Joplin and other Tornadoes

[HSpencer]

The recent rushing of tornadoes, and in particular the Joplin, MO, wipe out has brought to mind the unfeasibility of home ownership.

If one takes a careful look at the myriad of photos of Joplin, post tornado, one must wonder if there is anyway to recover.

The following thought popped into my mind:

Suppose instead of owning a home with yard, outbuildings, etc, one decided to instead rent (not own) a two bedroom apartment or townhouse. One then could carefully list and photograph ALL belongings inside the apartment and purchase "renter's insurance". In the event of a wipe out such as Joplin, MO, (hopefully one would survive or have been away), then one could simply come back, view the collapsed apartment complex, and drive off. It would then be a simple matter to forward the claim to the insurance company, and possibly get your claim paid in a reasonable time frame. Then all one would need do is "go rent another unit" somewhere. No hanging around to wait weeks/months for insurance adjusters on the property damage, no concerns about any rebuilding, just insuring that your carefully detailed claim is paid. You could go to another city, rent another apartment similar to what you had. No looking back or going thru the grief a "property owner" would contend with. It would be like your tent blew away, and you just go and put up another one someplace else.

In this case your problems would be:
1. Surviving the tornado

2. Getting paid off on your claim.

3. Locating another two bedroom apartment.

4. Exiting the area of destruction.
I am writing this from a homeowner perspective. I was aware of the Northwest Arkansas tornado of 1996, as my mother's home, while undamaged, was in the area of it. I knew the grief then that the property owners went through. The Joplin disaster will be multiple times worse than that. Apartments are everywhere, and many are vacant and ready to rent. All we are talking about anyway in needs is a roof, heat/air, hot water, etc. Basic needs. No need for a sprawling 3000sq ft ranch house to be blowing away.

So if you lived through it, just pick up and go. Those of us owning homes could sell them, invest the money, and use the interest to subsidize the rent payments on the 2BR/1Ba apt.

This action would offset the saying "Your throwing money down the drain when you rent" syndrome. In effect you would be using the money now invested in your home to earn payments for or toward the renting of a place to live. Also, an insurance company in those times of distress would be much more likely to pay a carefully prepared and documented loss claim, than a property loss claim. (Much less red tape). While waiting possibly months on a property loss claim, your going to have to rent something anyway.

In these increasing times of peril, home/property ownership may not be the best way to go. Its more ERE because there is a LOT of expenses to be avoided by not owning a home. The mainstream public won't buy this, but it "should" be accepted on this forum.

[m741]

This is the classic rent vs own conundrum, and I think personal preference is the most important thing, as both are valid options. On the one hand, as you mention, there is less risk with renting, and you have fewer obligations. On the other hand, you are probably spending more than if you owned (though not too much more).
To me, in the current economy, owning, as well as renting *to* other people, makes more sense if you have the capital. Property values are depressed, so it's unlikely that home prices will go too much lower. And there are plenty of people who just want to rent right now, or are only able to rent right now (there's another thread on this active on the forum).
To me, home ownership seems like it's more difficult, but that the rewards are greater from an ERE perspective. Thus there is the opportunity for the smart owner to do better than the smart renter.

[Hoplite]

@HSpenser,

I'm commenting as a life-long renter that has been through a similar experience to what you describe. Rather than a tornado, an explosion and fire in the space below my apartment. The explosion drew 911 calls from miles away and burned or blew out the entire first floor of the building. I survived, but this is what happened next.
First the good news; renter's policy provides emergency cash between 1-2 thousand immediately for hotel/temp housing to search for a new apartment. Not so good, no matter how well documented, the adjuster is going to want to see the remains, especially for the more expensive items claimed (my Daliesque melted laptop seemed to satisfy him after I pulled it from the charred rubble).
But next, my insurer (renter's policy) is going to want contribution from the building owner for the money they pay out, or really from the building owner's insurance company. Once they paid the claim to me, the renter (me) has subrogated (transferred) all rights of action to the insurance company. This means I got to relive the entire experience and mentally inventory my possessions years later under oath in a deposition when my insurance company sued the building owner's insurance company. There is just no easy exit from this stuff.
My opinion, the ease and peace of mind has to come from within--particularly by detaching oneself from property, real or personal. Realizing that such things are impermanent is more freeing than renting or owning.

[HSpencer]

Good comments, and I forgot to mention the issue is circumstantial. In my case and at my age, it would be far more difficult for me to try and recover and rebuild my house, than it would for me to do the plan I outlined. It is, I have learned, imperative that one try and remove one's self from any emotional connection to material goods, be it property or contents. My piece is about lowering risk and and the simplifying recovery where possible. Remember, at the end of the day its about a roof, heat/air/bath etc. In my case, I would be looking for risk management and rapid exit strategy.

