Fort McMurray Wildfire: Wake Up Call for Real Estate Investors

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The massive May 2016 wildfire in Fort McMurray, Alberta, was a huge wake up call for real estate investors everywhere. What does this mean for them? How can they invest well in the face of disasters like this?

The recent devastating and tragic wildfire destroyed an estimated 2,500 properties. This in itself is beyond words for those directly affected; those who weren’t prepared will face ongoing financial impacts. If there is one positive thing that can be learned from this, it is a testament as to why investors need to learn how to minimize the risk of random natural disasters.

Commercial and residential investors should start by reviewing their disaster plans. A natural disaster can occur anywhere, anytime and without notice, so it is imperative to be prepared and have a plan in place.

When reviewing and devising a disaster plan, it is important to note that insurance plays a huge role. Commercial property insurance should be regularly reviewed, and coverage should be increased to protect rising equity, value and income production. Tenants should be advised to do the same. It is also crucial to ensure that all insurance premiums are paid up.

A carefully and well-thought out plan should also include detailed actions to be taken to physically protect a property in the path of a disaster, as well as having a team identified to immediately jump into action. Without this, contractors may be unavailable to protect and restore your property for months or years after taking the hit.

The unpredictability of these events also demands that commercial real estate investors stay diversified, which includes location diversification. If all of your assets were in the group of 2,500 properties, you would be in quite a predicament. However, if you have properties spread across the country, it is highly unlikely that your entire portfolio will be impacted in a given season or year.

Immediately after a disaster hits, investors and their property managers need to get out and secure properties. Damages should be assessed, independent evaluators should be called to provide quotes, and (in some cases) an attorney may be beneficial to fight for the deserved insurance payouts.

A plan should also be in place for helping tenants bounce back and maintain operations in any way possible. The faster they can resume business, the faster your property performance will bounce back.

Summary

Our hearts go out to those impacted in Fort McMurray and we hope that they are rapidly assisted. A tragedy could strike at any time, it is critical that investors stay prepared in order to come out ahead in the long run.