Flooded Houses in Louisiana
Wholesaler · Baton Rouge, LA · Member since 2016 · 16 posts · 6 votes
Hi BP family
Living in Louisiana I'm beginning to receive calls about people wanting to get rid of their flooded houses from the 2016 flood. I have never thought about flooded properties before so I decided to reach out to my BP family for advice.
As buyers of investment properties, is this an area I would want to dive into to wholesale to buyers? I guess my question is do you as investors have an interest in repairing flooded properties if I decide to wholesale them?
I have to say Mr. Thakkar, you have no idea of the resilience of the people of Louisiana. If you feel that "South Louisiana will become Ghost Town like Michigan" it's okay, you just don't understand how this type of adversity only makes us stronger than if this never happened. The shared struggle will in no uncertain terms lead to the shared triumph on the other side of this situation for us.
Katrina was a once in a lifetime event for those who weren't born before Hurricane Audrey in the 1960s. Who do you speak for when you say "people are tired of the flooding issue?" Flooding, tornadoes, earthquakes, snow and ice storms, wildfires etc, - disasters happen all over the country. There's nowhere to run to and NO THANKS, but we're not looking for anywhere to run.
I was thinking of this myself and would be interested on everyone's thoughts.
i am headed to Baton Rouge tomorrow to help in the recovery of a friend of mine and will be looking for deals while I am there.
I would love to know the ins and outs of this as well. Would these be properties without insurance coverage or with insurance coverage? I suppose you would have to wait for any insurance settlement to go through before conducting a purchase/sale? I would love to hear from anyone with experience in this area also. Great question.
Yes, I am ready to buy every flood/water/mold damaged property you can secure in Baton Rouge as long as the price is right and it's really worth my while. In fact I decided today that I am going to put out all the "We Buy Houses" signs I have in my attic just waiting for a rainy day and do some of my own marketing.
I'm not going to pass up this opportunity if there are sellers in pain and we can alleviate their pain and pick up a deal in the process. I'm struggling to manage my own properties cleanup at this very moment and wondering how I'm going to go back to work Monday, but regardless I will not miss this opportunity to buy and accumulated houses.
I FEAR NO MOLD!!!
I'm headed there Friday to help a friend gut his parents house and will keep an ear out for people talking about ditching properties. This is a crazy situation for these people because only 12% of the flooded homes had flood insurance because most weren't in flood zones. There will be lots of people who will just want to walk away because of this experience, it can be very scaring to some. I think there will definietly be deals to be had BUT I also think that you're going to be paying a ton of money in flood insurance on these units so buying right will as always be key. New flood maps will be drawn up quickly and these areas will more than likely be added as 100 Year flood zones. I'd bank on 100-150 a month in flood insurance premiums depending on your coverage. @Ralph Dicharry
I personally would steer clear of properties that flooded. Insurance goes up, hard to sell, etc..
Good luck if you go this route...
I'd love to learn more about these flooded properties as well :)
I'd be extremely interested in purchasing some of those properties, as an investor located in the BR area. If anyone has some good deals, I'd love to chat with you, if you have time. If that sounds good, send me a PM. :)
I'm also considering buying flooded properties, but here are my thoughts and concerns.
1) What will future flood insurance costs look like? I've heard that flood maps will not be redrawn quickly, but that it will take years. Therefore, there may be an opportunity to get houses for a good deal and help the thousands of displaced people get a newly rehabbed home to rent.
2) How many people will decide to leave and not come back?
3) I fear buying a flooded house in a neighborhood filled with tons of other empty houses. Let's say I rehab the one I buy, and then half the neighborhood doesn't come back or takes two years to return. What does that mean to the future value of the home? While I think I may be getting a deal, I may just be paying the new market price for the home that will not appreciate for years and years.
4) What does this flood due to the macro-economic picture of South Louisiana. It's hard to get my head around the idea that only about 10% of the people in 60,000 flooded homes had flood insurance. In my mind, this is going to bankrupt a ton of people. Those that don't go bankrupt will have to put all of their hard earned money into their homes and have less disposable income which will crush the economy around here.
