Many homeowners who experience a house fire decide to sell instead of renovate. For these homeowners, finding a new place to live is easier and faster than rebuilding. But they still need to sell their homes, and this presents an excellent opportunity for an investor who is looking for a real estate project. But finding and buying fire damaged property presents a few unique challenges that other off-market properties don’t.
What is fire damaged property?
Fire damaged real estate is pretty much what it sounds like. Homes and businesses categorized as fire damaged have been through a recent fire and are sold as is. You have to plan to deal with any damage from that fire when you buy them. Rehabilitated properties that had fire damage before repair can be quite profitable if you know how to find these opportunities, but it’s also important to know when to walk away from them.
Finding fire damaged property
Investors typically use several tools to find fire damaged property. Real estate auction houses frequently list fire damaged property when owners list them, but they are not a comprehensive source. You can also see the information on fire damage through detailed property lookup apps like BatchLeads, which uses tier-one data sources to provide investors with information about fires, tax liens, foreclosure processing, and other essential details that can help you figure out which properties to invest in.
Buying fire damaged property
Like any property, you need to perform your due diligence before making an offer on a fire damaged property. That means viewing the lot before an auction or researching it before reaching out with an offer. If possible, get inside the building to survey the damage before bidding or making an offer.
You will likely need to track down the owner with skip tracing tools and then open the conversation to get the chance to view things up close. It’s important to understand not every owner wants to part with a fire damaged home or business, so be empathetic and considerate with your outreach.
As you evaluate the property and assess likely repairs, keep an eye on your potential after repair sale price and make sure you run the numbers. There are some great deals out there, but some fire-damaged properties need to be deeply discounted to be worth renovating.
Fire damaged property to avoid
There are no hard and fast rules about avoiding every property with certain damages, but there are issues with pricing if the damage is extensive. That means the owner has to be willing to cut you a deal that works for you, and not every owner will do that. Investors working leads at volume might want to steer clear of these properties because negotiating a deal that works could be time-consuming.
- Properties with significant floor damage requiring replacement
- Fire damage to major support structures like basement beams
- Fire damaged properties with luxury features that the owner may overvalue
Negotiating these deals can be profitable if you only have a few leads, but don’t hesitate to change your approach when your lead workload increases.
How to flip rehabilitated property for a profit
Any property rehabilitation flip is going to be about the numbers. Make sure you get the property and the repairs done for less than 70% of your estimated after-repair value (ARV). To estimate accurately, use property lookup tools to find detailed comps in your area. The more closely your comps match the property you are trying to buy, the more likely you will get a reasonable estimate.
Key takeaways
Fire-damaged properties have unique needs for renovation and re-marketing, but they still follow the basic rules of any investment. Make sure the numbers work, be considerate when reaching out to owners who have not listed the property yet, and remember that it is a volume game. It can take quite a few leads before you find the right investment opportunity.
