How 4mm Cost $4,000

Four millimeters is pretty damn small.

Stack a couple of pennies together and they would be about that thick.

A few weeks ago, something that small cost us $4,000.

My family owns some investment properties.  One of them is a century triplex near downtown Brampton.  We have spent lots of money over the years updating and modernizing the interior as well as necessary updates to the roof, windows and other structural elements.

It is a fantastic investment property.  Three units, renting out for a total of over $3,000 per month.  It more than covers the mortgage, property taxes and other expenses.

It is, however, still over a hundred years old.

In that timeframe, lots of the elements of a home can require repair or replacement.

Some of them are obvious to the eye and others don’t appear to be an issue until the right (or wrong) combination of circumstances.

A few weeks ago, in the midst of an extreme cold spell, a tenant in the 3^rd floor unit decided to go away for a week and leave some windows open to air out the unit.  Not the wisest of decisions in the middle of winter but apart from some wasted heating costs, not likely to cause any problems.

Unfortunately, what neither the tenant nor we knew was that at some point the brick work on the north side of the house had deteriorated a bit and the mortar had crumbled enough that there was cold air from outside getting into the space underneath the 3^rd floor.

Not too far from that hole was the copper plumbing pipes for the 3^rd floor shower, toilet and sink.

With the temperature at over minus 20 and the interior of the apartment almost as cold, the water inside the hot and cold water pipes froze.  As water freezes it expands, putting pressure on the pipes.  If this happens enough over time, then the pipes can rupture.

The rupture doesn’t cause a big hole.  Just one about 4mm thick.

I don’t know how much water can come out of a 4mm thick hole per second and I refuse to look it up because it would probably make me curse again.

I can tell you that when two pipes on the third floor of a house rupture, the water that comes out follows the path of least resistance.

It pools at the lowest point and if that lowest point is made of a permeable surface, say, drywall, it eventually starts dripping through.  As each lowest point is reached, the pool spreads and all of the little imperfections, angles and uneven surfaces in the area mean that water trickles into all sorts of different places.

In our case, pooled water eventually caused the kitchen ceiling on the 2^nd floor to start leaking.  By that time, a significant amount had already found its way down one of the wall cavities and began to pool between the 1^st and 2^nd floor.

As water continued to flow, the pool above the ceiling of the first floor spread out, eventually causing damage to the ceiling in the kitchen and living room, filling up light fixtures with water and dripping down and damaging the flooring.

By the time the main water shut off was turned off, the cost to repair the damage was over $11,000.

We have comprehensive insurance for the property but certain costs remain.

• In most cases, the insurance you have covers the results of an emergency, but does not cover the cost to fix whatever caused the emergency. In this case, we hired a plumber at our own cost to cut holes in drywall and determine where the rupture took place.  It was the plumber that discovered our brick and mortar issues.  He replaced the ruptured sections and was kind enough to give me them as a souvenir.
• Every insurance policy has a deductible for claims and in this case, it was $2,500. I had lowered it from $5,000 last year so I felt fortunate it was only that much.
• The insurance company hires contractors to repair the damage and bring the place back into the same condition it was before the emergency. As this is a rental property, we have a property manager and we paid him to oversee the work, coordinate with tenants and generally make sure the repairs were being done to our satisfaction.

Much as I did in my post explaining why I can’t pull off wearing clothes with horizontal stripes, I would love to have you learn from my mistakes.

So here are three quick lessons from this.

1. Preventative maintenance is often far, far cheaper than the cost to repair the problems they prevent. If we had hired a brick tuckpointing inspector last year during warm weather, he could have noticed the issue and fixed it beforehand for much less than $4,000.
2. Take a close look at your insurance policy once a year and make sure the deductible and coverage is suited to your specific property. There is a tendency to try to keep the premium as low as possible but insurance works best for the insured when it is designed around minimizing the impact of likely scenarios.  Many insurance policies are written up based on second hand information given by home owners who aren’t 100% sure of the answers.  A qualified home inspector can be brought in at any point to give you a good handle on potential issues with your home, which can help you adjust your insurance coverage and deductibles accordingly.
3. Set aside some money for maintenance and emergencies. This is true for both income properties as well as homes you live in yourself.  When I advise clients on purchasing income properties, I always include a provision for their own little reserve fund.  A bad experience is even worse if you don’t know where you can find the money for the deductible and other expenses you incur to cover your side.

If you take steps like these, I believe the number of emergencies you deal with in your property will be lessened, as will the cost and impact of those that do take place.

Have a safe and emergency free weekend!

As always, if you or someone you know could use some advice or help in real estate, please don’t hesitate to get in touch.  I would love to be responsible for what comes next.

Regards,

Jeff