5) Real estate investing 101 - invest in the path of growth. Is Baton rouge going to boom with all of the reconstruction or go bust due to the drain on resources of all of these flooded home-owners?
6) Is the an investment opportunity of a lifetime or a risk that will result in future dread?
I feel South Louisiana will become Ghost Town like Michigan...
People are tired of flooding issue. Katrina and now this flooding.. what if another hurricane in horizon.... Personally i move out from this area if this is common issue...
I have to say Mr. Thakkar, you have no idea of the resilience of the people of Louisiana. If you feel that "South Louisiana will become Ghost Town like Michigan" it's okay, you just don't understand how this type of adversity only makes us stronger than if this never happened. The shared struggle will in no uncertain terms lead to the shared triumph on the other side of this situation for us.
Katrina was a once in a lifetime event for those who weren't born before Hurricane Audrey in the 1960s. Who do you speak for when you say "people are tired of the flooding issue?" Flooding, tornadoes, earthquakes, snow and ice storms, wildfires etc, - disasters happen all over the country. There's nowhere to run to and NO THANKS, but we're not looking for anywhere to run.
Well said Robert.
Having watched this unfold on a smaller scale (~4500 homes) in north LA earlier this spring (Monroe area), I can tell you what we have seen.
Primary differences I see between our situation and the current one is this is much larger scale and a higher percentage uninsured. It will depend on the macro economic picture, but I feel we have rebounded and continue to persevere. Based on what I know about Louisiana, I expect to see more of the same here.
Based on experience in the NJ area due to Hurricane Sandy, this will not be an easy task. Depending on the house, and how much water the house took in, the house may have to be lifted. In my town, Keansburg, NJ, most homes were flooded, as well as mine, and the ones that were flooded and "substantially damaged", 51% of more of damage, would have to be lifted.
My house had to be lifted roughly 10 feet to meet the new FEMA requirements on the 100 year flood level, which in an ideal scenario is not that difficult to do, but the issue is with the contractors.
The contractors in the area would take on 30-50 jobs at once, and they will take FOREVER to fix the house. It took them close to 2 years to finish the work on my house. TRUST ME, they will tell you that they can finish your project in 45 to 60 days, and you will see yourself waiting months, maybe even years for them to complete your house.
Find a contractor that will be there EVERYDAY to get the job done and get the timeline to finish the house on the written contract. This is super important because contractors will take forever to fix your house, if the timeline is not stated on the contract.
A good article on the subject from our local rag:
Experts predict housing, population shifts in Baton Rouge after historic flooding http://www.theadvocate.com/louisiana_flood_2016/article_869a1806-6654-11e6-b4f5-17157281a229.html
That is some great advice, although the part about raising the house is not entirely applicable to us. I'm assuming most houses in your area are already on piers? In our area, the majority of our houses are attached to a solid concrete slab and raising the home is neither a requirement nor is it really feasible.
Thank you all for your input into this situation. I must say that I couldn't agree more with Mr. Leonard about the people of Louisiana. I am 57 years old and I have seen the people of this great state bounce back from these types of catastrophes more than once. We have some great people living in the state of Louisiana as shown in the news coverage of the great flood of 2016. People here move into action without any thought. We do what we have to do but never doubt, we will rise above this and remain the great people of the State of Louisiana.
I'd also like to thank you Mr. Johnson for your link!
Here is my house. Built on a cement slab, and still had to be lifted. I had about 4 feet of water in my house, thus considering it substantially damaged. They lifted up the walls, then build the block foundation, and sub-floor, then lowered the house onto that. Crazy house project and very expensive.
Living in NOLA, before and after Katrina, I can tell you what I saw here. The first 1 year after, it was a robust rental/selling market. You saw rental rates triple what they were before...and people in line to get them. Furniture stores, car dealerships, and RV dealerships were making a KILLING. But after the dust had settled and everyone had found their new place to live and bought their new furniture and cars, there definitely seemed to be a dip in all that. I didn't own property at the time, but saw for sale/for rent signs everywhere. Seemed to take a few years to pick back up, but now it has been a hot market for awhile on both the selling and renting end.
