Fire Damage, Would you Buy?

Question

Hello all!!!

I am new to investing and I am reading David Greene’s book Buy, Rehab, Rent, Refinance. In the book he talks about analyzing deals to get practice. I came across a home with fire damage with a good amount of fire damage in a room or two and looked like smoke damage in the rest of the house.

What are your experiences whether buying or staying away? In these situations, what things usually make this a deal breaker?  I believe ARV for this 1500 sq ft home would be around 65k.

Thank you!!!

Carl Millsap · Answer

@Andrew Peters do you have any experience w/ rehabs?  A house w/ fire damage is tricky.

If you don't have any experience I wouldn't tackle this as my first project. Can it be done....yes, but the risk / potential to lose a boatload of money is greater.

For starters I would completely gut the house to the studs to ensure I find and treat any potential mold issues and electrical issues. And since its to the studs I'd check plumbing etc. and then put it back together.

When the fire dept. came out they just sprayed that house to kill the fire so water maybe sitting behind the walls etc.

You would then need to check all the electrical wires and potentially have to bring everything up to code depending on how old the house is. The list goes on. Let's just agree there is a lot involved and with an ARV of $65k, you would have to buy the house at $5-15k and keep expenses below $20k to make any money on it.

Again, it's not impossible but I'd recommend taking on something with cosmetic fixes (i.e. painting, flooring) before I jumped into a house fire renovation.

Kenneth Garrett · Answer

@Andrew Peters

Fire jobs are not necessarily for the beginner.  In theory it’s same as a rehab, depending on the severity of the damage.  Code upgrades may be required even though the damage was limited to o my certain rooms.  Structural damage needs to evaluated for replacement of structural members.  Electrical, plumbing, etc needs to be evaluated for extent of damage. Might require replacement beyond what you see.  Hire a contractor and contact the city for what they expect to be done.

Jeremy VanDelinder · Answer

I flip fire-damaged properties and own a fire damage restoration company. 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 estimate was—if they will share that info, that might tell you some of what you need to know.

As @Carl Millsap and @Kenneth Garrett have pointed out, 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.

If you do a type of project like this, 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.

Just to chime in with the others, I steer people away from fire damage for their first few projects. They can bite even an experienced rehabber, and will almost certainly cause a problem for a newbie.

I'm happy to look at pictures, answer specific questions or be a help in any way I can.

Carl Millsap · Answer

@Andrew Peters I'd look for something that needs cosmetic repairs ie. a coat of paint, new floors, counter tops etc. for my first project.

Keep looking something will come your way.

Good luck.

Andrew Peters · Answer

@Carl Millsap thanks!  You make a lot of good points. Part of analyzing these deals I am also trying to figure out what would be too much and what is a good first project.

Fire Damage, Would you Buy?

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