Bad idea to buy in Houston (flood areas)? How much can you lose?

8 Replies

Is it bad idea to invest in properties in Houston due to hurricanes and the high chance of flooding? How much would the insurance be? How much can you lose if your home gets flooded? Is the ROI significantly lower and impacted than areas outside of Houston?

@Tom Smith good question about investing in Houston. The answer is that to NOT invest in Houston due to fear of flooding is probably a BIG mistake as there are some very simple precautions you can take to mitigate the risk extensively. The Houston economy is one of the biggest and fastest growing in the Nation/World so it is a great place to invest if you take the proper precautions.

Here is one: http://www.harriscountyfemt.org/

This is an interactive flood zone map. We use it when we do acquisitions of properties and lots. You can see exactly where any address is in Harris County in relation to flood zones. We don't buy in Flood zones [unless we get a deal we can't pass up] and cash flows even with flood insurance. 

A little about flood insurance: Protects you from rising VS falling water. Insurance in "100 year flood zone" is quite expensive, thousands per year. Insurance in "500 year flood zone" much less expensive [$400-$600 annual] on $150K property. Insurance out side of any flood zone is about the same as the 500 year zone.

Flood damage to property is expensive to repair without insurance and a decent rule of thumb is to budget $25/ft for repairing a home in a flooded area [but that can vary a lot depending on the damage] 

Originally posted by @Brian Foster :

@Tom Smith good question about investing in Houston. The answer is that to NOT invest in Houston due to fear of flooding is probably a BIG mistake as there are some very simple precautions you can take to mitigate the risk extensively. The Houston economy is one of the biggest and fastest growing in the Nation/World so it is a great place to invest if you take the proper precautions.

Here is one: http://www.harriscountyfemt.org/

This is an interactive flood zone map. We use it when we do acquisitions of properties and lots. You can see exactly where any address is in Harris County in relation to flood zones. We don't buy in Flood zones [unless we get a deal we can't pass up] and cash flows even with flood insurance. 

A little about flood insurance: Protects you from rising VS falling water. Insurance in "100 year flood zone" is quite expensive, thousands per year. Insurance in "500 year flood zone" much less expensive [$400-$600 annual] on $150K property. Insurance out side of any flood zone is about the same as the 500 year zone.

Flood damage to property is expensive to repair without insurance and a decent rule of thumb is to budget $25/ft for repairing a home in a flooded area [but that can vary a lot depending on the damage] 

 Hi Brian, thanks for the great post. Do the insurance companies use this exact map (the harriscountyfemt.org map) when quoting you flood insurance? How much would the flood insurance be in 500-year zone and in the X flood zone on a 300k, 400k, and 500k house? Do you know how I can get accurate quotes? I am looking at properties near the Medical Center and Kirby/Montrose/Galleria areas.  

I am echoing what @Brian Foster said.  

The entire city isn't in the flood plain. It may seem that way from afar on TV but I saw a statistic that only 6% of the structures in Harris county flooded from Harvey. 

The Harris County Flood Zone map is easily available online, and it performed perfectly during Harvey. The only areas not in a flood zone that flooded were those areas that were affected by the opening of the dams.

There are two basic flood zones: The 100-year zone and the 500-year zone. I would be more cautious of the 100-year zone because it is much more likely to flood.

Insurance in the 100-year zone is going to be pricey, well over $1000. I saw a quote for one property the other day that was $2800. In the 500-year zone, you're probably talking $500-$600 give or take.

If you're not in a flood zone it's pretty cheap. My house is not in a flood zone and I only pay $400 a year.

Hey we had a house flood. We made about 30k off of the flood as we got an SBA loan well over the damage done. We have over 60 doors and only had one house flood. Harvey was an anomaly. I believe that flood risk is a bit overrated as most homes in Houston if flooded would trigger government support for affected home owners. @Tom Smith I'm in Mountain View so can meet up if you want to learn more about Houston.

A note about Houston, we lived there for 25 years and still have a house we collect a mortgage on. The house we lived in from 1988 to 1995 and collected a mortgage on until 2003 never had water reach half way up the curb in all those years. My wife's dearest friend's house, six doors up the street, flooded for the third time in 6 years during Harvey and they sold it to a CA investor for about $60K. They had paid $135K in 2002.

Another friend posted TV news footage of the neighborhood as their boat went past our friend's house. The water was almost to the top of the garage door. I'm pretty sure FEMA will update their map.