Adjusting for vacancy with rental homes in a flood zone.

[Eugene Davis]

Hello, I’m brand new to real estate investing, and I’m hoping to buy my first single-family unit to rent out soon. There are many homes for sale in my local market because of Harvey and Imelda. Many have already been repaired. My own home flooded during the above-mentioned tropical depressions, so needless to say, I have a little flood anxiety. Getting to my main question; does it make sense to buy a rental property in a flood zone and set my vacancy expense for the average repair time after a flood? Allow me to add a few more details. The average time, according to my contractor, to repair a home is 5 to 6 months. My contractor happens to be my brother in law; he takes pride in his work and I consider him an advantage for me getting in this business. Any extra advice for someone who is new would be appreciated. Thank you.

[Colleen F.]

No, not really unless it is deeply discounted and flood is a rare occurrence. Flood insurance can be expensive and is required if you have a mortgage. FEMA has different standards for helping investors, if at all. That means in a flood you go to your flood insurance if you have it or an SBA loan if you don't. Of course, there are areas that are in a flood zone and don't flood and it may be worth it there. Harvey did flood many areas that weren't in a flood zone but if there are other options maybe your first investment isn't the place to start with flood zone properties.