Houston - Buy and Hold in flooding zone

5 Replies

What are your opinions about buying rental property in a flooding zone? I rented in one area and it survived through Harvey - the street was flooded but the water never made it to the garage. However, the area is in a flooding zone according to harris county flood map. The flood insurance is required in order to finance the house via a bank. For buy and hold investor, do you guys invest in these property since the flood insurance is pretty high. 

Thanks all 

From a cash flow perspective, you might be on to something but from a value added, not so much. At least lower property values mean lower taxes helping your cash flow

On the front side of it: you'll need your own cash to fix them up and make them ready to lease. The better deals will be from sellers who don't want to lift a finger.   

You still got issues with maintenance of an older home eating in to your cash flow as in any older home (and cash flow might be your only benefit)

look at the age of the 

1) water heater

2) AC

3) appliances

Get an inspection to see regular rain penetrations, failing mechanical and plumbing, so many things , its worth the money.

I agree with Charley. May be more of a pain than a treasure considering costs of replacement and repair. Also a renter would be required to maintain renters insurance to protect their belongings for their benefit. If you do purchase, you may want to consider a seller financing arrangement. 

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In case tenants get a rental insurance for the properties, then what is covered under that insurance like flood, fire and appliances?

Do we need to buy a additional rental insurance that is not included on it?

Flood insurance is just part of the cost of the rental.  You can ask your insurance agent to look up the flood claim history on the property.  If the only claim was after Harvey, then it may be worth considering as an investment.  If there have been recurring flood claims, then the flood insurance will be higher and you will have issues in the future.  I would recommend avoiding those properties with multiple claims.