point of like no return.

[00:37:10] Sarah: Got you.

[00:37:11] Annette: No, that’s an important message too. That’s a side effect from the fire that I would not have anticipated at all, is I would think compassion, but it sounds like it’s the exact opposite of that from some of the neighbors.

[00:37:28] Sarah: Nick, let’s dive into AirCover. And actually, listeners, we don’t know what Nick is going to share with us about AirCover, first of all, but I can say that we have been very passionate about educating people and understanding that AirCover is not your insurance company that has a policy within your name and to make sure that you are properly insured.

[00:37:49] I still hear it where people say they don’t have insurance because they have AirCover. So Nick, what has that experience been like? Would you agree with that statement? And share with us what you can that’s been going on between you and the department, behind AirCover.

[00:38:09] Nicholas: Yeah. So all those things you just said are extremely insightful points that I cannot emphasize enough being through this. So AirCover is not insurance, and they will say that when you’re going through the claim. It’s in there somewhere in the, I don’t know, very long document. It is a service they provide hosts, is what I would say it is. It’s not insurance. That’s what I’ve been told. 

[00:38:38] So I don’t want to get into the legalities of things, but that’s what I been told in the last three to four months. So there is a cap on it. It’s a million dollars. If you think that you are going to be able to get reimbursement from AirCover, I would caution you and say, based off my interactions, you need to have very substantial proof that whatever damage was the guest.

[00:39:04] First and foremost, you need to have short-term rental insurance if you’re renting your house out, I would say. That is 100%. You cannot 100% rely on AirCover because, I don’t want to say it’s not going to cover you, but look at my scenario, is what I would say.

[00:39:18] So that’s the first thing. The second thing is, this goes back to the importance of documenting everything. My circumstance is extreme. It’s not going to happen to everyone. If something might happen to your house where it’s $20,000, 25,000, what I would say is, really work with your cleaners on a process and documentation of things when the house is left to the next guest, things like that. 

[00:39:45] Document the last time you cleaned things. If you have a fireplace, when was the last time you cleaned the chimney? If there has been any electrical issues in the house, you better document like heck that you’ve fixed them because these are all things that came up and have come up in my conversation with them. So I’ll leave it at that, but the biggest lesson out of all this is it is not an insurance company.

[00:40:09] An insurance company, when you file a claim, like my home insurance has to cover me whether they find a cause of origin or not, unless I was the one that burnt down the house. So they didn’t find a definitive cause of origin, but they still have to cover me. That’s not how AirCover works. That’s all I’ll say about that.

[00:40:28] Annette: And I have a question about future bookings. Did you have to reach out to them? Did Airbnb say, “We’ll reach out to these guests on your behalf?” What happened to your future reservations?

[00:40:41] Nicholas: Yeah, they were pretty good about that. They were just like, catastrophic occurrence. We just said, “Hey, we have no house for you to stay at.” I think we only had two or three reservations. But yeah, that was something that we– they got their money back and moved on with life.

[00:41:06] Annette: And you were the ones that had to contact them for that?

[00:41:09] Nicholas: I think we did. I think Airbnb helped though. They sent them a message, and then we just said, hey, if you need anything– we’re so sorry this happened. I think one couple was their anniversary or something, and you’re like, oh man.

[00:41:22] Annette: And with a catastrophic event like this, did you get an actual person at Airbnb, a one-to-one contact, direct line? I know that’s always beef with everyone, is there really isn’t a representative, but something like this, did you have that one source of truth, one person that you could contact, or was it always calling in in general to just Airbnb?

[00:41:45] Nicholas: Yeah. Here’s my advice on that. We got a lawyer. Chad, from our Proper insurance said it is just better to communicate with them, it sounds like, via email or messaging. So I would just say that’s my advice. It’s just like any other big company with calling someone over the phone.

[00:42:05] I feel like it’s just better. And then it also is a paper trail if there is anything later on. So the answer I guess is no. I did not get a primary contact from Airbnb, until later on. I kept emailing over and over and over and over again because it was months. It took, I think, four months until we– wait, let’s see here. January, 4th. Sorry, I guess I stand corrected. 

[00:42:29] Maybe at least three months before we had gotten a ruling on whether they were going to cover it or not. So I was emailing every week basically, and me just saying, “Hey, just looking for an update.” And we finally did get someone who was responding consistent.

[00:42:45] But just so everyone knows the way it works in some of these bigger losses, they outsourced to an actual insurance company to do the work, to get their own cause-of-origin investigator. So you’re really working with this, let’s just call it insurance Company X, who does what an insurance company would do otherwise. Talk about all the collectibles you had in the house, talk about the value of the house, get their own cause-of-origin investigators. I did have a primary contact for that.

