Flipping a house in a 100-year floodplain

8 Replies

Hey everyone,

Is there anyone flipping flooded houses in Houston?

We are about to close on a deal in a 100-year floodplain. First time flood, got about 3-4 ft of water. 

Purchase Price - $130k, Repairs $30k, ARV - $235k. Flood insurance - $1,900/year, Property Taxes - $6,200, Rent ~$2,000

Numbers are great, but should a 100-year floodplain be a big concern? 

Is there any chance we won't get a permit to rebuild, or what are the chances that we'll be required to raise the house up? Any advise from experienced redeveloper would be highly appreciated.

Thanks guys 

Lukas, great idea!

It all depends on where the property is and where it sits if you had a property that had flood loss (most of Houston were in X zone where they flooded but were not required to carry flood insurance. If the property is in the high-risk flood zone and did flood then the NFIP (government) program would be the only one that will pick up the risk. X zones even though the property flooded get subsidized by the government program. There is also the Private flood insurance that you can look at too. the Government flood program is up for review in December and there are significant changes that will be coming that think will help those who are required to purchase flood insurance as the 50-year monopoly that the NFIP program has is loosened more. 

I would suspect FEMA will be revising the flood maps for Houston. Raising the house is very likely. If you are flipping you may be able to dodge any future flood issues but be prepared to old it a bit or lower the price.

I'm very suspicious of your repair estimate of $30,000, especially if the home got 3-4 feet of water. I was looking at some flooded homes for my clients and the estimates I received from different contractors were in the $58,000 to over $60,000 range.

Our normal rehab budget is about $20/ft2, for flood damage that can go to $30/ft2.

So a 2,000 ft house normal rehab we would budget $40K, flood damage could go to $60,000.

Thanks everyone for your input. We committed to the property, I'll keep the process posted here. 

@Fred Heller Yes, I revisited the property twice with contractors. We will most likely spend about $50,000+ in repairs, although, we bought the property for $115k (from $130k), so huge savings here. 

We bought it for $38/SF, comps are at $90-100/SF

The more I talk to investors who are flipping in the area, the more I hear that they won't lower their listing prices due to the flood.

Any update on this. I am looking into a property my self for the first time and just trying to see what repair costs ACTUALLY cost. My situation  house and arv wise is similar to yours

I believe the cost of flood insurance will be critical in analyzing this deal. The few times we have looked into properties in flood zones, we have found the cost to be a deal-breaker. We bought a duplex that was literally a few houses away from a flood zone. Flood insurance requirements would have diminished the profits. That said, we live in an area where it's fairly easy to avoid flood zones. So why buy a house in a flood zone when we can buy one in the same neighborhood for less expense and get the same rent on a comparable property?

Of course, being in Houston or any other large flood zone, it is certainly more likely that homeowners and tenants are accustomed to that additional cost and market rents are adjusted for it.

So in the end, this reply is really directed at others who can avoid flood zones. I suspect you will do fine- it's not like you're among a small group paying the expense.

I'd like an update on this project too. 

Any unforeseen obstacles? Cost overruns? Market for flooded homes softening? Everything turned out perfectly?

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