Allentown, PA · Member since 2018 · 3 posts · 1 vote
Looking for some advice, looking at a property that had fire damage (insurance declared a total loss) county inspector says it can be rehab up to code he mentioned that a structural engineer will be required. first time with this size of a rehab. my question is am i save a 70% of ARV for purchase and rehab? should I be more conservative? its a A- NEIBORHOOD 2600sqft 4bed and 4baths any advice is appreciated.
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.
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.
The concept of a "total loss" in the property damage world is kind of borrowing a concept from vehicle insurance, which is very different. What they might mean is that they hit policy limits, so the insurance carrier paid out the maximum amount the policy allows, but that has nothing to do with whether the house can be repaired for that amount. The real question is whether it is repairable or is a tear-down--you might be looking at a lot with a new build. If it does turn out to be a tear-down, remember to back the cost of demolition out of your max offer. It may cost you significantly to get it to buildable condition.
I'd be happy to look at pictures and answer any other questions you may have.
All that said, I strongly discourage investors from taking on a fire-damaged property for their first rehab--the learning curve is steep...and expensive.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
3y
I would not do this rehab. Not worth the risk. If you were your own GC or had experience with the city then yes. It will be a large rehab and many hurdles due to dealing with the city. Also if you do do it make sure you have the right GC. You will deal with GC's flaking because they are going to underestimate the project.
Looking for some advice, looking at a property that had fire damage (insurance declared a total loss) county inspector says it can be rehab up to code he mentioned that a structural engineer will be required. first time with this size of a rehab. my question is am i save a 70% of ARV for purchase and rehab? should I be more conservative? its a A- NEIBORHOOD 2600sqft 4bed and 4baths any advice is appreciated.
Thank you
@Yinette Roa, a rule of thumb like that might work on a certain type of purchase where the scope of work to rehab is going to roughly similar (cookie cutter), but on something like this I think you need to be able to do actual detailed estimates to determine what you can pay.
Looking for some advice, looking at a property that had fire damage (insurance declared a total loss) county inspector says it can be rehab up to code he mentioned that a structural engineer will be required. first time with this size of a rehab. my question is am i save a 70% of ARV for purchase and rehab? should I be more conservative? its a A- NEIBORHOOD 2600sqft 4bed and 4baths any advice is appreciated.
Thank you
Walk away, do not attempt to do this, it will not end well. County involved, permits, inspectors, and you with little experience, please walk away.
Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
3y
As others have posted, this is not a deal to cut your teeth on. Fire damage often requires a total gut due to the smoke / water damage which is often not visible. You will find yourself with a property that has a lingering smoke smell once you have finished the reno and wind up redoing the work. Having the city inspectors already involved will ensure you are held to every little requirement they feel like dishing out. If you are set on proceeding, you need to have a contractor that has done fire damaged properties before and can give you an accurate estimate. Doing the work that is needed for your 70% target is a non-starter . . . . you will have way more into it than you think you will.
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.
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.
The concept of a "total loss" in the property damage world is kind of borrowing a concept from vehicle insurance, which is very different. What they might mean is that they hit policy limits, so the insurance carrier paid out the maximum amount the policy allows, but that has nothing to do with whether the house can be repaired for that amount. The real question is whether it is repairable or is a tear-down--you might be looking at a lot with a new build. If it does turn out to be a tear-down, remember to back the cost of demolition out of your max offer. It may cost you significantly to get it to buildable condition.
I'd be happy to look at pictures and answer any other questions you may have.
All that said, I strongly discourage investors from taking on a fire-damaged property for their first rehab--the learning curve is steep...and expensive.