As for "jack o'lantern" streets, we had those for a few years after Katrina, but I can't think of any currently. Sure, there is the occasional house here and there that is a Katrina leftover, but there aren't the "half the houses are abandoned" streets anymore. For the most part anyway.
A lot of people brought up a good point about the difficulty with contractors. I'm sure rehabs will take longer and be more expensive.
I don't think BR will become a ghost town at all. It is the state's capital and there is a lot of major industry there. I believe the population in NOLA is lower than pre-Katrina levels, but we've hardly disappeared, lol. And the people who left NOLA didn't go far. Most went to the surrounding suburbs.
@Fred Stevenson, I would like to discuss your thoughts and concerns:
1) The flood insurance program (FIP) was a huge question mark before this happened. Congress (Biggert-Waters Act) and FEMA (FIP)have been monkeying around with the rules in the recent past and we are currently following a temporary fix that created the $25 surcharge for O/O properties and $250 surcharge for non-O/O properties. Rates were set to make significant increases on all properties in the FIP in 2014, but the politically expedient "fix" was the surcharges I mentioned above. Reforms are imminent and there is nothing certain, but uncertainty. I'm still only buying outside of special flood hazard areas. [I think significant increases were coming after the coming elections, even before this happened. Sometimes politicians pass unpopular stuff right after an election, because they expect you to forget it by the time the next election happens.]
2) Unknowable.
3) The BR market has a housing shortage as measured by the low inventory mentioned in the article @Brandon Johnson provided a link to (if its the same one I read). It's possible, but unlikely that will happen. I would be extra conservative on valuations until we see how values will be effected long term.
4) This is where I'm thinking totally opposite of you. The silver lining of an event like this is the money spent for rebuilding and replacement of household goods will prime the economy. Huge amounts of money from federal disaster relief, insurance proceeds, and money out of people's pockets will cause economic activity that will drive positive macro economic impacts. There will surely be some people who experience financial ruin due to the burdens of this type of event, but I think that will be a minority of people. Just like before this event, there are pockets all over the market where values or higher or lower and some of those pockets will be created or otherwise impacted by the degree of flooding that happened in each location.
5) Baton Rouge is in the path of progress. This event doesn't change that for the overall market.
6) I would not call it the investment opportunity of a lifetime, because I was alive during the big oil bust in the 80s when you really could have bought some real estate for super cheap in Louisiana. The crux of real estate investing is calculating risk. All of the risks are very real. I think when you talk about "future dread" you are talking yourself out of the business.
As an investor from Monroe, I took advantage of the flood and bought 3 more properties in my target community. I did have to buy flood insurance for all properties (even though the likely hood of another flood in that area is slim) but the benefits and profits are worth it. i paid a little more in carpentry work, still not the equivalent of what a licensed contractor charged, but the work was done relatively fast and my homes are all rented.
I will add this, the city code enforcers required that I either use a licensed contractor, which would have been significantly more, or get my home improvement registration. I chose to get the home improvement registration which allowed me to use unlicensed carpenters to work on my properties and it allowed me to pull my own permits. The home improvement registration allows an inverstor to work on property that he owns but does not live in. The improvement / renovation cannot exceed $75,000.00
i have been in baton rouge for the last 10 days helping friends gut there house and i can tell you that people ARE working on there houses. i road past about 200 houses in the neighborhood i am working in and only saw 1 house not being cleaned out so the people are back. also F.E.M.A. is helping where people had no flood coverage .
@Mike McCarthy, I was wondering about the impact on any revisions to the FIRM maps myself. I haven't had a chance to look at many of the impacted homes in Baton Rouge, but I live in Livingston Parish and I've seen a lot of the damage there. And I can't really see how raising homes would truly be an option for most of the homeowners; most of the homes are on slabs. It just seems like it would be too cost-prohibitive to even consider. I just can't see most of the people who will decide to rebuild waiting for revisions to the FEMA maps to decide.
I think the decision is made as soon as they determine if it's affordable once the insurance payments (or FEMA payments for those who weren't even in a flood zone and had no flood coverage) are known.