The recent series of wildfires here in our own Smokey Mountain region of North Carolina and Tennessee has been devastating to everyone involved including Real Estate IRA owners. The fires around Gatlinburg, Tennessee late last month resulted at least 2,460 structures that were damaged or destroyed, and the death toll has reached at least seven.
Lots of people have lost their homes and businesses – and surely many of them were uninsured for wildfire damage, or will find that they were woefully under-insured. The real estate investment community, including Real Estate IRA owners, can and should be active in this environment. By offering a fair price for fire damaged properties that we have the capital to repair and resell or rent, investors will be vital players in helping a traumatized community get back on its feet and rebuild.
Families and small real estate investors who have seen their homes and investment properties damaged or destroyed and who are uninsured or under-insured and unable to make the repairs themselves will desperately need the cash from the sale of these properties to start over.
Meanwhile, homes with moderate fire damage are often very good investment opportunities for the skilled property investor. If damage is limited, it’s well within the scope of many investors’ capabilities to take the damaged home at an appropriate discount, make the needed repairs, and return a very livable, quality home to the community.
But Real Estate IRA investors who are working in this environment should be investing with open eyes. Fire damage isn’t like ordinary wear and tear on a home. Here are some tips for assessing fire-damaged properties:
- Don’t try to do all the inspections yourself. You should probably consider hiring a qualified structural engineer to help you determine whether the fire affected key support beams or other vital elements. This may be beyond the expertise of a garden-variety home inspector – but well worth the effort. Furthermore, their errors and omissions/professional liability insurance will help protect you and any tenants or buyers you may have later.
- Check for mold. If the home was saved by the fire department or the owner hosing everything flammable in sight, there’s a significant chance you will have water damage and/or mold issues to deal with. If fire was extinguished with water, be sure to anticipate the cost of opening, gutting, drying and treating these areas for mold and wet rot.
- Check plumbing for warping or melting.
- Check windows, doors, flooring and vertices for evidence of warping.
- Check wiring for burning or fire damages.
- Be careful to distinguish between mold damage and fire damage.
- Be alert to the practice of painting over fire damaged areas. In many cases, there’s no harm in simply painting over wood that’s been blackened by smoke. But you may want to build in the cost of using sealant paints that are rated for fire restoration.
- Painting over smoke damage is fine. Don’t paint over mold.
- Understand the disclosure rules in your jurisdiction when selling a restored Real Estate IRA property. Here in North Carolina, Self-Directed IRA owners are governed by the Residential Property Disclosure Act. In Tennessee, you should be aware of the Tennessee Seller’s Disclosure Law.
American IRA, LLC is the leading provider of third party administration services to Self-Directed IRA owners in the Smokey Mountains region. If you would like to put your retirement assets to work in direct ownership of investment real estate, and you want to take advantage of opportunities to help rebuild the Smokey Mountain area following this season’s terrible wildfires on a tax-advantaged basis, a Self-Directed IRA is a great way to do that.
For more information, or to get started, call us at 866-7500-IRA(472), or visit us on the Web at www.americanira.com.