New Construction in Flood Zone

[Deonte Hill]

Good morning all,

thank you in advance for your input. I am looking to do my first deal and have decided to go the route of building a duplex. I am faced with a decision of paying 50k> to purchase a lot in a regulatory flood way or >75k to purchase a lot not a flood zone.

Obviously as investors, the numbers matter, so is this an action I should enact on or should I avoid the flood zone and purchase the higher priced property or take the risk? 

[Chris Kersey]

@Deonte Hill

I think it matters what part of Houston you do this in. I build in Independence Heights which is usually in the 500 and 100 year flood plain. This area pulls comps. and appreciation from the nearby Heights area. The land is about half the cost of the Heights. All of our structure is well above the flood plain with no garages (I build duplexes).

Couple of thoughts:

- Permitting the project takes longer because it has to go through additional departments with the city. I think our last set of plans took 5-6 months approval time (this may have gone down now). 

- Construction is more expensive. There are more hoops you have to jump through with inspections, building techniques and building materials. This adds cost and time to the project.  

- Resale value may be lower depending on factors regarding the flood zone. 

I would suggest not trying to re-invent the wheel. I build duplexes in areas that have good duplex comps for long term holds (avoid overly saturated areas). I try to copy the type of structure thats working (changing the elevation) and use those as comps when I go to use a DSCR loan on the back end to pull money backend.

Knowing what strategy you are going for would help me direct in a more accurate way. Feel free to shoot me a private message. I and a Houston Re investor, developer and agent. 

- Chris Kersey