Houston Flood Damaged Homes - What will happen to them?
Investor · Houston, TX · Member since 2017 · 5 posts · 1 vote
Houston Flood Damaged Homes - What will happen to them?
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Flipper · Port Vincent, LA · Member since 2017 · 2 posts · 11 votes
9yI can give a little insight to the flooded house situation. I live in Denham Springs, Louisiana and we flooded last year in August. My house flooded just under 4 feet, had not flooded ever before since it was built in 1985. Since this was the only time it flooded I fixed it with the insurance money and am staying. My rent house flooded and I was about to sell it before the flood. Luckily I had insurance on it, was able to fix it and improve it and sold it for $25,000 more than I would have gotten before the flood. I then bought a flooded house before the flood ARV $230,000, paid $80,000, had to put $70,000 in it to fix it and am having my daughter live there, eventually she will get a mortgage on it and start out with lots of equity for her. I also bought another flooded/gutted house in May and am finishing it now to sell, will make about $35,000 on it. I make sure the houses I buy that flooded only flooded just that one time. In my area, fixed up flooded houses sold initially for 20k-$30k more than they did pre-flood because they were completely remodeled. Now the fixed flooded houses are not selling as high price because there are a lot more fixed houses on the market and lots more to choose from. Also, people waiting for FEMA to give them a large check to fix their house will wait a long time as our flood was over a year ago and many people who didn't have flood insurance and didn't have their own money to fix their house are still living in their gutted unfixed houses currently. FEMA hasn't helped much around here, may give $10K-$15K to a home owner but you can't fix a whole house for that. Any house that has flooded multiple times I don't touch, if it is in a flood zone it flood insurance will be too high to afford. And raising houses several feet in the air is extremely costly, I have only seen a few houses raised. Many many more houses were torn down rather than raised up. There are deals to be had on flooded/gutted houses but some homeowners want too much for theirs, some are still sitting today here, not worth buying for the prices they want for them. Sorry this is long. Just thought I would give a little insight. If anyone has any questions or comments I will respond based on my experience.
27 Replies
- Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes9y
Great questions. I suspect that many of the properties are not insured. So some people will walk away from them. The values of Houston houses will be interesting. There will be a shortage of habitable houses, so maybe the prices will remain stable Flooded houses will be semi-stigmatized. Remember that not all the areas were flooded. Areas that were are going to take a major hit in pricing.
Raising the houses is not possible. I think that Houston is going to have to make some serious changes in their development strategy. Lots of water retention areas, less paving, more flood control. Possibly less sprawl development. This hurricane was so intense, that I am not sure planning would have helped.
My final thoughts are that Houston's growth will be stunted. Expect Austin, San Antonia and Dallas to take up the slack in Texas. But enough people will stay and rebuild, provided they feel safe that this will not happen again.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
@Account Closed If I wanted to make a play in Houston, I would think about possibly doing an assemblage of SFR and turning it into high rise mixed use. One man's retention pond is another man's water feature.
One thing about Houston, is many of its jobs do not transfer to other places easily.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes9y
I forgot, the latest number I have heard is 80% will not have flood insurance.
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes9y
If I lived in the area, I would be saving up and getting money lined up to buy and rehab as many as I could. They are calling this a 1,000 year flood, so the chances of it happening again in my lifetime are slim to none. The slab, studs, plumbing, and wiring should all stay in tact. All of the sheet rock, insulation, flooring, and appliances will need replaced. I'm sure the roofs are messed up from wind damage too. I see deals in the future. In a few years, this will all be a distant memory.
- San Diego, CA · Member since 2017 · 33 posts · 7 votes9y@Anthony Dooley may not happen to this magnitude again but Houston has had flooding for 3 consecutive years (if I'm not mistaken) which should certainly play a role in the decision. but I imagine they're better equipped for a rebound than New Orleans was with Katrina
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes9y1000 year floods will occur much more frequently. Despite climate deniers the science is real. Climate change is as predictable as the eclipse. In the same week there were even bigger floods in India and Bangladesh. At the same time Bay Area temperatures hit 120 degrees. You can let your political beliefs guide your investments and deny this is happening. But at least get flood insurance in coastal markets. Speaking of expect rates for those parcels to shoot up astronomically as well. Because insurance companies are not stupid either
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes9y
@Account Closed the world will end at some point. We may as well be rich when it happens.
