Under contract for a flip in a flood zone. What would you do?

7 Replies

Hello BP,

I am currently under contract with a flip in a flood zone, which will require flood insurance. We are buying from a bank so they do not have any information on the property. With that being said, I will need a flood elevation certificate to get a quote on flood insurance. The target buyer for this flip is a first time home buyer and the flood insurance can range anywhere from $500 to $5000 a year. So it's a gamble. If it turns out the flood insurance is big $ it will eliminate a large pool of buyers :(. Should I be concerned with this? Anyone have any experience with this? We purchased the property for $55, Renovations will be $55 and sale price will be about $180-$190. The flood insurance requirement is a downer though...

Any help would be much appreciated,

Ben

Best,

Ben Haberman

@Benjamin Haberman , I'd do some market research on other recent sales in that area and compare with similar sales outside that neighborhood. People are buying there, so it would be helpful to get a feel for what the "flood zone penalty" is. Then make sure to factor that penalty into your rehab plan to leave wiggle room in your profit estimate. Just an idea. Good luck!

As far as flood insurance, just see what the other houses in your same flood zone are selling for. Those buyers all had to get the same flood insurance. 

But before you do anything you should google FEMA 50% rule. This rule shut us down mid project and cost us many 10s of thousands of dollars.