Flood zone restrictions on our flip

2 Replies

Hi all, great site and many helpful resources.  My first post, thought I would share some info on my recent (still in progress) flip.  It's our first flip, but we own 3 other properties that we rent.

Found a good deal on a local area house, reo, in need of major renovations. On my spreadsheet, everything looked really good for nice ROI, appropriate safety margins built in, carry costs, etc etc. So we pulled the trigger. Also have a contractor already lined up, he had gone through a few properties with us prior to this one, giving us renovation estimates on each.

So, this property turns out to be in a flood zone.  Not necessarily a bad thing.  House has fantastic views of the cove, walk to beach, etc.  On CT shore.  But, turns out you can only spend 50% of the house assessed value on rehab, else you trigger federal regulations around the work.  Meaning raise the house, put on stilts, 120mph windows, all sorts of costly things.  Yikes!

So are working to stay within our 'federal' budget.  Some stuff, like interior floors and paint, don't counts towards the federal limits.

Anyone else encounter this sort of situation?  Any advise?  This is an odd case where we actually have more money to spend on the property than we are being allowed to.

I there a limitation as to how often it can be rehabbed? Like could you hold it for a year and do the rest of what you want to do?

Not sure on the limits yet. I'm still learning. I'll also consider selling to another LLC, but for now the nice feature of this limit is it is forcing us to make good decisions on priorities for renovations. Otherwise we would easily go over budget. Funny how we treat the house as if we would eventually live in it and want top quality everything, whereas this is a business I'm in, and want to fix reasonably well, within time, and within budget.

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