- 9yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votesAnthony Dooley I was actually thinking about this the other night. If we let world events hold us back from pursuing wealth we'll all be in real trouble.
The Moorhead Team5140 Reviews - Investor · Pearland, TX · Member since 2016 · 246 posts · 136 votes9y
Being one of these guys who spent the last few days pulling soggy carpet out of houses here in Houston, and seeing some of the destruction in many of these neighborhoods; I believe a lot of these people will just want to collect their FEMA checks and move on without actually repairing anything.
With that stated, these people that will actually do this are in neighborhoods that you wouldn't want to be in anyway. I plan to be one of the guys to revitalize a bad neighborhood once the people like this move out of it.
of course, this is after i help the people i know get back on their feet after losing almost everything.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@William E. Texas being a dual action state in the foreclosure process. IE the bank gets the house and can get a deficiency judgment.. Do you think the lenders will go after the owner that walks ??
Obvious the renters just walk.. but what about owners .. ???
you will no doubt have a lot of folks that have little to no debt but no money to rebuild .. and those folks may walk and sell at fire sale prices ( or flood sale price as it were). Its hard to compare to Katrina since the majority of the flooding was in super low value asset areas to begin with. Here in Houston though its all across the board.
But I suspect it will rebound quite a bit different than what happened in New Oreleans. on the gulf coast over in MS those houses got scraped off the foundations so there was not much left to do but to totally rebuild.
- Flipper · Port Vincent, LA · Member since 2017 · 2 posts · 11 votes9y
I can give a little insight to the flooded house situation. I live in Denham Springs, Louisiana and we flooded last year in August. My house flooded just under 4 feet, had not flooded ever before since it was built in 1985. Since this was the only time it flooded I fixed it with the insurance money and am staying. My rent house flooded and I was about to sell it before the flood. Luckily I had insurance on it, was able to fix it and improve it and sold it for $25,000 more than I would have gotten before the flood. I then bought a flooded house before the flood ARV $230,000, paid $80,000, had to put $70,000 in it to fix it and am having my daughter live there, eventually she will get a mortgage on it and start out with lots of equity for her. I also bought another flooded/gutted house in May and am finishing it now to sell, will make about $35,000 on it. I make sure the houses I buy that flooded only flooded just that one time. In my area, fixed up flooded houses sold initially for 20k-$30k more than they did pre-flood because they were completely remodeled. Now the fixed flooded houses are not selling as high price because there are a lot more fixed houses on the market and lots more to choose from. Also, people waiting for FEMA to give them a large check to fix their house will wait a long time as our flood was over a year ago and many people who didn't have flood insurance and didn't have their own money to fix their house are still living in their gutted unfixed houses currently. FEMA hasn't helped much around here, may give $10K-$15K to a home owner but you can't fix a whole house for that. Any house that has flooded multiple times I don't touch, if it is in a flood zone it flood insurance will be too high to afford. And raising houses several feet in the air is extremely costly, I have only seen a few houses raised. Many many more houses were torn down rather than raised up. There are deals to be had on flooded/gutted houses but some homeowners want too much for theirs, some are still sitting today here, not worth buying for the prices they want for them. Sorry this is long. Just thought I would give a little insight. If anyone has any questions or comments I will respond based on my experience.
- Investor · Pearland, TX · Member since 2016 · 246 posts · 136 votes9y
@Jay Hinrichs according to a forbes article we have this quote
"We've got probably 30,000 to 40,000 homes that have been destroyed," said Harris County Judge Ed Emmett."
30k+ houses that go from slightly flooded to nearly completely devastated. I do believe a vast number of these have no insurance to deal with the damage, and will be unable to handle the financial/emotional burden. Many will also be unable to physically handle the work on their own without help. There are a lot of 'out of sight,out of mind' people in this world, if they are able to get a check from FEMA, i do believe some will accept the home as totaled and walk away trying to start anew. I've see it for the Allison floods, i don't doubt it will be different now. I'll find the house at the auction block eventually and have to deal with an old fridge and dried moldy Sheetrock sometime next year.