[00:43:16] Annette: From a third party that they consulted with.

[00:43:17] Nicholas: Exactly. They didn’t work for Airbnb. The work was outsourced to them. They worked for X and X insurance company.

[00:43:26] Annette: Okay. And I don’t know if you’re allowed to talk about the AirCover at all. So it sounds like you’re still working with both your insurance company and AirCover for the final results of how you’re going to be financially helped.

[00:43:38] Nicholas: Yeah. I think I can talk about the initial ruling. It was denied. So it was felt that there wasn’t substantial enough evidence for them to help cover.

[00:43:49] Annette: Okay. So at this point in time, $0.

[00:43:54] Nicholas: Zero, yes.

[00:43:55] Annette: Okay. Got you. This has been a lot. So where are you today, Nick? You and Monica, your wife, which hopefully she can join us maybe when you rebuild, but where are you at today? Is the cleanup happening? Is the city on top of you to get that cleaned up?  Where are you currently in the rebuild, or the healing phase, I guess we’ll call it?

[00:44:21] Nicholas: The cleanup’s done, which is good. We have a, I think it’s like a civil engineer. It’s a mountain-based property, so it’s on a slope. So you have to get a civil engineering firm to essentially say, hey, this is where you can build, and this is how big you can build it, and this is what gradient you have to build it at, all those things.

[00:44:43] So that we’re in the process. I think in the first or second week of May they come out, and then we will hopefully start building. We’ve got the plans submitted to the county, which are being approved, like the septic and stuff like that. And then we’re going to submit the plans to HOA, and hopefully, if there’s no barriers there, we’ll start building some sometime, I guess, early summer. So that’s where we’re at. Yeah.

[00:45:07] Sarah: If the entire Thanks for Visiting community could wrap their arms around you guys like, what would you want? And I want this to be not as woowoo as possible because I’m not a woowoo person, but truly, is it just everyone checking their insurance coverage? What could we, as a community of short-term rental hosts, obviously, be compassionate where your neighbors were not? What could we do for you?

[00:45:37] Nicholas: Here’s what I would say. I would say that you can still be a– obviously, I’m biased when I’m saying me and my wife, but I think my wife does the brunt of it, and she, I think, was an extremely responsible host. Just thinking that that’s good enough sometimes isn’t enough in asset protection.

[00:45:57] So yeah, I would say right now, after this episode, everyone, call your insurance company and say, “Hey, if the worst catastrophic thing were to ever happen, what would it look like?” And then really going through each of those cost items, and then making sure you feel comfortable with that financially.

[00:46:18] I guess we’re not younger couple anymore. We’re a middle-aged couple. But we’re not extremely well off. We’re not glad. Some people may have a lot of cash reserves, and they’re comfortable with that.

[00:46:33] But if you are like us and you weren’t, then that’s something you should either develop cash reserves or insure more. It’s one of the two. I will say, big shout out to Proper Insurance. If anyone is interested in getting them, they were very receptive. No if sands or bots about getting the money, and working with us, and just everything.

[00:46:56] Annette: We will have Proper in the show notes, but don’t be upset if Proper doesn’t insure you. Just because they–

[00:47:03] Nicholas: Oh no.

[00:47:04] Annette: They have certain areas, certain things, certain maxes. So I just want to put out there, that it’s not a free for all that they’re just going to approve everyone.

[00:47:11] Sarah: No, but we appreciate that, Nick, because we have used Proper for years, and they are, I would even call them friends of ours at this point. So we’ll be sure to put their link in our show notes. And it’s lovely to hear, obviously, this is not sponsored or affiliated with Proper, this conversation with Nick.

[00:47:27] And so Nick, it’s nice, I think, for our listeners to hear that you had a great experience with them. Because Annette and I could say it. Other, thought leaders in the space promote that. But it’s nice to hear that they live up to their reputation

[00:47:38] Annette: And the business side of it. I think a lot of hosts don’t think about that business loss of income. And that’s one of those things where people are, I think, talking about AirCover, or just in general, it’s like, well, what if the income went to absolute zero? It’s not just your cash flow. It’s zero. 

[00:47:55] Sarah: Zero, and there’s no asset to sell or rent out.

[00:47:57] Nicholas: No. Oh my gosh. You’re painting the exact.

[00:48:04] Annette: So that’s when you’re talking about risk. That’s the risk of like, it’s not only– we talk about it with property a lot like, and Sarah and I are at fault for that. Like worst-case scenario, when we’re doing the math, we just resell the property. Well, there’s nothing to even resell here. 

