Fire damages can be scary but for the savvy real estate investor, fire damaged homes present great opportunities. Most home buyers stay away from fire and flood damaged homes for good reasons. They often contain hidden damages that may not be immediately noticeable to the average investor.
Once the decision is made to go into the business of buying fire damaged homes, it pays to follow some simple rules. Failure to do so could result in catastrophic losses. It is possible to profit from buying fire damaged houses but knowledge is important.
Know the rules
Like any other business, buying fire damaged homes has its unique challenges and rules. First, it is a business and not a hobby. Treating it like a business instead of a hobby means paying attention to all aspects of the transaction from buying the houses, to managing contractors and other professionals. It is also important to know the laws governing information disclosure and repair to ensure limiting exposure to potential future lawsuits.
You’ve probably heard the saying, “buy low, sell high”. It does not only apply to the stock market, it is particularly applicable to real estate investing. Buying low allows for proper repairs to the property while staying under budget and protecting the profit potential. Buying the damaged property low also allows for bigger margin and the cushion needed should there be hidden damages that may not have been evident at the beginning.
Inspect the property
Having a professional home inspector go through the property before and after repairs is necessary to ensure it conforms to local and federal standards. Begin by taking photos of the damages to the home. In addition to fire damage, look for damages from soot, water and smoke. Hire a certified inspector to look at the structures, beam, walls, ceiling and more to confirm that the home has not been damaged beyond repair.
Clean and repair
Once you confirm the extent of the damage, bring in professionals to begin the cleaning and repair of the damage. Unless you are a certified professional with expertise in cleaning fire damaged homes, it is advisable to hire qualified individual contractors to clean and repair the damages. If the house has basement, it is not uncommon to have it flooded with a few feet of water. The walls may have to be torn down and cleaned out to eliminate odors; the ceiling cavities may need inspection and cleaning or replacement. These are better handled by contractors. Electrical and plumbing systems, windows and doors, hardwood floors, carpet and more may need replacement or refinishing, whether damaged by fire or not.
Buying the house at low price as discussed earlier allows for complete cleaning and repair while maintaining healthy profit margin.
Appraise for value
Once the house is inspected, cleaned and repaired, it is time to access the value. Hire a certified home appraiser to appraise the home for sale. If you bought the house at the right price and cleaned and repaired it professionally, the value of the property may be high enough for healthy profit margin. It is not uncommon to see up to 50% profit margin on fire damaged homes. Using a certified appraiser ensures you get the right value and allows you to set the right selling price.
Finally, selling the home for the best possible price allows maximizing of profit. It is possible to profit from fire damaged properties. If you have any questions in the Fort Worth, Texas area, call us at 817-495-6685 or 817-229-5155.