Fire Damaged Multifamily

[Stephen Earley]

Hi BP community,

I am interested in purchasing a fire damaged row house in Jersey City, NJ. The building is a historic brownstone located in a very desirable neighborhood. This would be my first investment, that being said I'm not sure if this would be the safest way to begin my B&H investment career, especially due to the amount of rehab needed. Does anyone have any experience with renovating fire damaged row buildings and turning them into B&H properties, and if so might there be grants available through local or state departments?

To be honest I don't have much info on the property, I've just sent a certified letter to the property owners to see if they would be motivated to sell. Can anyone give tips on how to persuade an owner in this position to sell.

Thanks,

Stephen Earley

[Paul Ortiz]

Hi Stephen,

I have done this on residential properties here in California and unlike most Rehab's it is a lot more intensive on the construction side of things.

Most people are fearful of this but you really shouldn't be, Find yourself a good General Contractor and run repair cost numbers. sometimes the owners are willing to let go of the property at a heavy discounted price due to the damage and the stress associated with rebuilding.

Cheers,

Paul

[Michael Wolffs]

Stephen,

My broker sent me that listing (assuming its the same one.) So it's out in the wild at this point.

[Chris Winterhalter]

@Stephen Earley

It looks like you are a contractor in Jersey City so you are probably familiar with the local codes. If you aren't familiar with historic buildings I would just network with other contractors that have dealt with historic brownstones. If it's going to be a gut project you have less unforeseens with a fire damaged brownstone because of how they were built (2-3 layers brick thick and hand laid stone foundations). You can probably figure all new interior framing for the gut anyway. You will want to make sure the rafters are solid and you don't have any structural issues. Honestly the more difficult part is the rehab on the historic structure than the fire portion of it. Get an excellent inspector or contractor that has dealt with fire damaged buildings to go through the building with you to verify. It can very costly to rehab these buildings properly.

State historic tax credits may be available in your area however you will have to go through an approval process which can be lengthy. They can also dictate how you rehab the project which can add costs. Generally if the project is less than 250k (rehab) it doesn't make sense (IMO) because of time lost. Your city might have tax abatements available which are easier to obtain. Other grants can be difficult and time consuming on a smaller project. The city should have someone in the development department that can help lead you to specific grants. You can also talk with a historic tax credit consultant. Good luck!

[Ankit Duggal]

I would echo the comments of other BP members that you need to get a good, local GC who has experience with fire damaged and historic properties in Downtown Jersey City (I am assuming that is where this Brownstone is located).

To help answer your second question of persuading the owners to sell:

Given that it is a fire, you can assume that the owners got paid from insurance proceeds so they own this asset free and clear and may have made some money. The only pain point they should have is that they will be getting pressure from the city to secure and fix the asset to protect it from being a hazard to local residents. So you need to stress on that pain point and the cost of carrying the asset I.e. property taxes and property security & maintenance fees

[Ravi P.]

I recommend this book for light reading;

Chase, Sara. (2009) "Brownstone: An Owner's Care and Repair Guide." Society for the

Preservation of New England Antiquities.