[00:48:18] Or we’re like, worst-case scenario we go to midterm. Worst case we go to long-term. You have nothing to sell, and you’re still responsible for the mortgage. I don’t know what I was thinking where the mortgage just went away if the house went away. I really thought that. I don’t know what I was thinking. 

[00:48:32] Sarah: No, because I think worst-case scenario for a lot of investors in real estate can go in so many terrible ways. There’s lots of different worst-case scenarios, from squatters, to flooding, to hurricanes. So it’s really tough to wrap your head around, how do we protect ourselves from all the worst case scenarios?

[00:48:50] And like you said, Nick, it’s either having a ton of cash reserves or over insuring. And not just getting insurance and calling that like a done deal, but really understanding, I just did this with our properties of no. If it disappears, what happens?

[00:49:05] How much do I get? I don’t know about you because they send you your policy, and it’s this big stack of papers, and half of it you don’t understand. I was literally copying and pasting in ChatGPT, and I’m like, explain this to me in layman’s terms. So the amount of emails that went back between me and my broker were– but I don’t care.

[00:49:22] You know what I mean? I was like, tell me like I’m five years old, what cash will you send me? And I think that’s what, as investors, we have to– and now I’m going to go back today and even ask again. Because Nick, you’ve reignited a fire in me. And I think you can give that back to our community, which we really appreciate you sharing this story because it has not been that long. It’s only April 29th today, we’re recording this.

[00:49:45] Annette: I have a final question, Nick, because you reached out to us. This is a tragedy. What was it inside of you that was like, I want to share this story? Because I know there’s other listeners that have a story, not like this, but it could be actually a win, a huge win or a huge loss. 

[00:50:03] But what was that inside of you that was like, you know what, I’m going to take some time out of my schedule, email the ladies at Thanks for Visiting, and share my story? I just want to get through why was that important to you. I’m interested in that.

[00:50:15] Nicholas: I think the biggest thing for me, I was like, okay, what good can come from this? Because it’s been a rough 2024 in general, and I’m like, well, I’ve gained so much from all of these podcasts. I can’t thank you guys enough. And really, I’ve learned so much in this space from. 

[00:50:32] And just to even compartmentalize what happened here, and then even before this property, when we had this one and obviously Fort Lauderdale, we wouldn’t have been able to do it without your guys’ education. And I feel remiss if I’m not giving back to that and something good’s not coming out this.

[00:50:51] I just hope it never happens to anyone else. And I was like, well, if someone else can learn from this just really crappy situation, then it’s a win for someone. That’s why I emailed you guys. I think it’s important. 

[00:51:04] I think it’s important to understand what AirCover is, what kind of insurance you need, and to think worst-case scenario because you know, you think it’s not going to happen, and then next thing you know, you’re on a podcast telling people about how your house burned up.

[00:51:18] Sarah: Yeah.

[00:51:20] Annette: No, we’re super thankful for that. And listeners, hopefully, take action today. Do the homework of looking at your policy. Email us. Let us know, and we can share that with Nick. And if any of the listeners uncover things about their policy that might’ve been hidden or they didn’t know, also, please reach out to us. We are on the other end of this email. That’s why Nick is on today, because he reached out to us. So if anything comes from this for any of you, please reach out. Let us know, for sure.

[00:51:46] Sarah: Nick, are you comfortable with if people have a question, or would you prefer they just contact Proper and see what they can offer them? Usually at this point of the podcast, we say, contact our guest if you have questions, but I’m not sure how you feel about that.

[00:52:01] Nicholas: Yeah, yeah. Me and my wife are an open book. So yeah, we have, I guess– do you guys have show notes? Because I know that we have–

[00:52:08] Both Annette & Sarah: Yes.

[00:52:09] Annette: Yeah, of course.

[00:52:09] Nicholas: We have an Instagram, and we have our direct booking website. Then we have a Facebook page. So we still have our Fort Lauderdale property, and who knows what we’ll do with this Blue Ridge property. Maybe we will rent it. But yeah, listen, we’re open. But if we can help anyone out in any way, just let us know. 

[00:52:28] Even if you want to share a similar story, or if you have questions, I’m happy to answer. I’m not an expert. I’m not a lawyer, I’m not an insurance professional, but I can certainly just go off what I’ve learned in this process and what we’ve learned. So yeah, happy to help any way.

[00:52:41] Sarah: Perfect. With that, we will put all of Nick’s information in the show notes. If you’re traveling to Fort Lauderdale, I know we could support them by staying at their amazing property. And with that, I am Sarah Karakaian.

[00:52:54] Annette: I am Annette Grant. And together we are–

[00:52:55] Both Annette & Sarah: Thanks for Visiting.

[00:52:56] Sarah: Talk to you next time.