Fire Sale!! Need advice..(another darn newbie) - Posted by Mike B.

Posted by HR on March 23, 2000 at 06:26:50:


Your holding costs, utilities, sales costs, purchase costs, insurance, etc. typically come to about 15% of the after repaired value of the house. Hence, to figure out your offering price, simply take the after repaired value, multiply by .85, subtract the repair costs, subtract your desired profit, and you have your max offer you should make. Be conservative on the after repaired value; be liberal with your repair estimates (especially if you are new to rehabs!)

On your deal, the numbers work out to:

180 (after repaired value) X.85 -40k profit - 50k repairs (you will find other problems) = $63,000 max offering price.

There is a good article in the money making section (?) here on fire damaged properties. I am not aware of any good books or courses on the subject.

I am currently renovating my first fire damaged property. Are the utilities on? Do you need inspections from the city? (Uggg). Etc.

Mine, too, is cosmetic fire damage. Don’t underestimate the seller’s desire to dump this, especially if they already collected an insurance check. Mine was owned by the Money Store. They originally wanted 24k, dropped the price to 8k, I offered 1k, they countered at 2.5k, and we settled on 2k. It will take about 7k total to put in new electrical, new plumbing, resheetrock rooms, etc. Get good help, cheap.

Hope this helps. What other concerns do you have? Please be even more specific.


Fire Sale!! Need advice…(another darn newbie) - Posted by Mike B.

Posted by Mike B. on March 22, 2000 at 23:10:24:

I am a beginning investor and seeking advice. I have an opportunity to purchase (via submitting an acceptable bid)
a property that has been involved in a fire. The damage was somewhat minimal. It was upstairs in a master bedroom area and barely touched the remaining areas of the house other than a small part of the attic/roof. Anyway, we are considering a bid of $85K and feel we have a decent shot at acquiring the property. The damage has already been assessed
by a very reputable ‘restoration specialist’ company that has been in business for many years. Their detailed estimate is 18 pages long and includes the smallest details including new copper wiring/junction boxes, roof, rafters, paint, cleanup, insulation, etc… It is so detailed it includes the seperate prices for washing the windows and painting the baseboards. This estimate is totalled at $42K.
This house markets FMV at $177K - $195K per very thorough MLS comparables. Sounds like there is approx $50K profit minus the closings (on both sides), interim insurance and finance costs, & miscellaneous. I’ve probably added too much detail and bored everyone to tears…BUT! I and the buddy I am partnering with (he has less experience than me God help us) have never dealt with a fire damaged house. Are there particular/specific issues related to this type of rehab that I should be aware of??? You guys/gals are so helpful and have gazillions of years experience that I thought I should ask the experts before I jump feet first. Any feedback would be greatly appreciated!!!
Sorry this was so long!!

Re: Fire Sale!! Need advice…(another darn newbie) - Posted by Ben in Ohio

Posted by Ben in Ohio on March 23, 2000 at 07:55:32:

A recent fire in one of my duplexes has been a learning experience. In my case the city has a code upgrade policy. This means if I rebuild the damaged portion then I must bring up to current code all items in the house, not just those affected by the fire.

For example, the house has knob and tube wiring. In order for me to get a permit I must remove all knob and tube in the entire house and brung it up to code. If I choose to sell the house the investor will be responsible.

Also, my insurance policy did not cover me for code upgrade, though it was an option my agent failed to offer. It ads a mere $70 per month for $140K of coverage. That $70 may cost the rehabber tens of thousands in code upgrades.