Would you fix and flip a home with fire damage??!

Question

Hey guys! Theres a home in my area where it looks like there might have been some fire damage.. its hard to say with the lack of photos up. But the lower price point and boarded up windows and possible soot on the roof (which is brick) made me come to this conclusion. Although, I am not a fix and flipper, I am a wholesaler. Can any of you professionals give me some insight if this property is worth trying to make a deal on and handing over to a cash investor. Or is it just a big waste of time...

Appreciate y'all,

Chelsey

Appreciate y'all,

Chelsey

Andy Sabisch · Answer

Great responses so far . . . . another saying that definitely holds true in real estate is that EVERY property has a price that makes it a good deal.  Factors such as damage, location and comps dictate that price.  You need to make sure you know the numbers going into the deal to see what your profit is on the back end.  Use the Fix & Flip calculator and see where you need to be in terms of a max price to pay and if that number is not acceptable to the seller, find the next deal.  We have walked from a few deals that while the two of us were close in price, we could not meet where I needed it to be.  Remember, you make your money when you buy not when you sell.  Overpaying and then hoping you can either cut costs in the rehab even after you have run the estimator or sell for a higher price than the comps support is a sure fire recipe to come up short.

A few things about fire damaged properties.

• In most cases the owner received payment from the insurance company which plays in your favor to buy it.
• Be sure to check with the city to see if there are any issue with buying and renovating.  When we lived in Michigan the city we lived in had strict inspections that had to be conducted for a fee to redo burned homes.
• Realize that while you can encapsulate some of the burned wood to eliminate the smell, the heat does change the structure of the wood and may dictate replacement - again factor that into your offer. 
• Be sure you make sure that any contractor you choose is versed in fire damaged restoration.  You might get a recommendation from a fire service company such as ServPro or the like.

Good luck . . . just be 100% sure of your path before signing that contract

Account Closed · Answer

@Chelsey Nunez Welcome to BP! Just about any deal can be worthwhile depending on the merits of the deal. Depending on what you can get it under contract for, repair costs (might need a professional estimate(s)), and what the comps are going for, it could very well be a deal. It all depends on how much room there is on the deal. Sometimes it's the really ugly, or burned up houses, that do really well! Good luck with it.

Will Barnard · Answer

As with any flip / wholesale opportunity, it is all about the numbers. There is no way to tell you if it is worth it as none of the financials were presented here so all the answers above could only be generally speaking. Fire damaged homes can easily scare many potential buyers away which could work in your favor, that of course is up to your negotiating skills.

The short answer is YES, fire damaged homes present opportunities to the right buyers who can negotiate the right price and perform the rehab efficiently.

Dave Schmidt · Answer

@Chelsey Nunez There is a saying in the used car business - "there is an a** for every seat". There is always a buyer out there and it just is usually a function of price. Learn what the property needs in the way of repairs and use something like the 70% rule to figure out what a flipper would be willing to pay for the property.

I would use the fire as a negotiation tool and try to negotiate the best price possible. There is such a lack of inventory with real value add propositions in many areas, so it is likely that the property will attract many investors.

Michael Schleicher · Answer

To echo Tim's comment, at the right price, fire-damaged properties can be a great buying opportunity for an investor. If you are working in areas where you may commonly come across properties in this condition, work to build your network of professionals and personal understanding of redevelopment costs. If the property can be acquired at a price point where an investor can rehab the distressed property and have room for a profit, there may be an opportunity. Those numbers, though, depend on many factors that will be specific to your local market; you won't be able to be given a simple yes or no response from anybody here. As a starting point, I would look to see if there is a local investor meetup group that you can be a part of and see if you can find an investor that would be willing to educate you as they are working through the process themselves.

Would you fix and flip a home with fire damage??!

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