Rental Property Investor · Baton Rouge | New Orleans, LA · Member since 2018 · 51 posts · 7 votes
At what point does flood insurance become a dealbreaker for you? -$25 cash flow a door? $50? Looking at a deal where the insurance on the building and flood insurance are identical, doubling that cost of insurance per year. What is your take on this?
@Sherman Dunn If you are in a flood area you need flood insurance. You should not do a deal that is so iffy it can be tanked by buying insurance-any insurance. Look for a better deal that one is a non starter. IMO
Ask the seller if he/she has an Elevation Certificate. It may help you lower insurance rates. It costs about $250 to do one in our area, so you may weigh the cost of due diligence. Or maybe the seller may spring for it.
I would say like you were thinking. Just run the numbers. However, I would project a hefty increase in future rates. It has been my experience that the rates increase much faster than inflation.
Also, you must weigh the high flood insurance rates in your exit plan. I have passed on many purchases due to high rates. I know that selling it one day would be extremely difficult. Some properties are not worth keeping in service due to high flood insurance rates. For flips, anything over 1k and you will have a big issue selling it, so it will severely impact the sales price.
@Sherman Dunn I definitely avoid properties that are not in flood zone X (flood insurance not required). But you could come across a deal where the numbers would work even if the house requires flood insurance. Seeing that this thread is old did you end up buying that building?
@Sherman Dunn I definitely avoid properties that are not in flood zone X (flood insurance not required). But you could come across a deal where the numbers would work even if the house requires flood insurance. Seeing that this thread is old did you end up buying that building?
Turned out to be a non-starter, Anthony. It’s still on the market though, been there for quite a while now.