How much would you pay for a fire damaged house?

Member since 2019 · 5 posts · 2 votes

Aspiring investor here. My goal is to buy my first BRRR within the next 3 years, investing long distance in the Midwest.

On Zillow I have seen some houses in decent areas with fire damage or needing structural work going for under $20k, a few for as little as $5k! That seems like a laughably low price.

Would you buy a house with fire damage? How would I go about getting a ballpark estimate on a full gut and remodel before buying a property when I’m investing out of state?

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Eliott Elias

Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes

Do not buy fire damaged properties without an expert looking at them. There are heavy rules and regulations when it comes to fire damage. Often times, tearing down is a better solution than remediation.

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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
Do not buy fire damaged properties without an expert looking at them. There are heavy rules and regulations when it comes to fire damage. Often times, tearing down is a better solution than remediation.
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Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Andrew S.:

Aspiring investor here. My goal is to buy my first BRRR within the next 3 years, investing long distance in the Midwest.
On Zillow I have seen some houses in decent areas with fire damage or needing structural work going for under $20k, a few for as little as $5k! That seems like a laughably low price.
Would you buy a house with fire damage? How would I go about getting a ballpark estimate on a full gut and remodel before buying a property when I’m investing out of state?
Some of the question involves "what did they determine started the fire"?

If it was arson I would touch it. Same if it was a meth lab. Wouldn't touch it. The arsonist/druggies may return. If it was wiring, then plan on rewiring the whole house. If it was a kitchen fire caused by grease, maybe I'd buy, but it depends on how extensive the damage is.

You never get the smell out of the wallboard and wood so plan on it being a major demo and rehab.

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Investor · NH · Member since 2023 · 54 posts · 25 votes
3y
I agree with Eliott Elias but wanted to add one point. It is alright to buy a home with fire damage if you have a solid quote on tearing down the home and have a clear understanding of the land value. If you can buy it close to the fair market value of the land itself minus the cost of demolishing the home then that is ok if you are looking to rebuild.
I'm not sure where these properties are for $20,000 or $5,000 but if it is an area where the lots aren't worth enough then don't bother. The cost to demolish an entire house, especially if it is an old house with lead, asbestos etc won't be worth your time.
I'm curious to see the listings anyway. What city or town?
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Andrew S.
OP
Member since 2019 · 5 posts · 2 votes
3y
I found a few of these around Toledo, OH. I’m curious, how do you find the value of the land itself?
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Eric Gerakos
Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
3y
No.
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Account Closed
Investor · NH · Member since 2023 · 54 posts · 25 votes
3y
Quote from @Andrew S.:

I found a few of these around Toledo, OH. I’m curious, how do you find the value of the land itself?
You find the value of land by looking at what similar land around the same area sold for in the past year.

I looked at what is for sale around there and you certainly wouldn't want to buy a burnt out tear down for $5,000 since there are also several vacant lots for sale for $5,000. Anyone buying that would be flushing money down the toilet.

I don't know that market but in my market I look for deals in good locations or areas that are improving because the town right next to it has become too expensive. Location is very important!
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Bud Gaffney
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
3y
@Andrew S. I’ll pay what the land is worth minus the cost to get rid of structure and any issues with land once removed.
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
3y
Quote from @Andrew S.:

I found a few of these around Toledo, OH. I’m curious, how do you find the value of the land itself?

Hey mate,

The land in many parts of Toledo is worth a couple grand.

I know the properties you are referring to and we walked away.

The margin isn't worth the hassle.

You can get decent deals that need rehab for under $30,000 in most B to B- zip codes of Toledo.

Just knock on enough doors as the deals are always out there.

