Into The Flames: Fire-Damaged Houses

Fire-damaged houses: a good deal or a bad deal?

The answer is, it all depends…

Hey Moguls, Jason Lucchesi here, and a fire can be a really traumatic experience for a homeowner. The thing is, you can turn that homeowner’s awful situation into a situation of potential. But you also need to proceed with caution – not all fire-damaged homes are equal.

So I’m going to walk you through how to evaluate a fire-damaged property and how to make sure you’re not missing out on any opportunities to help a homeowner.

Do Your Homework

The bottom line here is that the level of damage to the property is going to determine whether you should get involved or not.

When deciding to invest, gather all the information:

Where did the fire start?
Which rooms are damaged?
What are the significant damages?
What are the minor damages?
What is the square footage of the property and how much of that was damaged?
How much does the owner owe on the property?
How much will the repairs cost?
What kind of discount can you get on the property?

So for example, many fires start in kitchens…

Maybe the oven was left on and caused a fire. If you know the damage is limited to the kitchen and you know you can get a great discount that will easily cover the cost of the renovations, then buy.

But if the fire demolished the entire second story of the property or if the roof will also need to be replaced, think carefully about the discount on the property – you might not make anything.

The bottom line is that there’s not a formula for when to buy. Do all your homework and carefully consider the numbers before you make an offer.

Next Steps

Have a workable plan in place for the property before you make an offer. If you are going to wholesale, think about how much you will need to sell the property for.

fire If you are going to rehab, consider who will do the work. If possible, walk through the property with a contractor to make sure you haven’t missed any potential costs.

And of course, if you want to fix and hold you can absolutely do that too.

Where’s the Fire?

How do you find fire-damaged properties? You need to have 3 key players on your team...

First, real estate agents are key partners. They can find fire-damaged properties on the MLS. Plus, a real estate agent can show you the properties and take care of you. If you’re having a tough time finding real estate agents, try social media or do a quick Google search for agents in your area.

Fire departments can also tell you about recent fires. This is public information. If you call and develop a relationship with the department, they’ll be more than happy to share information. You can take that and find the owner to see if you can help by getting that property off their hands.

Also consider insurance agents. These people are a gold mine, and if you treat them right, they’re going to treat you right. These are the first people the owner of record is going to call after a fire. If you have 2 or 3 insurance agents on your team, you’ll always know when there’s a property owner dealing with the aftermath of a fire who might want your help.

Keep in mind that most property owners use their insurance payout to take care of the mortgage. Then they have a decision to make: use the leftover cash to fix the damage or sell the house?

Many owners, especially families, want to avoid living in a hotel for a few months (or more) waiting for renovations, so they opt to sell. That’s where you come in.

And remember, there’s no formula to help you decide when to invest and when to walk away. Make sure you have other key players on your team to help you, especially when you look at your first few fire-damaged properties.

But also remember that many of these properties turn into win-win investments!