AUCTION PURCHASE for a potential BRRR or a flip ARV is 325-365

[Yinette Roa]

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

[Jeremy VanDelinder]

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.