[mikeBOS]

"In these increasing times of peril"
C'mon Spence! Chin up
I think the emotional connection to material things is a big part of what makes property-destroying disasters such a disaster. Sure, there are headaches with relocating/rebuilding and red tape, waiting on hold, etc. involved with making insurance claims. - Maybe a few months of living in a tent and being careful with rationing water.
A headache, sure. But those happen in life. But so long as the damage is only property there shouldn't be any grief. It's just a bunch of sticks arranged over your head.
The big advantage of renting is that you're not tied to the land. So, as you said, you could just leave and rent elsewhere and leave the mess for everyone else. 'Course, as a home owner, you could just take your insurance payout, pay someone to clean up your lot, and go buy a place somewhere else. Then sell the lot after everything's all cleaned up.

[CestLaVie]

We own a house, but it is fairly cheap and it represents a small portion of our net worth. In case of disaster, I would have no problem walking away and starting again somewhere else. The "stuff" can be replaced easily if one doesn't need much and has plenty of money in the bank.

[dot_com_vet]

My home has two storm shelter rooms in the basement. (Reinforced concrete ceilings and all concrete walls.) Definitely more protection than any apartment I lived in.
But, if there was a huge disaster, the outcome would be the same. Move somewhere else for a while, get an Amazon Prime account, order the essentials the family needs, move on.

[JerseyGirl]

OK, this thread is convincing me that I am definitely in the right place as I was just thinking through this subject this week.
My experience with insurance companies personally, and what I have seen of the insurance field's responses to disasters like Katrina all lead me to believe that relying on insurance to pay out is a very poor bet. They don't get rich by writing checks, and they will delay, lie, or do whatever is needed to avoid paying out even the most legitimate claims.
Knowing this, I was mulling over the idea of buying a used mobile home and installing it on land which I own. The "blue book" value of an older mobile home is almost nothing, which is fabulous because it means I pay less property taxes (which are downright confiscatory in NJ). If an errant storm destroys my mobile, I can just have the remains of it cleared away and purchase another one for less than 20k. No need to wrangle with the insurance company for 5 years. Simply hire a crew to clean up for a few days at most, find another cheap mobile and pay to have it moved onto my land.
Of course, my multifamily rental properties will need to be insured and may necessitate fighting tooth and nail with the insurance company but I can't see much of a way around that part. :/

[HSpencer]

@JerseyGirl
Sounds like a good plan, sort of similar to what I was proposing in the OP. After I wrote that about a week ago, I was beginning to waffle a little on whether or not I had an idea or not. Probably not already owning a house and selling out to do it, but if someone was thinking about buying something expensive in a metro area tornado prone, maybe then it would be a consideration, Your plan sounds good. I will echo again myself, it's about risk management and exit strategy. (I am almost getting tired of those terms myself, and I am the one writing them.) But, that's what it is about. I like your plan a lot!! You still own something, sort of a loss but not big. Invest in the mobile and collect some insurance probably more than you paid for the mobile in some cases. I like it. Also your NOT in the middle of an ant hill if someone steps on you. You see, it isn't the problem of having an insured home, nor even what disaster occurs on it. The problem is, like Joplin, your only one of many. The competition soars for attention to your claim. Your claim could be delayed for so long. You need to be "lesser risk" in losses. The person probably better off in a disaster is someone who has made two payments and NO down payment on their home!

Thanks for sharing.

[JerseyGirl]

Hi HSpencer, thanks for your reply. You have a kinder opinion of insurance companies than I do it seems! The delays in paying out claims are only a fraction of the issue, of more concern to me are the legit claims that the companies downright refuse to pay! God knows I go through all kinds of grief getting my health insurance to pay a $300 doctor's visit, the last thing I need is to be fighting to get $300k paid out.
If each multifamily rental property is of relatively low value, and they are spaced out throughout the city, then my risk is spread. The odds of them all getting wiped out at once is low. Since each one is cheap, the potential claim is lower than on a McMansion, say. Also, my cash can keep flowing in from the undamaged rentals while I deal with getting the damaged units repaired.

[Maus]

The situation in Joplin is a tragedy on many levels, but the prospect for expedited insurance claims and orderly rebuilding is actually better than one might first surmise. Because the devastation was so widespread and total, there will be a much more concerted effort than if the damage had been more localized.
I base this on the aftermath of the Oakland hills fires in the 1990s. I lived less than half a mile from the outer perimeter of the burn zone. Over 3000 homes were destroyed to the foundation, and the neighborhoods looked like a moonscape. Within two years the entire area was filled with replacement homes, many of them more ostentatious (early McMansion syndrome) but many of them more energy efficient and more seismically sound.
I can only imagine how difficult it must be to cope with the immediate aftermath of a Joplin situation; but for those who can tolerate being a pioneer for a few years, this represents an opportunity. Some former residents will be willing to sell their lot for less because it will be a distressed market. Insurance doesn't cover the dimunition in the value of the land, only the value/replacement of the structure on the land. Buy, build, and be a part of fashioning a new Joplin, rising like a phoenix from the pyre.

[HSpencer]

@Maus
"but for those who can tolerate being a pioneer for a few years, this".
Point taken, but as I said in an earlier post, the situation can be circumstantial and situational.
Would probably work for someone who is 30 or 40 years old, but what about the 70 year old couple who lives between them?

They really need an "easier out".

[JerseyGirl]

@HSpencer... the "pioneer" is quite helpful to the couple in their 70s, as they can purchase the land, providing an out for someone too old to start all over.