“A lot of these people are going to be in very serious financial situations,” said Loretta Worters, a spokeswoman for the Insurance Information Institute. “Most people who are living in these areas do not have flood insurance. They may be able to collect some grants from the government, but there are not a lot, usually they’re very limited. There are no-interest to low-interest loans, but you have to pay them back.”
will the lenders go after these people if they just walk away? they'll try,.. but you can't get water from an empty well.
@Angie Byrd you hit on one key point here in Houston. Avoid flood zones. Houston is the Bayou city, we flood, always have in some areas. That is the first criteria that i meet before considering any houses in Houston. I've passed on great deals because i didn't want to deal with the fallout from a flood, and this past week confirmed it all for me.
http://www.harriscountyfemt.org/
- Investor · Prairieville, LA · Member since 2015 · 311 posts · 424 votes9y
With the Baton Rouge flood last year where over 25,000 homes were flooded (the final numbers aren't in yet) for a total population of about 350,000 in the area, the proportions are similar to Houston's 150k flooded for the size of the metro area. Also similar is the amount of people flooded who didn't have flood insurance, about 75%.
Many sellers sold at a steep discount in the first few months after the flood. I have seen 5 to 30% of pre-flood values. These were people with no mortgage, small mortgages, or had flood insurance and just took the totals and ran with it. As time went on, investors from all over came in and normal folks like contractors started buying and prices went up. The lack of housing stock increased all values. A year later, I still see some neighborhoods with 30 to 40% of the homes untouched. Some neighborhoods still have FEMA temporary trailers in their front yard while the house is being rebuilt. By the way, did you know the set-up costs of these trailers are over $100k? The better neighborhoods are the one further along in the reconstruction process. Now, investors are bidding up prices on flooded houses and the price of fixed-up houses is falling back to normal. Price cuts have become common. As a result, margins are getting smaller and smaller. Some investors will be left with a tiny profit or none. Some may have to keep the properties as rentals. Some have chosen to save money on the rehab. Since it takes about 6 months to a year to foreclose on here, a lot of these houses are going into foreclosure right now. Mortgage providers give 3 months of forbearance for a natural disaster. Therefore, in three months, there may be wave of foreclosures. As I understand it, the foreclosure process in Texas is quite rapid.
I am not seeing much "subject to's." Most of these investor purchases are cash purchases. A lot of money is needed to fix the places up, so the purchase price is just part of the equation.
Houston is much different market affecting the outcome. For example, there was much more housing stock available, so I doubt there will be as much of a run-up on prices. Construction costs are much cheaper on a per square foot basis, so I suspect a lot of people will just buy new construction in high areas. Houston had a greater vacancy rate than we had, so a lot of people will have a place to stay.
A far as raising the property, I think this is prohibitively too expensive. It can cost over $100k to do so. And yes, houses on slabs can be raised. In Katrina, there was some of that going on as FEMA set up a program where about half of the costs would be paid for. Without that assistance, I just don't see that happening. And it looks ugly when half the neighborhood is raised and the other half is not. In extreme cases in Sandy, some houses were raised by 20 feet.
- Wholesaler/ Investor · Houston, TX · Member since 2014 · 491 posts · 113 votes9y
Hey @William E. great points! Question: How often is the flood map drawn out and published?
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes9y
Construction prices are going to rise, good quality contractors going to be booked up, crappy contractors will be out in droves. Combined this increased insurance costs... it could make it hard for OOS investors. Local investors or those with a team in place though....
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes9y
@Anthony Dooley you are misunderstanding the meaning of a "1000 year flood". This terminology is very misleading and easy to misinterpret. it means there is a 0.1% chance of a flood like this EACH YEAR. The fact one just happened has ZERO influence over another one occurring next year. Over the course of a 30 year mortgage, that means there is a 3.0% chance of a flood like that occurring. You look like a pretty young guy, so if you live another 50 years, there is a 4.9% chance of a flood like that occurring again. That's a small probability, but it doesn't fall into "slim to none" in my book.
Further, is that 0.1% estimate even right? Who knows? Areas that were open prairies when I lived here (in the 80's and 90's, just blocks from this flooding) are now covered with concrete and buildings. If the probability is now 0.2% (i.e., a 500 year flood) the chances of it repeating in your lifetime are almost 10%. The chances of a 100 year flood (1% chance each year) are 40% of occurring in your lifetime.
