Would you buy a fixer upper in a flood zone?

Question

Im looking at fixer upper north of Lancaster, CA. It's in a flood zone. Anyone have experience with live in flip in a flood zone? The property needs a new roof, flooring, kitchen, basically I doubt there's any room for profit, but I lived most of my childhood as a renter and I can't stand renting. There's something about four walls and freedom that is calling my name. If I can't get really cheap house in CA, I'm looking out of state as plenty of property is available dirt cheap. Like Cleveland, yes it's a warzone, but it can be my warzone wink wink.

Tom Ott · Answer

Well, Clevelanders divide the city by the river. That property is on the Eastside in the Glenville Neighborhood. That neighborhood has seen better days...much better days. It is just north of University Circle which is booming right now, but it is a little far to feel any of that new development.

Fun Fact: The Glenville Neighborhood is where Superman was born (yes, THAT Superman!) Artists Jerry Siegel and Joe Shuster were from that area.

OH, and Jesse Owens is from there as well.

I may be wrong, but I think Steve Harvey is from that area as well!

Jake Recz · Answer

All I can say is don't just "jump in" to a war zone. I was desperate for my first deal. I drove through war zones. I actually got "chased out" of one. The numbers made sense but... that area. I slowed down. Next thing you know I found a great property on the other side of town! Everybody was screaming mold! I didn't believe it. Guess what? NO MOLD! I jumped in, and never looked back. Take your time. Flood zone? Well... It can be stressful sometimes but I got flood insurance for that. Yes, it's expansive but it gives me great peace of mind.

Michael M. · Answer

That was very helpful. You have good market knowledge. Thank you.

Tyler Mullen · Answer

Let me make sure I'm understanding you correctly... you live in California and you're thinking about buying a 5plex in Cleveland for 9k, a city to which you've never been, a property you've never seen, not even pictures of inside, being sold as-is... then you're thinking of moving into it and rehabbing the units over a course of time...  and you've never done this before and you don't know anyone in Cleveland?

What could go wrong and how are you planning to overcome these challenges?

I'm worried about the likelihood of your success but I wish you all the luck in the world!

Melissa Kirchhoff · Answer

@Michael M. - If you're considering this, go. Find a group of BPers out there and see everything for yourself. I won't say it's a dumb idea, because people invest in markets besides their own all the time (very successful people might I add.) But, I also work with a company who doesn't, and I see their very very very big mistakes. But maybe I can help you help yourself with this if you haven't already:

1. Are all the houses in that area way cheaper than what you'd imagine (or is this sort of the odd ball out?)

2. Look at the houses/MF in the area. What do the pictures look like? Likewise for rentals, what's on the MLS and craigslist for that neighborhood (not just the whole city!)

3. Research newspapers and groups in that hood. Are they trying to bring in large industries/schools/anything that would make it grow one day? Or is all the industry leaving and never coming back?

Yes, there will still be people who will need to live and rent there, but just know what you're getting into and be ready with a few different plans for all those circumstances. I mean, honestly, people here talk tough game but if you're not putting in a ton and if you're fairly comfortable it will rent even at 50%, you probably will break even not far in the game.

As for the flood zone, I would look into what past damage that may have done (yes, mold) and if it's been handled/mitigated after the flood. I would look at how frequent you might be looking at a flood and how it will affect the building.

I'm not in that area, but where I am is between 2 rivers and our "100 year flood" has been happening every few years, but there's still houses I would invest in that are "in the flood zone". Flood insurance isn't that much more to make me walk away. And frankly, around here, there's stuff that's in the zone that has never flooded and there's properties in neighboring towns that are in but will be moving out in the next few years (hello great investment!). Most towns have meetings about this. Get the hookup and go, if you can't, see if you can get a transcript or something on this. And again, talk to people in that area for that reason! (I actually learned that certain areas were being taken out of the zones soon by talking to people who wanted to buy a house there and knew these things, when I checked into it for myself, yep! They were right!)

Good luck, I don't think there's ever really a "right" or "wrong" way. I think some people like to kick a little harder to keep their head above the water than others do and good for them, we can't all own $15M apartment complexes day 1! ;-)

Tyler Mullen · Answer

I look forward to hearing about your success, post some pics and let me know how you're doing down the line!

Michael M. · Answer

I dont know if this is an excercise in guided discovery where I qualify myself. I'm a cynic by nature, however, winners find a way...By me posting already I have some feedback on area, taxes, and local lenders on BP. Yes I do have a brother in Pittsburgh and he's a craftsman, living in PA his whole life. I'd be leaning on him for consulting while getting estimates on the walk through. Its an old structure, that's a challenge, its crime ridden, that could be a deal breaker, employment is an issue, I get it. However Brandon Turner is doing well enough and he is in a similarly challenged market. Old structures, little employment, etc..

The bottom line is getting started with a cash flowing property that I can live in. My budget is under $50k. This place is $9k, rehab might run $35k and I'd still have money left over...$9k...wait for it...$9k. Unheard of prices in the socialist republic of California.

If you've got a better idea I'm all ears. I'm a shelter buyer looking for cashflow and upside. I hope this all makes sense.

I'd never buy sight unseen, however, some do. I'd fly over, walk the property, get bids, perform due diligence, and buy accordingly. If it weren't for BP, I'd never think of Cleveland, OH market.

Michael M. · Answer

I'm blushing I'm a virgin, no flips, no b&h, unless you count my old condo I held for 27 years as the president of the HOa for seven years, then sold. I've been listinging to BP, among other sources ever since I sold. Last six months I'm seeing a market top and getting my license to gain credibility and MLS access, plus network. I have a family member in PA that can do handyman work.

I plan to househack actually. The fiveplex would be perfect as I could live in one unit, rehab and rent the others. I've been looking all over for the right deal. The math is challenging, yes the BP calculator is helpful.

The house in north Lancaster would be a live in flip, but CA is very speculative. The quitclaim joke was funny and helpful, thanks.

Tyler Mullen · Answer

I'm completely baffled right now...  How many properties have you purchased before, how many flips have you done?  What is your plan for this property, b&h or flip?  Are you a contractor?  Have you seen inside?  Who's selling it, why?

If you're asking me... it's just not the kind of thing I do, I wouldn't take that property if you quit claimed it to me.

Gary Parker · Answer

I would stay away from the flood zone.  Partly because insurance will be much higher in a flood zone.

Would you buy a fixer upper in a flood zone?

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