MY FIRST PROPERTY OFFER?

Question

Good day Biggerpockets, This is a exciting time for me. I'm 50 years old & in the beginning process of buying my first investment property, first of many to come. I just didn't have the opportunity nor the resources to make this happen. Now that I do have the resources, I'm making sure my children who are in their early to mid 20's, get into this now & learn everything I'm learning to enjoy the benefits before they hit 50.

So I'm soliciting your opinions on what I should offer for this property. My goal was & is to buy mostly multi-family properties. This is a duplex, 2bdrm, 1bath. It has fire damage in one unit, which started in the kitchen located in the back of the unit. The fire worked its way into the roof, above the kitchen leaving it open to the elements. The property has been on the market for at least a year and I've been keeping my eyes on it the whole time, hoping I would have this chance. I realize everything that comes with this property. Smoke damage, possible mold. I have a contractor that specializes with this type of rehab.

Now I know some of you will need more info. Based off the details you do have & your mastery experience. I'm asking for your opinion.
The current asking price is $29900, down from 36900. I will be paying cash for it. Should my mindset be to get the price low as I can or take it and run?

Jeremy VanDelinder · Answer

First congrats for getting in the game--too many sit on the side-lines and you are to be commended. Beyond that, good job for your bravery in considering a project like this.

I flip fire-damaged properties and own a fire damage restoration company. It can be a big undertaking, although there can be good profits in it IF the numbers are right and IF you have done your homework to know what you are getting into. (Both pretty big "IFs"--this is why others in this thread are sending a note of caution.) 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.

This is a specialized field! 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.

Let me know if I can help with anything or answer any questions.

BTW--what market are you in?

Eldridge Stroman · Answer

I really do appreciate both of your advice. I will take it to heart, tread lightly and give this careful thought and let the numbers speak for themselves. I do have a contractor that specializes in this type of damage. If the diagnosis is way over my head, I will back out and look for something else. Being that this is potentially my first deal, I make sure not to get emotional about it, play by the numbers. I'm not afraid to admit if I made a bad choice. I don't want my first deal to make me bitter.

Jaron Walling · Answer

@Eldridge Stroman Assuming the fire was contained to one side of the duplex, what's the repair budget and how much will it rent for?

If you can't get this property repaired and rented for around the the 1% rule don't waste your time. Fire damage is extremely tricky and if it's your first investment property that's a big risk. That's probably why it's been on market for so long. TOO MUCH DAMAGE.

Eldridge Stroman · Answer

Good day Jaron, Thank you for your response. This is an area with multiple duplexes all with similar floor plans & configuration of 2&1. The comps are 150k & up. Rent for each unit, median is $850, roughly $1700. Being that this would be basically brand new, I would push that to at least $950 per unit.

The rehab estimate will be done in a few days, which is what I'm waiting on to make my final decision. So yes that will be the major factor if I move forward with making an offer.

From that, can you give me a suggested offer price or do you still need more info?

Jaron Walling · Answer

@Eldridge Stroman I'm going to be completely honest and blunt. This is not a wise investment. The numbers loosely make sense the but the rehab could KILL you. You stated it's your FIRST investment property. Distressed deal are great but find something with less rehab. Find a deal with less risk and less cash-flow. I'm saying that as a newer investor that's 33 years old.

MY FIRST PROPERTY OFFER?

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