I just wanted to get some insight on our current situation here in Houston and our surrounding areas. As investors I think we all understand the market is going to be full of flooded houses and a demand for livable move-in ready houses will be high. This catastrophe did not discriminate and properties ranging from 30k to 1 million were victims, and unfortunately from the many people that have called me to work on their homes they did not have flood insurance and are really depending on FEMA to help with the situation at hand. Everyone's situation is different and obviously there will be some irresponsible homeowners that will spend their insurance money on a new vehicle and wonder why they will not have enough to cover the 60k repair. This will then be the prime example of a "distressed seller", and this is where we come in to get them out of the hole they just kept digging into. Now here are a few of my questions and would greatly appreciate any input.
Will this be the best time to do short sales as the mortgage debt will be much higher than what a flooded house is worth?
There are many affluent areas still under water or damaged by the storm such as memorial, cinco ranch, meyerland, sienna plantation, etc. some of these areas have houses built in the 70's that in my opinion will need to be completely redone and brought up to code (I have been noticing this before the storm when I go to inspect houses) for a better ROI, these are really the ones I plan to target. What are your opinions on doing these type of flips in older affluent neighborhoods? I know there are houses that have been redone inside the beltway, but I am looking more into the Katy/Cinco ranch are and the Clay Rd area, these houses were flooded due to the overflow of both the reservoirs and now that we all know there is a possibility for it to happen again unless some major overhauling is done to prevent. In my opinion these would be great investments if they do something to prevent this from happening but also if nothing is done these might be areas now known to be in a "flood zone" as they should have originally been disclosed. Any thoughts?
Sorry for the long post.
The Katy/CR area will be interesting as few of those homes had flood insurance. There might be decent deals at bank debt if you have your own team and internalize renovation costs. I'm dubious at best on that area... but I imagine a lot of people will want to walk away free and clear.
Instead of calling it once in a 500-year flood, or once in a 200-year flood, I think more appropriate to divide the year number by 50. Once in a 500-year flood really is a once in a 10-year flood; once in a 200-year flood is really a once in a 4-year flood. Now factoring in that if a house is already flooded twice, it disqualifies for a flood insurance. The reality is you may need to rehab the same house repeatedly with your own money within a decade. Knowing that now let's ask how much you are willing to pay. It has nothing to do with how much is owed on the house. The real question is what is the exit strategy. I only see buy dirt cheap, cheap rehab, creative rental and several years or decade later after people's memory fade, rehab accordingly then sell.
My house has flooded more than twice and I have flood insurance.
It may be interesting to point out that just 11 days before Harvey, Trump signed his infrastructure bill under the shadows of Charlottesville. Buried in that bill was a relaxation of the construction standards in flood zones that were driving up costs. I'm not entirely sure what that means but it would seem that it would make construction cheaper by removing the uniform standards in flood zones. It makes me nervous about the quality of construction post Harvey.
Awesome responses I appreciate the feedback, let me just throw in these 2 areas Meyerland and Sharpstown. These 2 areas have flooded repeatedly within the last 10 years and I have dealt with the renovations for some of these homeowners on more than 1 occasion and actually will be doing the 3rd renovation due to flooding for a client on the same house. It seems people do not want to leave these areas and new home buyers keep paying top dollar to move there. It is possible I am not grasping the situation at hand but it seems to me flood zone or not people are still buying in all these areas. @Zack Bloom that is a very interesting bill, thank you very much for sharing that information.