There are basically three types of damage to assess when investing in fire damaged property. The first is what most people see when looking at property that has been burned. This damage appears to be so extensive that it cannot be repaired. This is rarely the case unless the roof has collapsed and the walls are not structurally sound.

In reality, most damage is much less severe and falls into one of the following three categories:

1. There is light soot or smoke damage to most of the property with the major damage concentrated in one room, usually the kitchen or bedroom. These usually start when a pot on the stove overheats and catches fire. The generated smoke is electrostatically charged and sticks to everything, including the walls and ceiling. This type of damage is very easily fixed and should cost $15-$20 per square foot for the entire living area of ​​the property.

2. The roof has been pierced by fire and the trusses have burned. However, the roof is not penetrated or only slightly burned. In some cases, firefighters have opened the roof. Usually a couple of rooms are badly damaged. This type of damage should be in the area of ​​$20 to $35 per square foot.

3. The interior is badly damaged and the roof is completely burned in several areas. This is the most extensive type of damage and could cost $40-$70 per square foot or more. Be very careful with these properties, as a contractor may start and have trouble finishing the job because he underestimated the necessary repairs and labor.

More accurate estimates of these repair costs should be obtained from local contractors engaged in rebuilding burned properties. Keep their phone numbers as contacts for your buyers list, and ask for referrals from investors who work with these contractors so you can sell them your offerings.

The opportunity that exists for even more damaged properties is to put them under a buy and sell contract or obtain an option agreement with the seller. Then market them to a buyer’s list of local contractors and smoke damage repair companies. Look to buy these properties at about 10% of their After Repair Value (ARV) and sell them in “as is” condition for double what you paid as a wholesale property.

In short, there is excellent potential to wholesale burned properties. Don’t worry about the condition of the properties, just get them under contract and wholesale them to investors who know what they’re doing. Properties in category no. #1 above offer great potential as the repair job is labor intensive but only minimal materials are required. A homeowner will usually get a substantial insurance payout from his insurance company and anything he sells his home for is essentially found money. You have no risk except your deposit with the homeowners, so try out a few burned properties to see how easy it is to buy and sell.