Flood factor - Is it a deal breaker?

Question

Hey all,

Has anyone ever flipped a house that appears to have a high flood factor due to proximity to a small river or such? I know the insurance might be higher (and I'll check that aspect), but will it affect the ARV and be harder to sell?

V.G Jason · Answer

I won't invest in high risk flood zones. I see usually lots of nice, well priced houses sit in high demand areas due to flood risk.

Bjorn Ahlblad · Answer

I would not want my tenants or me putting up with any water damage. On the West coast there has been no sea level rise, in the PNW the land is still rising from the last ice age, but we have had flooding from rain and snow melt. Something I always check it is a gating item for me.

Kevin Ivey · Answer

Flood zones are managed by FEMA and can require a different set of permits.  If the house is older than 1984 when a lot of these regs were put in place & you are "significantly" increasing the value of the building they can make you retro & meet current flood standards.  The property could already be in compliance & easy breezy or you maybe getting flood surveys & elevation certificate & an extra layer of permits

H. Jack Miller · Answer

Its not good, I would check to see if its in a flood zone and the cost of flood insurance and factor that in

Will Barnard · Answer

It can be a deal breaker or perhaps not. Generally speaking, any negative aspect to a potential flip home reduces your buyers pool and as such, adversely impacts your ability to obtain the highest offer in the quickest amount of time, a home close to or next to commercial buildings, near rail road tracks, in an airport flight path, without a garage, it’s lots of steps to the front door, on a busy street, etc all can negatively impact your resale value. With a high floor factor, your insurance premiums for you and your future buyer will need to be taken into consideration. Similar to an HOA fee, that added cost will impact the buyers affordability of the home.

So as long as you factor this into your expenses And that of the buyer on your ARV, and the numbers still pencil out in your favor, you can proceed. That said, it has been my experience over many years that when I have decided to take down a property with an adverse condition as mentioned above, it has often but me in the rear on the success so proceed with caution and perhaps find another better deal.

Andrew Garcia · Answer

Hi @Julia Havia, the flood insurance is really the only difference. As long as you disclose that information to any prospective buyers, you should be fine. It might be a little harder to sell since the monthly payment will be a couple hundred dollars higher than similar priced properties that are not in a flood zone. However, it should not be a deal-breaker if you take that into account.