How do you deal with a property on a flooding zone?

Question

I'm looking at some deals and I found this one that is calling to me, it looks like a great deal for a long term rental, but, the property is on a flood zone...
Do you have any experiences with properties like this?
What are some of the things I should be concerned?
If you had any experiences with a property on a flood zone, how did you deal with it?
Thanks in advance!

John Mocker · Answer

Rogerio,

I would advise getting quotes on Flood to determine the cost.  There are dozens of "Private Market" Flood programs.  They are not connected with FEMA or its coverage, National Flood Insurance Policy (NFIP).  These companies use their own rating programs and rates can be significantly cheaper than the NFIP rates.  Many of the companies can rate based on the address and a few other variables.  Make sure your broker quotes many of these Private Market Companies because I have found that the best rates often differ depending on the location, even within the same town.

Colleen F. · Answer

@Rogerio Moura  do a search of the forums on flood zone and you will see a lot of discussion on the ins and outs of this type of rental.  You have to consider the added cost of flood insurance which isn't cheap depending on the flood zone. FEMA is remapping in some areas too. Checkout www.floodsmart.gov for maps.  The term Base flood elevation and the type of flood zones you should get familiar with before buying. Also FEMA coverage is different for investment properties so when you get insurance make sure you know the coverage.

If the property is in a flood zone and has a significant history of floods you have to consider if you want to deal with that.  If it doesn't flood but has a risk due to the zone you its all about your risk tolerance. Make sure your renters have renters insurance.

I grew up and subsequently owned a two family in a flood zone. It had a history of flooding and because of that history I wouldn't do it again. However there are whole sections of town that are in the zone and never flooded. I would be fine having one of those homes as a rental.  It is still a risk but less so.

William Timmons · Answer

I have owned homes in the flood zone. One we got at a discount and were actaully able to pull out of the flood zone, which immediately added equity. Try to find out how frequently it has flooded in the past and get quotes for how much it will cost in extra insurance, sometimes it isn't cheap.

Colleen F. · Answer

@Rogerio Moura  I agree you can also seek private flood insurance but probably the most important part of this purchase is does it really flood?   How much ? How often?   You can alway figure the cost in of flood insurance.  A 100 yr flood is different then  10 years.

Mason Moreland · Answer

Where there are problems, they are opportunities to make $$$!

If you can make the numbers work out, raising the house up (piers, etc) out of the base flood elevation could increase the value of the home quite a bit.

How do you deal with a property on a flooding zone?

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