Investment Property in Flood Zone...Thoughts?

Question

I found a property I can get for about 100k and I think once it is fixed up I can sell in low 200s or rent out. My main concern is that it is in a "flood zone" although it RARELY floods. What is everyone's thought on investing in a property located in a flood zone? Will it make it more difficult to rent or resell?

Thanks!

Brian Leon · Answer

@Chris Laino an investment in a flood zone is clearly going to cost you more because you'll need flood insurance as mandated by the banks. However, I know lots of investors that can't really say not to do it because many of their best investments are indeed in flood zones. It's just important to include flood insurance in numbers and plan for those annual rate increases if it will be a rental. On top of that, look into the actual risk of the property vs. the blanket statement of being in a flood zone. For example, what is the history of floods? is the property actually elevated several feet above ground floor?

That being said, understand that flood risk is there and a real possibility - as they all say - plan for the worse and hope for the best.

To directly answer your question - I don't think it will impact a renter but another buyer may have the same thoughts you're having now.

Matt Vezina · Answer

I used to live near a town with a few of the rental heavy streets in the "1% annual chance" zone, looked at a few properties there.  It doesn't seem to affect rent amounts at all, the average tenant probably isn't pulling the FEMA maps when shopping around.  If you finance the property you must purchase flood insurance, rarely or not doesn't matter if it's in the zone.