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes9y
@Jon Holderman. The last one in the area was 800 years ago. So even if the next one is 400 years from now, I can live with that. Call me a risk taker, but a .1% chance is acceptable risk.
- Jersey City, NJ · Member since 2016 · 23 posts · 13 votes9y
Anybody know if the situation is different for commercial buildings than SFH? I've heard that most businesses have insurance that covers for acts of god, etc. They will take a hit for sure, but probably better than SFHs. Does anybody have a link to a good map of the areas that were flooded in Houston?
- Investor · Cypress, TX · Member since 2016 · 170 posts · 139 votes9y
@Brian Ploszay with all due respect, you don't know the area or it's population. Houston has a long history of flooding and that has not slowed it's growth. We had one of the top 3 flooding events in the city's history in April 2016 (was not even a named storm) and that didn't slow growth or investment down. This event will not slow it down either. What is amazing is that people just rebuild every time. People continue to move here because of job growth and the economy. That will not stop or even be slowed by Harvey.
You are correct that raising these properties is not [economically] possible. It could be done, but it is very expensive. And as far as less sprawl? I believe you will see exactly the opposite with development planned all along the new Grand Parkway (TX 99). And growth is fine as long as flooding is factored into the construction so that properties are built above flood zones and developments are engineered with high water in mind.
This storm was larger with more rain than previous storms and I think you will see some very interesting law suits regarding letting water out of reservoirs in Houston (caused many homes to flood that never flooded before) and also Lake Conroe (exacerbated flooding along San Jacinto River). I'm very interested in to see what these law suits result in both in terms of damages to property owners as well as future policies when it floods (and you know it will) .
- Real Estate Broker · Conroe, TX · Member since 2012 · 165 posts · 46 votes9y
@Brian Foster so would you consider buying a property either in a known flood plain, or one not in a marked flood plain that flooded during Harvey? I'm seeing some of these FEMA payouts and knowing what I pay for Sheetrock, cabinets, appliances, etc I am strongly considering picking up a couple around Conroe for buy and hold.
- Investor · Cypress, TX · Member since 2016 · 170 posts · 139 votes9y
@Eric Thomson I'm not a fan of buying in flood zones for obvious reasons. That said, if you can pick up a buy and hold in the 500 year flood zone and factor in flood ins then that would work. Your acquisition, rehab, and flood insurance need to all be factored into your return because it's not a question of if the property will flood again, but when the property will flood again. If you are insured for that, and happy with the return then I don't see why not.
- Investor · Cypress, TX · Member since 2016 · 170 posts · 139 votes9y
Great flood tool for Harris County
http://www.harriscountyfemt.org/
In my limited (since 1990) history in Houston we have had the following greater than 100 year floods
1994 unnamed (?) flood, 2001 (TS Allison), 2016 (Tax Day flood), and now Harvey. And I might have missed one other...
As you can see there is no rhyme or reason to this 100 year or 500 year thing and I'm not an insurance guy so I don't know if that has any bearing on how these are named.
With the tool above, and also FEMA has mapping tools (not as easy to read) you can see where your property is located.
BTW, flood damage was widespread but the vast majority of property did not flood. If you are risk adverse, then use the tools to stay out of the flood zones. And as one poster noted, the flood zone is a moving target due to development so it is wise and prudent to evaluate (look annually) to see if you property's status has changed.
- Investor · Houston, TX · Member since 2015 · 52 posts · 18 votes9y
Hello, just to add to all the great inputs above, if a house was valued (ARV) to 250K before it was flooded, how would you calculate the ARV after the flood and after it is being repaired (assuming it will go back to exactly how it looked before the flood)?
Is there a magical number to go by?
Cheers,
- Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 783 votes9y
After Hurricane Rita Years ago, the federal government gave some tax benefits to investors buying new homes in the "Rita Go-zone" to spur investment in those areas. Depending on what the govt does, there may be more or less available for investing. Luckily my 2 homes there have minimal damage- just a roof leak. CAn't even think about getting someone out there right now to fix it.
If you are investing in the area, you may have a very difficult time getting workers out there for a while.
- Investor · Gilbert, AZ · Member since 2015 · 96 posts · 46 votes9y
Any idea what flood insurance may cost for a house that never flooded before but flooded this time? Is there a factor based on value?
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