Dealing with a duplex in a flood zone.

[Joshua Hively]

My partner and I are currently in contract on a duplex in Columbus Ohio. Initially listed at $285,000 in contract for $272,500 post inspection and prior to flood zone discovery. Each side has 3 bedrooms and 1 bathroom. We are planning on having long term tenants on one side and list the other 2 bedrooms on our side as short term rentals. During due diligence I discovered the house was in a flood zone. The seller owned the property for 25 years and was unaware. We have been in contract on this property for about 3 months. While it has been a great learning experience about flood zones, nearly $5,000 a year in flood insurance kind of hurt the cash flow. We request that the seller have a survey done and try and have the property removed from the flood zone. Today we received the results. One corner of the property and the basement floor are about 3 feet below the base flood elevation. I have sent the survey results to my two potential insurance agents for final quotes. The seller is wiling to negotiate the sales price knowing that this will be an issue with any buyer using bank financing and affects the value as an investment. My current plan is to assume the highest quote for flood insurance, use that number in my calculations and come up with an offer. If we end up purchasing the property I would probably lean towards a higher deductible plan to lower the annual payment. This is an A-/B+ neighborhood. My gut has been to stick with this property for the entire time and am still hoping that I am able to swing it. I guess what I am curious from you, BP, are the following things. Does anyone have experience in dealing with FEMA flood zones? Should I be worried about basing long term financials on a government organization that is roughly $20 billion dollars in debt? What much lower would you need to see the purcahse price considering the flood insurance(I am leaning towards an offer of $200,000)? Is there something that I am missing? If I left out any details just ask! I really just needed to put this out the community and discuss and I am very appreciative of any responses!