Evening BP Family,
We're rookies and just finished driving for dollars and seen a number of empty homes in the houston area due to flooding? Is investing in a home that flooded during Hurricane Harvey a good idea? Will the value of the neighborhoods return? We plan on BRRRR'ing if that help with your guidance.
Thanks in advance.
T & Q
The communities will eventually come back. The big question is: when?
I think it's important to not only investigate the home but check out the entire community. How are the utilities affected? Roads? Schools? Shopping? Businesses?
In a large-scale natural disaster, you have to look at more than just the individual property.
Nathan is correct, it'll eventually come back. I think Houston could even bounce back quicker than even New Orleans. Not only are Texas folks resourceful, there's also a lot of money and business in Houston, as well as population growth.
But if you're buying property in that area you're going want to be sure whether or not the property is in a flood plain. And if it is, will there be flood insurance that will effect your cashflow? (chances are it will) You also want to be wary of mold.
Also, with all the high demand of supplies and construction, you want to make sure this won't effect your renovation costs or timeline. In scenarios like this, subcontractors could be in short supply.
WOW, great food for thought. Thank you both.
@Quinity Williams I have been looking closely at the market of the houses that were flooded. I can assure you that the prices have behaved in an unpredictable way and despite all the damage, the city has recovered quickly. In fact, there are many shortages of materials or a long waiting period. I really believe that this market is a good opportunity for BRRRR.
@Quinity Williams We buy in Houston, but not flood homes. You definitely can make a lot of money on those homes, we just don't want the additional hassle of the flood stigma for either our renters or the buyers when we eventually sell.
Camilo and Jeff, Thank you both.
@Quinity Williams . I'm also seeing some reports that homes in some of worst flooded areas of Houston will be required to be lifted (and built up) to above the flood plain.
Buying flooded homes in Houston can make you money or take your shirt - know what you're buying and what you will be required to do would be my advice.
Our house was flooded during Harvey and it was not located in a floodplain. I bought another property 3 miles down the street while rehabbing the old house and listed it for rent once the rehab was done. I originally thought the flood stigma would make the house a little bit undesirable and would take a while to rent it out. But to my surprise, we had several applications submitted to us within 2 days of listing the property and have since rented out the property.
Although I did get a couple of prospective tenant, who balked that the property was flooded, but because we put in higher end fixture, appliances, flooring, etc... most people generally didn’t care that the property was flooded. They only care about whether I accept tenants with low credit score or not.
I get that some people don’t want to deal with any issue that might arise out of a flooded property, but in my opinion, there’s plenty of people that want to live in a nicely rehab property at an affordable price.
As I write this post, I just signed a contract to buy another flooded property.
Jim and John,
Thank you both so much for your genuine advise. We greatly appreciate it!
One thing to note and take into consideration, as @John Vo and @Dave Van Horn mentioned, is if this is a first time flood or not. Harvey was a pretty real freak of nature that redefined the flood planes. If the property is a first time flood, people are likely going to overlook that fact (granted you do proper work) understanding Harvey as a 1,000 year type of storm. If this is the properties 3rd, 4th or 5th flood it might play into the stigma way more.
Also, take note that all of those displaced people and families are in search for new residences. Many jumped into an apartment complex on 6 month or 12 month lease and will soon look to get back into a SFR. If you time rehabs proper, there will be a huge increase in buyers for renovated properties.
I have been in the market to buy a flooded property to BRRR, but the more I look, the more I believe that the flood stigma is still very strong. In fact, look up the HAR listings for the past 8 days in the energy corridor and 8 new completely renovated previously flooded homes are being foreclosed. However, some flippers did manage to sell for a profit, but the renovated homes that didn't sell and whose investor didn't have the money to keep paying interest, are getting foreclosed on. I believe that the renovated home foreclosure epidemic will likely only get worse and probably bottom out next year.
And the previous owners of those recently foreclosed renovated homes were two institutional investors who bought over 200+ homes after Harvey. If the rest of their inventory also gets foreclosures, it will be a tough market to be selling a flooded home, even if its immaculate.