Florence Flood Properties & Investing Climate

[Eli Frederick]

I am a wholesaler in Wilmington NC, and I have a few sellers interested in getting rid of their flooded property. Today I went to a property that will be gutted by volunteers but needs new electric. Its located on a long road where every house had been damaged by the storm. I can lock this one in for cheap. 

The house in Burgaw NC actually had a pending sell of 120k days before the storm and I can maybe get this one to a investor for 20-30k. But does that even matter right now? Is anyone investing in fix and flips in areas affected in NC specifically Wilmington and surrounding areas (Leland, Burgaw, Jacksonville) ?  Areas where the whole neighborhood was flooded?  My thinking is if I cant sell this property then I need to forget about the other 20 houses on this street. 

(admins: this post is not a pitch for a property just a general discussion )

[David S.]

@Eli Frederick

As to your question as to if other areas have experienced this.  The Baton Rouge flood of 2016 flooded over 20,000 houses. Hurricane Katrina in 2005 flooded tens of thousands.  In my experience of 2016, here is what happened:

Month 1 and 2- A lot of uncertainty due to local regulation, FEMA, flood insurance. Will the local authority make you raise an entire house? Will flood insurance be too high in certain areas? The house raising or demolition is usually mandated when a house has substantial damage, or some similar term they use, which basically means over 50% damaged. This is highly subjective and determined by local government. You can even appeal based on a contractor's quote. Here is where you will secure the best deals. You can probably secure properties for less than 35 cents of ARV or less if the flood was 3 ft. or less. We had people buying for as low as 5 to 10 cents on the dollar.

Months 3 and 4- Outside investors will flood the area driving up prices. You can still find deals during this period.  By this time, flippers would have some inventory on the market.  In my area, they got a 10 to 15 percent premium of before flood prices because of lack of inventory.

Months 5-12 - Deals are there, but with increased competition. At this juncture, everybody is an investor, your dentist (no kidding!), contractors in the area, teachers, landlords who were on the sidelines, etc. We had people from all over the country mobilized and setting up shop. Professional flippers from different states were prevalent. Most deals of damaged homes was around 50% of ARV, squeezing margins of the flippers. Finished houses continued to sell at a premium.

Months 13+ - Not many deals at this point. You really have to work to get them.  Also, the prices of the finished houses are starting to come down as the inventory has flooded the market.  The market is starting to return to normal.  Compression of margins are at a maximum.  Investors who shunned flood zones (many initially ONLY invested in Flood Zone X) are now flipping in Flood Zones, such A and AE.  Some flippers did not do due diligence at this point and were getting stuck with houses that had $2000+ a year flood insurance costs.  It is much more difficult to sell a house with high flood insurance.

And of course, as mentioned, during this whole timeline, shortage of materials and qualified contractors will be an issue.  Prices will be higher on everything.

My advice: hit the ground running.  Many who had the "wait and see" approach missed out on some great deals.