In the field of real estate investment, fire-damaged properties are often considered investment opportunities. The average investor looks at ugly homes, but is comfortable with the amount of repairs needed to rehabilitate and resell the property. Burnt houses and multi-family properties represent a huge potential for profit if investors have or can focus on buyers who already own this type of property.
There are three very important aspects of smoke or fire:
1. The After Repaired (ARV) value of the property if it is fully rehabilitated. This is very important for rehabilitation and to get as close as possible to the full market value, whether for yourself or for a buyer.
2. The cost of repairs that, while critical, is not so important unless the property needs to be demolished. If a contractor does not perform regular smoke damage repairs, you will probably get estimates two or three times higher than those of someone who performs these repairs regularly. We have seen estimates of $ 100,000 for a rehab that cost $ 22,000!
3. What exit strategy you will use to sell the property. Your exit strategies are limited to repair or not to repair. If you just want to make money quickly, then basically the property and never touch it. All you need to do is take pictures and send them to your email list. In this case, the less there is, the better it is because the more photos you post, the less people will come. Professional rehabbers will be interested, everyone else will be scared.
If you do the repairs yourself, you can sell the property to an end buyer who obtains conventional financing. This end buyer could live in the property or he may have purchased as a rental unit, anyway, your profit margin could be significant if you control your costs and do the vocational rehabilitation. A conventional lender will need permits that should be drawn for the job and a copy of the occupancy certificate required by most counties to be able to live back into the property.
Therefore, the value of investing a fire Damaged property depends on the extent of repairs and the rehabber that makes the reconstruction. For the average investor, it is suggested that they find these properties by watching the night news, the newspaper, checking with the county fire stations, and flying for dollars in their farming areas.
Then get these properties under contract and sell them wholesale to other investors who can meet the challenges. Build your list of buyers with entrepreneurs and investors who have already done these types of rehab. It is often easy to double the price you paid for the property if you remember to pay only for the value of the property's land, or even less if possible. If the structure of the property needs to be demolished, reduce your supply to half or less of the land value.