Investing in Bear Creek and Canyon Gate communities

13 Replies

Fairly new investor looking to possibly purchase flooded homes in the bear creek and canyon gate communities.  So far, none of my offers have been accepted and that may have been a blessing!  It would seem there is alot of information being released about the precarious position of these communities in relation to possible flood loss if they ever have to release water from the dam's like they did with Harvey. 

My question is, are there other investors looking to do the same, or are they communities basically off the radar and should be avoided?  I called Fort Bend county to see if a few of the properties I was interested in would need to be elevated, but they responded that the homes are not in the flood plain and no remediation was required.

Thanks in advance for your valued advice!

My parents house flooded in Canyon Gate and I can assure you, since day 1 that it was accessible there have been signs up about buying flooded houses. Canyon Gate is technically in the Reservoir though, it has nothing to do with any dam release.

@Carlos O'Neil I am not sure of the condition of Bear Creek and Canyon Gate but I have seen a lot of activity in North Harris County (Klein/Spring area).  I have personally been apart of several transactions with flood houses and there are some good opportunities for someone willing to take on a big project.  

My advice is to look in areas that did not flood previously to Harvey as I expect the value in those areas to stabilize before other more "risky" areas.  Also if you are new to flipping taking a swing at a flooded house that had 8' of water is like swinging for the fences, especially if you are considering working with flood elevation. You might hit it out of the park but there is a risk you could strike out as well.

Be sure to NOT use pre-Harvey values to run your projections on, there is too much risk in that.  I have heard anything from a 10%-30% pre-Harvey discount is expected but you will not know until things sell and it will be very location dependent.  Remember appraisers use "sold numbers" to come up with values, so if people discount the houses out of the gate things will be off to the races.

Finally, I would suggest partnering with someone who is or has done a rehab like this.  There will be many things with a flooded house that you need to consider, like AC, ducting, MOLD, electrical, etc that would normally not be a problem if it wasn't for the fact it was under 8' of water.  There are great opportunities out there but you need to go in eyes wide open.

Originally posted by @Kevin Coggins :

My parents house flooded in Canyon Gate and I can assure you, since day 1 that it was accessible there have been signs up about buying flooded houses. Canyon Gate is technically in the Reservoir though, it has nothing to do with any dam release.

Hi Kevin.  I am sorry for their loss. I know alot of people were affected in that community.  We sincerely want to help the community move on and rebound.  Would you as investor, invest into the community or are you staying away?  

Originally posted by @Todd Faulk :

@Carlos O'Neil I am not sure of the condition of Bear Creek and Canyon Gate but I have seen a lot of activity in North Harris County (Klein/Spring area).  I have personally been apart of several transactions with flood houses and there are some good opportunities for someone willing to take on a big project.  

My advice is to look in areas that did not flood previously to Harvey as I expect the value in those areas to stabilize before other more "risky" areas.  Also if you are new to flipping taking a swing at a flooded house that had 8' of water is like swinging for the fences, especially if you are considering working with flood elevation. You might hit it out of the park but there is a risk you could strike out as well.

Be sure to NOT use pre-Harvey values to run your projections on, there is too much risk in that.  I have heard anything from a 10%-30% pre-Harvey discount is expected but you will not know until things sell and it will be very location dependent.  Remember appraisers use "sold numbers" to come up with values, so if people discount the houses out of the gate things will be off to the races.

Finally, I would suggest partnering with someone who is or has done a rehab like this.  There will be many things with a flooded house that you need to consider, like AC, ducting, MOLD, electrical, etc that would normally not be a problem if it wasn't for the fact it was under 8' of water.  There are great opportunities out there but you need to go in eyes wide open.

Todd thank you for your reply. I have considered the flooded home may be a tall order, but although I am new to real estate investing, I am very good with data!  That 10-30% discount is generally why none of our offers are being accepted as the poor folks are looking to recoup as much cash from their home as possible, but I am not jumping at every opportunity.  I was really hoping to get feedback about whether other investors are looking in the area and what they thought of the community's location as a deterrent to future sales.

For me, I have to get an outstanding deal on the property to justify the potential long carrying period as the community digs out and gets back to normal.  There are also many lawsuits being filed by the residents against Fort Bend and the Army engineers for not disclosing the "maximum flood pool" warning on the title documents.

--Honestly just answered my own question lol.  I think we'll look for opportunities outside of this area.

I would think this type of rehab is not for the beginner. I have no experience flipping houses, and you shouldn't put much stock in advice from people who haven't done what you want to do, but I am giving my opinion anyway. It just seems very risky, unless you are sure you are acquiring the property at a significant discount.

I agree with Paul.  I live about one mile north of Canyon Gate.  My house did not flood, thank goodness, but what those residents went through (and are still enduring) is terrible.  To be clear, the area did not flood because of the Barker reservoir release; the release actually moved the water away from the Katy area.  Canyon Gate is low enough that it will flood when we get an enormous rain event like Harvey and as extreme weather potentially becomes more common you are looking at a very real possibility of this happening again.  I think that you can find much better opportunities without so much risk.

