Adjusting for vacancy with rental homes in a flood zone.

Member since 2020 · 10 posts · 1 vote

Hello, I’m brand new to real estate investing, and I’m hoping to buy my first single-family unit to rent out soon. There are many homes for sale in my local market because of Harvey and Imelda. Many have already been repaired. My own home flooded during the above-mentioned tropical depressions, so needless to say, I have a little flood anxiety. Getting to my main question; does it make sense to buy a rental property in a flood zone and set my vacancy expense for the average repair time after a flood? Allow me to add a few more details. The average time, according to my contractor, to repair a home is 5 to 6 months. My contractor happens to be my brother in law; he takes pride in his work and I consider him an advantage for me getting in this business. Any extra advice for someone who is new would be appreciated. Thank you.

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Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

No, not really unless it is deeply discounted and flood is a rare occurrence. Flood insurance can be expensive and is required if you have a mortgage. FEMA has different standards for helping investors, if at all. That means in a flood you go to your flood insurance if you have it or an SBA loan if you don't. Of course, there are areas that are in a flood zone and don't flood and it may be worth it there. Harvey did flood many areas that weren't in a flood zone but if there are other options maybe your first investment isn't the place to start with flood zone properties.

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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
6y
No, not really unless it is deeply discounted and flood is a rare occurrence. Flood insurance can be expensive and is required if you have a mortgage. FEMA has different standards for helping investors, if at all. That means in a flood you go to your flood insurance if you have it or an SBA loan if you don't. Of course, there are areas that are in a flood zone and don't flood and it may be worth it there. Harvey did flood many areas that weren't in a flood zone but if there are other options maybe your first investment isn't the place to start with flood zone properties.
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Eugene Davis
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Member since 2020 · 10 posts · 1 vote
6y
@Colleen F.
Thanks for the reply. So it's likely a more significant risk than a first-timer should take. What about buying one to flip?
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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
6y
If they are selling probably not as great a risk to buy one to flip. You are just betting it doesn't flood while you are flipping. Check out what people locally say about the market for the houses that flooded in Harvey.
The thing about having one for a rental isn't just the expense it is if you have a flood event do you really want to deal with a tenant that has just been flooded out? My experience is limited (my brother was the tenant and part owner) but I can imagine some of my regular tenants. Sure you can have a clause that cancels the lease but you still have to deal with them.
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Eugene Davis
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Member since 2020 · 10 posts · 1 vote
6y
@Colleen F.
That's a great point. Thank you very much.
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Kristie S.
Real Estate Agent · Houston, TX · Member since 2019 · 42 posts · 20 votes
5y
@Eugene Davis
Hi Eugene, I just wrote a blog about this very subject today: Rookie Flip Lesson #6: Houston area flood zones. If I were you, I would not buy in a flood zone regardless of how cheap the property is. At least not right away until you are established and think you can stomach the hassle and have enough cash reserves of the long vacancy. I'll admit, I have been tempted just like you, but there is no guarantee you can get in and out before a storm hits. Plus, the time to rehab a flooded property is at least 6 months and that's if you can find contractors at all. Do you remember during Harvey how hard that was? And then many people got ripped off by bad ones. The scammers came out in droves in the aftermath of that mess. If you read my blog, you will see we were flooded 3 times so well versed - let me know if you have any more questions.
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Eugene Davis
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Member since 2020 · 10 posts · 1 vote
5y
@Kristie Smith
That's excellent advice, thanks. I have an advantage with finding a contractor because my brother-in-law is a legitimate one. His houses are beautiful. I wouldn't have to worry about scammers, but there are still factors to consider like limited materials, workers spread thin, and dealing with a six-month vacancy. Can you link your blog or what's the title?
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Eugene Davis
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Member since 2020 · 10 posts · 1 vote
5y
@Kristie Smith
Actually, I see you already included the title. I'm having trouble finding it, partly because the app keeps crashing.
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Kristie S.
Real Estate Agent · Houston, TX · Member since 2019 · 42 posts · 20 votes
5y
@Eugene Davis
Hi - I can't figure out how to past a link to the blog. Still working on navigating this site. I get to it by going to bigger pockets.com/member-blogs. Doing on my desktop computer - I find it is easier to navigate here than the phone app. They seem to function differently.
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