Wholesaling Fire Damaged Houses

[Namon Thorn]

Hello BP Fam,
I have a question for anyone one out there. Has anyone ever wholesaled fire damaged houses before? Is flipping these type of properties any different from a regular wholesale non-fire damaged house?

Thanks
Newbie Namon

[Dyrol Harding]

Norman,

A friend of mine rehabbed a fire dammaged 2 family property in Brooklyn NY years ago (may be 12 years ago). It was a great deal for him in a competitive market for the following reasons:

1) He had, at the time 15 years of construction experience,

2) The city was a week from flattening the building because it was a hazzard so many invesrtors probabely stayed clear of it thinkinking it was too far gone to rehab.

Long story short, he spent about $30K on the building (doing all the work himself and sold the building a couple months ago for about $800k. There are definate pros and cons in wholesaling of rehabbing fire burnt buildings.

Cons - You need to make very good assumptions with your pricing. Repair of structural members such as joists, rafters and studs. Components like electrical or plumbing piping may be partially damaged or may need to be completely destroyed. Since there was a fire there is definately water damage (to get the fire out). So if the fire was on an upper floor the water can seep down to lower floors and damage furnace, water heater etc. Fire damaged buildings also have very strong odors that need to be addresses. So if you are not budgeting for a gut rehab you may get burnt (no pun intended). This obviously depends on the severityand location of the fire etc.

Pros - Because of the cons listed above you will more than likely have less competition. If you cover yourself on the repairs there is a lot more room for you to create value as a rehabber and this translates to profits. My friend ended up renting his 2 appartments for years and cashflowed beautifully. With these properties, depending on the market, you have the option to purchase for less than the land value if you have to tear the house down to rebuild. In NYC it is advantageous to keep at least the facade of the building so it is considered a renovation and not a new building. New buildings get reassessed for higher taxes than a renovation/rehab.

Conclusion - Make sure you are covered on the construction cost. Take an experienced contractor, engineer or someone who can tell you how much needs to be replaced. Could be a great deal but could also be dangerous if you are not euipped to estimate the work or execute the repairs required. Good luck. Please let me know what you decide.