Originally posted by @Paul B. :

I would think this type of rehab is not for the beginner. I have no experience flipping houses, and you shouldn't put much stock in advice from people who haven't done what you want to do, but I am giving my opinion anyway. It just seems very risky, unless you are sure you are acquiring the property at a significant discount.

There is certainly more risk with these homes.  I cant help but think that where there is risk, there is also opportunity if the data is analyzed correctly and you enjoy a little bit of luck.  I am watching the area with some interest, but only time will tell.  So many aspects are still in the air.

Originally posted by @Jamie N. :

I agree with Paul.  I live about one mile north of Canyon Gate.  My house did not flood, thank goodness, but what those residents went through (and are still enduring) is terrible.  To be clear, the area did not flood because of the Barker reservoir release; the release actually moved the water away from the Katy area.  Canyon Gate is low enough that it will flood when we get an enormous rain event like Harvey and as extreme weather potentially becomes more common you are looking at a very real possibility of this happening again.  I think that you can find much better opportunities without so much risk.

 Hi Jamie,

I agree, I really do feel very bad for them -- especially given the circumstances and information that's been released post flood about the position of the community relative to the reservoir.  We actually drove the community and found its amenities to be awesome and so family friendly -- hard to believe that community was so devastated a few months ago.

For the right price would you invest in that community knowing the risk?  As of now, the flood maps don't show the majority of the community in the 100/500 flood plane and ft. bend county is NOT requiring remediation before rebuilding.  

Originally posted by @Carlos O'Neil :

For the right price would you invest in that community knowing the risk?  As of now, the flood maps don't show the majority of the community in the 100/500 flood plane and ft. bend county is NOT requiring remediation before rebuilding.  

Hey Carlos, I would not, but only because I don't feel like taking that much risk.  I would be concerned about getting the right price, finding ethical contractors to do the renovations (very hard to find right now given all the post hurricane work), mold and issues like that, and then either finding a tenant or being able to sell it.  I just read a good local article about post-Harvey real estate and it specifically mentioned that all buyers and renters are asking if the prospective home flooded.  With Canyon Gate everyone in this area knows how bad it was . . . people literally had five feet of water in their homes and were on their second floors and roofs waiting to get rescued by boats.  I think that it would be hard to sell or rent, frankly.  

You could certainly make money but you might get burned too.  Just tread very very carefully.

Originally posted by @Jamie N. :
Originally posted by @Carlos O'Neil:

For the right price would you invest in that community knowing the risk?  As of now, the flood maps don't show the majority of the community in the 100/500 flood plane and ft. bend county is NOT requiring remediation before rebuilding.  

Hey Carlos, I would not, but only because I don't feel like taking that much risk.  I would be concerned about getting the right price, finding ethical contractors to do the renovations (very hard to find right now given all the post hurricane work), mold and issues like that, and then either finding a tenant or being able to sell it.  I just read a good local article about post-Harvey real estate and it specifically mentioned that all buyers and renters are asking if the prospective home flooded.  With Canyon Gate everyone in this area knows how bad it was . . . people literally had five feet of water in their homes and were on their second floors and roofs waiting to get rescued by boats.  I think that it would be hard to sell or rent, frankly.  

You could certainly make money but you might get burned too.  Just tread very very carefully.

 I would agree with that and other feedback given so far.  Initially, I thought there might be specific scenarios to grab some buy and hold properties, but as I mentioned earlier, the research shows that Canyon Gate specifically is definitely a hard sell, while bear creek appears a little better, both are very risky.  I have to admit I was on the fence for a while though.  Fortune favors the bold, and sometimes the bold get burned -- right? :)  thanks.

Wishing you the best!  If you do proceed I hope that you'll report back on how it's going.  :-)

I looked at houses in canyon gate a couple months ago and even met with 7 or 8 homeowners to discuss buying their homes. In the end, I realized that since everyone single one of the 700+ houses in the neighborhood flooded and had been gutted, it will take a long time for this sub to recover. Not to mention the stigma that will never leave. I think some of the investors I saw buying houses in there right afterwards jumped the gun a little. 

Originally posted by @Gene Cook :

I looked at houses in canyon gate a couple months ago and even met with 7 or 8 homeowners to discuss buying their homes. In the end, I realized that since everyone single one of the 700+ houses in the neighborhood flooded and had been gutted, it will take a long time for this sub to recover. Not to mention the stigma that will never leave. I think some of the investors I saw buying houses in there right afterwards jumped the gun a little. 

 Gene, I think you are 100% correct.  Initially, I was drawn in by the depressed home values, but when looking at the stigma and precarious location of the subdivision, I figured it would be a a long time before people were willing to lease or buy in that area.  With most of the residents filing class action lawsuits, I am not sure of what the future of both bear creek and canyon gate will be.

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