Duplex in flood zone! Is that worth to buy?

Question

Hello my BP friends,

I find the duplex that I can potentially interested to buy as  owner occupied property. I did analyses on rental calculated I include property managements and other fees. Number makes total sense , i am making total of $154 in cash flow and that include flood insurance cost. My only concern that since its been flooding badly last year , I live in Austin, TX , that near in Martinsdale, what is my expectancy as far finding tenants and dealing if it get flooded. Please help me out, if is anybody deal in Similar cituation . Is this property worth to pursuits ?

Thanks you an advance.

Appreciate any feedback

Lynn Currie · Answer

I wouldn't touch a flood plain property in Austin, but other people like them. The problem is that we actually flood, the properties get damaged, and even if you have insurance, the down time to get it fixed just equals lost money.

As a side note, I helped someone repair their flooded house in S. Austin last year. It took 45 days before they got the payment from the insurance company so the rehab went really slowly. The other challenge is that in this market, contractors are already busy, so to fix fast it's going to be really expensive.

THU NGUYEN · Answer

Thank you for the info.  I'm contemplating the same.  My cf would be $350 to $400 a month after Piti for the duplex but still... Headache is not what I want to deal with.  Also anybody know how to check if a house or duplex had been flooded before?

Fred Heller · Answer

@Sergey Vasylkov  I would pass. I don't know what's going on in Austin, but here in Houston we're seeing areas flood that have never had a problem with flooding before. I was looking at a house last week that flooded in April and it wasn't even in a flood zone (close to but not in). I spoke with a flood insurance agent and he said insurance can be as high as $3000+ a year.

Jared Watson · Answer

why take the risk? There will be others

Shawn C. · Answer

I would check to see how much the repairs and flood insurance would run. Since it is going to be owner occupied, I would have to weigh the risk of selling the property later on in life. Also, if you are having a hard time finding a contractor, send me a PM. I may have one but I would have to check with him.

Scott Schultz · Answer

So if you are Owner Occing it you are ok, and will get the Flood insurance subsidy, but if you move on, keep it,  and need flood insurance you will have to pay actual risk, about 4+ times the subsidized rate, and the diminished value, as well as difficult resale, if your all in cash, and self insure the flood side, and just want cash flow, go for it, but think long term.

Jim Adrian · Answer

Sounds like you are in the 100 year flood plane and not the 500 year flood plane, which is worse.  I would check historical data to see how often it has been flooded in the past. FEMA may have historical data.  It all depends on how big of gabble you want to take.  I would pass as you will have problems reselling this later.

Tamara Elliott-Deering · Answer

With our current lack of rentals someone will always rent your unit but they will probably not be the top tier tenants that most landlords desire. Also, after a flood the flood maps get rewritten so even though you can cash flow with flood insurance this year it doesn't mean that your rates won't rise next year or the year after, plus you'll have to calculate in a lot more for capital improvements and repairs each year because you know a flood will happen again. Remember some of our neighbors have been flooded 3 times this year, and some of my neighbors have been through 2 fires and 2 floods. I agree with @Joe Splitrock the risk is really high on this investment so you'd better get it at a huge discount.

Erick Caffarello · Answer

I was looking at a duplex here in Indiana that was in a registered flood plain.  Sump pit was bone dry, land was bone dry, and it had flooded badly about 8 years ago and had to be torn down and rebuilt...it was a duplex for $34,000...hard to pass up, right?  I'm glad I went back after a fresh storm...the yard around the house was completely slushy, but up towards the house the land was dry, and the sump pit was bone dry.  Too much of a risk.

Flood insurance for that property was over $3,000/year.  It was a brand new duplex, it was so hard to pass up.  But cleaning up after a flood and dealing with a frustrated tenant was not worth the price.  But I loved the duplex.  Absolutely loved it.  Floor plan was awesome, and the master bedroom was AMAZING!

After I sat back and thought about it over the weekend, I opted to pass.  Just not worth it.  Hope this helps.  I know its not what you wanted to hear....

Joe Splitrock · Answer

There is another investor who just bought a duplex in Texas and has spent $4000 on water related problems. I personally avoid any properties in a flood plain or at the bottom of a hill. I would take lower cash flow to avoid that headache.

Here is the thread:

https://www.biggerpockets.com/forums/52/topics/320570-i-bought-a-lemon-how-do-i-get-some-of-the-money-back?page=1#p2068288

Duplex in flood zone! Is that worth to buy?

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