Is Buying in a Floodplain Crazy?

6 Replies

Based on the numbers a house I am looking at is a great deal.  But it is in a flood plain and will require flood insurance.

Is buying a house in a floodplain crazy?  Should I run away?

Has the place already flooded or is it in a 100 year flood zone? As long as it's cash flow positive and in a place that isn't flooding every other year, setup sump pumps so you're ready for when a flood happens. Did I mention to make sure it's cash flow positive? This may be even more important for potential flood damages and vacancy while it's repaired...

If flood insurance will be required for a loan, I would consider a flood zone property if it was a good cash deal or if I had the funds to pay off the loan if flood insurance rates skyrocket.   My flood insurance on one  property has more than doubled over the 9 years I've owned it, very frustrating as it was mapped out of the flood zone over 3 years ago, but the state has yet to make the new map "effective" so I'm stuck paying the insurance until they do or until I pay off the mortgage.  

Don't pass up a good deal. Do understand that when you resell, around 1/2 of you potential buyers may walk away w/o even serious consideration.

As long as you can make good money on the rental why not, as @Lynn M. pointed out, prices have gone up on flood insurance. I have one property that is in a flood zone and i have had it for 3 years now and my insurance on the property has gone up $1600 or an extra $133/ m.  with 3 tenants that would be a $45/m increase in rent per tenant. rents in the area i have this property have not gone up since i purchased it which makes it hard to recover that cost. make sure you know your area and the history of rents vs flood insurance increases.

@Michael Foster Having worked in insurance, I may be able to help out here. Flood insurance is different than hazard insurance, in that, flood insurance is guaranteed. It's backed federally. Your property could flood every single year, and they will back up the policy (at least until someone on a governmental level messes that up). Hazard insurance is provided by the company that you have insurance with, so if you continue to have claims every year, they will typically cancel your insurance at the worst or charge what feels like a penalty for having used the policy at best. So my suggestion is the same as the others here, if it's good on the numbers, go for it as long as you carry flood insurance.