Rehabbing A Fire Damaged House
I am buying a fire damaged house listed in the MLS for a complete Rehab project. The house need complete Gut renovation. I will have to check with a structural engineer just to make sure the structure is fine.
The numbers:
Purchase Price: 80K
Fixup price: 100K
Soft costs: 20K
Retail Sales Price: 260K
The numbers make sense to me. Has anybody done Rehab of fire damaged houses? Any tips/advice
Thanks,
Zack
Hey Zack,
I'd be careful on this deal. As with any rehab project, cost overruns are likely and fire damage properties are even harder to estimate.
I personally would want to see a bigger profit margin so I could make a few mistakes and still make good money. On a large project like this I never want to be over 70% of FMV when it's finished. That would be $182,000 in this case.
For what it's worth... Good luck!
I have done several fire rehabs, not that big a deal if you know what your doing and plan for some unexpected surprises. I generally plan it out to the Nth degree and line item every cost, I never go by a SF cost and I have never taken a bath on one, they have always worked for me.
[addsig]
How was the house processed through the owner's property insurance? Get a copy of the adjuster's estimate if possible either from the owner or the insurance company directly. This will tell you if the house was condemned or considered repairable by the ins. company and also it will have a very low estimate of the cost of repairs. Add at least 30% to the estimate for any gap between depreciated cost value and replacement cost value, then add another 10-15% for a more realistic repair estimate. Most people go cheap on their insurance and end up with a huge gap in their coverage. They don't have the cash to rebuild, they still have the mortgage, so they sell. If your "fixup price" is accurate, your "soft costs" may be too low. It will take a long time to demo and repair.
One thing you might look at is your rehab cost. If you're using a GC you are paying $20k profit to him (or more).
If you can act as your own GC and can hire subs and workmen directly you can cut that cost down.
$100k is a lot. Build a whole new $260,000 house for that.
One thing you might look at is your rehab cost. If you're using a GC you are paying $20k profit to him (or more).
If you can act as your own GC and can hire subs and workmen directly you can cut that cost down.
$100k is a lot. Build a whole new $260,000 house for that.
Fire Rehab is a very profitable business. There are about five companies in Los Angeles who do nothing but run on fires. They even monitor the Fire Department calls. They show up and check it out and then set up the call backs. What they want to do is of course get a real buy from the owner who is still in shock or in certain areas of town checking to see how well the set went.
In past time when I needed money this was a good way to get it. Check your charing very very thoroughly. A lot of stuff is recoverable.
Right now looking for lots I have called the nice man who runs one of those companies, I offered him a small mordito in exchange for the information when it was a total or too old to comply .
Its is interesting work. An awful lot of cost you would never think about unless you start doing a few.
Cheers Lucius