Wishing you much success
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Jon KellyPro Member
Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
3y
$1
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
3y
$25,000 to do tear down and backfill for an old house in our area. Landfill is 10 miles away and dirt is 2 miles away. Trucking distance may change your figures. If you take this approach I would check with the city on condemned properties. Ask them for you to get the lot and if they have funds to offset tear down costs. Will go through a bidding process. My contractor that does this will either tear down or rebuild based on the structure.
Remember location location. If your going to build a new house is this the market you would pick?
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Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
3y
In many urban cores the cost to build far exceeds the market prices of existing homes on that block/area. In such a case, the land actually has a negative value as it is essentially a recurring property tax liability rather than an asset with positive value.
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Chad Boyers
Real Estate Agent · Toledo, OH · Member since 2019 · 88 posts · 38 votes
3y
@Engelo Rumora
What B class areas are you finding properties for under $30k? What areas do you define as B class? They may be there, but it's really a needle in a haystack scenario, so I wouldn't go suggesting to an out of state investor to keep knocking on doors until they find something. They'll miss out on many other actual opportunities before they find one that fits this criteria.
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Chad Boyers
Real Estate Agent · Toledo, OH · Member since 2019 · 88 posts · 38 votes
3y
@Andrew S., I partnered with someone on a fire damaged property over a year ago here in Toledo. Thought that even with the extra hoops to jump through that the numbers would be good. Fast forward, we ran into many walls, including permits, lack of contractors following through, and more. Ending up selling the house at break even to another investor and I was very happy to be done with it.
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
3y
This is one of those, you don't know what you don't know. Inexperienced investors, especially those that aren't builders, should probably stay away from fire damaged homes. There are several questions that need to be addressed, Was it a total loss, or smoke damage? Location? What year was the home built? (may make a difference in demo costs, could require materials to be trucked to a hazard waste site, also other remediation could be needed) Is it on public utilities or on septic and well? (They are often damaged too) What is the cost for demo, then reconstruction (get actual bids) In regard to permit fees, many areas give credit back on fees for burned homes, ask if yours does.
I live in Shasta County, where we have had a lot of homes destroyed by fires. Personally I wouldn't want to do one of those jobs, too many unknowns.
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
3y
Quote from @Chad Boyers:

@Engelo Rumora
What B class areas are you finding properties for under $30k? What areas do you define as B class? They may be there, but it's really a needle in a haystack scenario, so I wouldn't go suggesting to an out of state investor to keep knocking on doors until they find something. They'll miss out on many other actual opportunities before they find one that fits this criteria.

We bought 1,000+ over the last 10 years

Back in the "Hey Day" they would fall of tree's (Even on the MLS).

Much harder nowadays.

Wholesalers, yellow letter campaigns, asset managers and good old Craigslist.

None on the MLS unfortunately where it's in your best interest as a realtor, right?

We close with cash and we close quickly.

All of this leads to being able to buy cheap.

Pockets of 43607, 43609, 43611 and most of 43612, 43613 and 43615 is where we shop.

Anyone can do it.

It takes time, experience and money.

All the best and send my regards to Pat Brady
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Jeremy VanDelinder
Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
3y
I flip fire-damaged properties and own a restoration company which specializes in fire damage. It can be a big undertaking, although there can be profit in it IF the numbers are right and IF you have done your homework to know what you are getting into (both big “IFs”). Unless you are rather experienced with this type of damage, it may be hard for your to tell the extent of damage. The place to start is by asking the seller what the insurance company decision is—if they will share that info, that might tell you some of what you need to know.

The challenge with fire damaged properties is that there is more than meets the eye. For example, often fire damage is water damage--they put the red stuff out with wet stuff. Unmitigated water damage becomes mold damage and and there is the potential of extensive smoke damage in the same airspace. So even elements that don’t appear damaged can be contaminated. Also, ODOR is a huge issue. If the odor is not properly mitigated that will cause ongoing problems.

