Flood houses are super risky, as they may have trouble selling make sure all your comps are in flood zones when doing ARV. Also flood houses are not ones to eyeball rehab numbers on just like fire houses get a professional opinion.
@Lanna Nunez Welcome to BP! If you don't have significant experience flipping houses or as a contractor/in construction, I'd probably pass on a flood house as one of your first deals. However, I do like the Houston market! The demographics are great - population, income, and house values are all growing, while crime is decreasing. I've been looking in parts of Houston as well! Best of luck.
@Lanna Nunez please talk to me or someone like me, a civil engineer that specializes in land development, specifically with properties inside the COH corporate limits, before doing this deal! Seriously, give me 15 minutes due diligence time to help you look at this, no charge, in hopes that you don’t step on a financial land mine. Houston made significant changes to their Chapter 19 flood plain ordinance last year that has profound impacts on development AND redevelopment. This area is ripe with wholesalers trying to pass off junk property that will soon be undevelopable once the updated interim flood maps get released.
@Lanna Nunez I recall, kast year, going to look at houses for sale. TONS of flood houses on the market, and the ones that werent flooded had big signs "NEVER FLOODED" those where the houses people flocked to with their realtor.
@Michael B. And there’s a good reason for that. Here’s the short version. If a house recently flooded inside the city limits of Houston and the rehab/repairs cost more than 50% of the pre-flood appraised value (per HCAD), that is classified as a substantial improvement. Once you cross that threshold the City requires the entire structure to be in full compliance with all ordinances. The 2018 revision to the Chapter 19 Ordinance (Floodplain) requires all structures in the regulator floodplain to have a FFE 2’ above the base flood elevation. The release of the NOAA ATLAS 14 rainfall data released in August of this year has made the 500 year flood plain the base flood elevation.
This means that if the $60k flood damaged house you picked up for $20k needs $30,001 in repairs, plan on spending another $30k to raise it if pier and beam or $50k+ for a slab on grade depending on size.
Know your local requirements and do you DUE DILIGENCE!!
I would not considering doing a flood house as a flip. Flipping is tough enough.
Time heals and memories fade, so if you find a deal and you can make it work as buy/hold, then OK, rent it out. I know a number of guys buying in areas that flood pretty often (Bear Creek for one), and they rent them out.
You also need to differentiate from Harvey and the other massive flooding events we've had around here. And believe this - sellers have NO problem lying to your face about flooded properties, so make sure you have a way to verify before your option period expires.
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