Should an "A" Flood Zone Kill a Buy and Hold Deal?

[Ben Stout]

Hey everybody, 

I've gotten myself into a heck of a pickle and I'd like to share this (hopefully brief) account to solicit advice and warn others of potential flood zone pitfalls. 

I bought my first rental 10 years ago and have about 15 right now. My agent is a 30 year veteran of the area and owns the largest property management company in the area and invests in many SFH as well. She recently brought a great deal to my attention and so I began my due diligence. My first fatal mistake was that I used freeflood.com. If you use this, stop. The maps are out of date and you should always use the FEMA site and that site only. Many others are not changed when FEMA decides to redo everything.

So after my EMD is accepted everything is looking good and then I'm told I need flood insurance because the maps just changed. The lady in the county government told me that 18 homes in that division have already been changed from A zone to X zone (insurance not required.) I would need to submit paperwork to have it corrected which requires 4 to 60 days by FEMA, but I would need a survey and elevation certificate.

My agent assured me that flood insurance would only be about $30 a month even if it couldn't get moved, so I went ahead and shelled out the $700 for these reports. After receiving the reports, my insurance premium was quoted by three agents at $1800 a year. This effectively reduces cash flow by enough that it's not worth my while, unless I can get the flood zone changed. Everyone (the agents and lady they know at the county office) seems to think it will get changed as only 1/8 of the house actually lies in the "flood zone," yet I feel extremely apprehensive. 

My options now are to either close and pray or back out and lose the $2,700 I've put into this deal (appraisal, survey/elevation, termite, EMD, etc.)

What would you do?  

[David Krulac]

@Ben Stout 

Always use the FEMA website for flood determination. Flood rates are going to be higher every year for the foreseeable future.

An elevation survey would help you get out of flood insurance.  But even if 1/8 of the house is in the flood zone, then your house is in the flood zone.

Being in FL, you probably don't have a basement.  But if you did one solution would be to fill in the basement, since the flood determination is based on your lowest floor, which counts basement floors.  Some houses can be taken out of the flood zone by filling in the basement and turning a basement into a crawl space. 

There are other things that can be done and as a last resort the house can be raised up out of the flood zone by elevation.

David Krulac