I would recommend you find a fire restoration company/contractor to walk the property with you and give you a good understanding as to what needs to be done. There are many things that could be overlooked as part of the renovation on fire-damaged properties.
In general, I do not recommend investors take on a fire-damage rehab until they have extensive experience in "regular" rehab first. Fire damage adds another thick layer of complications.
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Chad Boyers
Real Estate Agent · Toledo, OH · Member since 2019 · 88 posts · 38 votes
3y
Quote from @Engelo Rumora:

Quote from @Chad Boyers:

@Engelo Rumora
What B class areas are you finding properties for under $30k? What areas do you define as B class? They may be there, but it's really a needle in a haystack scenario, so I wouldn't go suggesting to an out of state investor to keep knocking on doors until they find something. They'll miss out on many other actual opportunities before they find one that fits this criteria.

We bought 1,000+ over the last 10 years

Back in the "Hey Day" they would fall of tree's (Even on the MLS).

Much harder nowadays.

Wholesalers, yellow letter campaigns, asset managers and good old Craigslist.

None on the MLS unfortunately where it's in your best interest as a realtor, right?

We close with cash and we close quickly.

All of this leads to being able to buy cheap.

Pockets of 43607, 43609, 43611 and most of 43612, 43613 and 43615 is where we shop.

Anyone can do it.

It takes time, experience and money.

All the best and send my regards to Pat Brady

I'll let Pat know you said hi!
How many places have you bought in the last 6 months for under $30k that you would say are legit class B properties? I'm not convinced that there's much at all right now, on or off-market, that you can get for that price that doesn't need a good amount of work (which means it's not really a $30k property).
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
3y
Quote from @Chad Boyers:

Quote from @Engelo Rumora:

Quote from @Chad Boyers:

@Engelo Rumora
What B class areas are you finding properties for under $30k? What areas do you define as B class? They may be there, but it's really a needle in a haystack scenario, so I wouldn't go suggesting to an out of state investor to keep knocking on doors until they find something. They'll miss out on many other actual opportunities before they find one that fits this criteria.

We bought 1,000+ over the last 10 years

Back in the "Hey Day" they would fall of tree's (Even on the MLS).

Much harder nowadays.

Wholesalers, yellow letter campaigns, asset managers and good old Craigslist.

None on the MLS unfortunately where it's in your best interest as a realtor, right?

We close with cash and we close quickly.

All of this leads to being able to buy cheap.

Pockets of 43607, 43609, 43611 and most of 43612, 43613 and 43615 is where we shop.

Anyone can do it.

It takes time, experience and money.

All the best and send my regards to Pat Brady

I'll let Pat know you said hi!
How many places have you bought in the last 6 months for under $30k that you would say are legit class B properties? I'm not convinced that there's much at all right now, on or off-market, that you can get for that price that doesn't need a good amount of work (which means it's not really a $30k property).

Thanks mate, Pat is a top bloke
B class is all about perspective hehe
Folks from Beverly Hills will call of Toledo and the suburbs a C class lol
If moderators allow, here is a detailed breakdown of what I would consider B class - https://ohiocashflow.com/blog/why-ohio-cashflow-buys-in-b-cl...
As for "$30,000" properties not being "$30,000" properties due to needing rehab, etc...
We are staring to play a game of words then lol
Then not a single property ever will be a "$30,000" property due to needing ongoing maintenance along with vacancy which is an opportunity cost, etc... so eventually the cost will be much much higher.
So I guess for simplicity purposes, we can use this criteria "Purchase price $30,000" 👍
Here are some numbers:
Isabella - $36,000
Secor - $45,000
Vermaas $40,000
Wright - $21,000
Bowman - $30,000
Colburn - $31,000
So all in all, we have a demand to meet and I am personally not a fan of doing much rehab work if not needed, so we pay a premium to acquire a property in better condition.
Individual folks that want to roll up their sleeves and buy 2-3 per year can find deals even cheaper than the numbers above in my opinion.
Thanks
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
3y
Quote from @Andrew S.:

I found a few of these around Toledo, OH. I’m curious, how do you find the value of the land itself?

There are a lot of cities in Ohio where the little tenth of an acre city lots are essentially worthless. Toledo, Cleveland, Akron, Canton, Youngstown, Euclid, Garfield Heights and Maple Heights to name a few...In all of these Ohio cities all of these types of vacant lots hold no real value.
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