High Flood Insurance? What to do?

7 Replies

Hey Everyone,

I am looking to invest in an area that is a high flood risk. It is a small coastal neighborhood where their seem to be a number of deals but I think the flood insurance on any of the given houses might prevent any of them from cash flowing.

Any advice on how to invest in an area like this? I know its harder to get a loan, and a lot of people I know just buy with cash so they don't need insurance, but how do you finance deals like this? How to get them to cash flow?


Alex Hake

Hey Alex, I recently looked at and evaluated a potential property that was in a flood zone. Based on the premium that the seller was currently paying, the house could've cash flowed. 

Unfortunately, flood insurance is going up like crazy every year so it is practically impossible to make any money or to even predict what you're going to be paying in 5, 10 years. For that reason, I'm going to steer clear of any properties that are in a flood zone. 

I am in a flood zone in SoCal and paid over $4,000 a year for flood insurance with FEMA aka NFIP. I had my agent check around and he found a policy through Lloyd's of London for around $850. (Insert government inefficiency joke here) Also check to see if a surveyor can get you out of the flood zone completely. I'm currently working with someone that only requires me to pay if I get out of the flood zone.

How legal/ ethical/ possible is it to hire a surveyor that offers you that deal? How do they lift you out of a flood plain?

Would love to take advantage of that if its something that is possible. 

Interesting concept @Andrew Bergman , I would love to hear more about this. From my understanding, the FEMA maps are widely considered to be outdated and therefore not very accurate in some/many cases. Are you talking about having a surveyor research and somehow prove that the FEMA maps are wrong in specific instances?

@Alex Hake @Jordan Decuir I could probably speak more intelligently to this topic once I've completed the process. My understanding is that FEMA chooses an area and makes their flood maps based on elevation. If you can prove, through a qualified surveyor, that your house meets the elevation requirements then that will usually satisfy the lender that is requiring the flood policy.

Any property could be elevated out of a flood zone. That’s why coastal Carolina, all new builds are on stilts about 23’ above grade. Nothing new. In fact, NFIP requires elevation certificates on most properties in the highest of hazards.

No FEMA maps are not horribly out-dated. They are revised very regularly.

Lloyd’s is not offering based on being more efficient. They are buying market share. Something that happens frequently in insurance. Once they have what they want, they will raise rates.

Feel lucky that $4,000 is it on flood insurance. Here in Florida a coastal $500,000 home can easily be $30-50k a year.

Thanks everyone for the awesome replies.

I live on the Oregon Coast, and (as a Realtor) I have encountered a lot of deals that fall apart when the lender isn't satisfied with the flood insurance or certificate. Most investors just say use cash and take the flood risk upon yourself.  Some policies here can easily be 20k/ yr

The main strategy here is for Buyers to assume the flood insurance already on the home. This can keep the costs down. 

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