As I watched tropical Storm Lee dump buckets of rain on my house, I was reminded of what has certainly been one of the most costly lessons over the last several years. When I began investing in residential properties 6 years ago, I had no concept of the devious and destructive ability that water can have on a property. Having had to learn this lesson multiple times on multiple houses throughout the years, I have developed a much better eye for potential water problems on investment properties.
Here are a few tips regarding water and flooding that I would pass along to any investor:
- Make sure the property you are buying is not in a flood zone (unless the numbers really make sense even with the risk and extra expense). Most lenders will run a flood certification before approving a loan, but many investors are buying with cash or private money and this may not get checked before closing on the property.
Homes that FEMA determines to be in a flood zone come with not only the risk of flooding, but also a hefty price tag for flood insurance. What may appear to be a great deal may turn out to be costly to insure and difficult to sell if the flood zone is not determined before purchasing the property.
- Watch out for basements. It’s been my experience that almost all basements (especially older homes built with concrete block) let some amount of moisture into the basement. Even with proper grading, the hydrostatic pressure that builds up against the outside of a basement wall in many cases will overwhelm the integrity of the water barrier and allow some degree of water into the basement. I have found that this can vary from a damp wall all the way to 4 inches of water in the basement after a hard rain.
When examining a potential investment property with a basement, it is critical to look for evidence of water intrusion. This could be stains on the wall, stains on the slab directly adjacent to the wall, mold on the studs, or perhaps mud stains somewhere else in the basement that appear to have been from standing water. Keep in mind that if you decide to move forward with a home where water intrusion looks likely, the cost to waterproof the basement is typically not cheap.
- Take a good look at the grade of the land around the property. This is going to be more or less important based upon what kind of rainfall a particular area typically gets. For those areas that experience heavy downpours, it is especially important to make sure that all water flows away from the foundation. Even on houses without basements, proper grading is critical to ensure that water is not getting into crawlspaces or even flooding into the home.
In evaluating potential investment properties, we typically look for soft or mushy spots around the foundation that may indicate standing water. You may also look for evidence of water in the garage or rotten siding somewhere along the bottom of the house. Many times, it just requires a certain degree of common sense to look at the lay of the land around the house and simple observation to see where water may be creating problems.
From costly foundation repairs to mold infestations, water intrusion can be a very serious problem for real estate investors. While sometimes the hardest lessons have to come from experience, I encourage any investor to do the proper due diligence on any questionable water issues before buying a property. It can be the difference between a profitable investment or a flooded money pit.
Photo: U.S. Geological Survey