Houston, TX · Member since 2019 · 1 post · 0 votes
Hello all, I am a 19 years old investor looking to buy my first rental. I am in the Houston, TX area. I found a foreclosed property (SFR) that flooded during harvey, but I really doubt it will flood again since another hurricane as bad as Harvey is unlikely. Here are some details/questions
- The property has been in the market for about 200 days (is this a red flag?).
- It looks very updated so I have a feeling it was rehabbed before Harvey. I think this is good because I will have a lot of equity right away.
- Located in a good school district
Now here are some of my questions:
1) is it a bad idea to buy a flooded property, what are some of the possible risks?
2) I see there are a lot of condos with similar characteristics for about $1,500 while SFR's like the one I am looking at are going for about $1,800 - $2,000. Would this make the property hard to lease since people can rent condos for much less?
3) I have little cash saved up but not enough for a down payment, would hard money lenders be willing to fund 100% of the deal?
@Emanuel Morales the TREC sellers disclosure requires previous floods to be disclosed to potential buyers. There will also likely be a record of the Harvey damage/loss in the insurance databases which might require you to carry flood insurance going forward. It may not be an issue if you’re renting the house but it could be problematic when you go to sell. Be sure to get a thorough inspection and request an itemized remediation scope of work that was done. Verify all mold was removed and that none is present.
Condos and SFR homes typically appeal to different demographics. Condos typically don't have backyards and can have animal restrictions which make them less appealing to families with young children.
Hard money lenders will almost never lend 100% of purchase and rehab. Most will go up to 80% of purchase price and 100% of rehab costs, not to exceed 70% of ARV. The rehab costs will be released in draws after you've provided proof of the rehab work done. Getting the maximum from a hard money lender will be tough given your age and lack of experience rehabbing houses.
Flood houses are tough because of the stigma they carry makes them very difficult to exit via sale. I’d pass on it as a first deal.
@Emanuel Morales the TREC sellers disclosure requires previous floods to be disclosed to potential buyers. There will also likely be a record of the Harvey damage/loss in the insurance databases which might require you to carry flood insurance going forward. It may not be an issue if you’re renting the house but it could be problematic when you go to sell. Be sure to get a thorough inspection and request an itemized remediation scope of work that was done. Verify all mold was removed and that none is present.
Condos and SFR homes typically appeal to different demographics. Condos typically don't have backyards and can have animal restrictions which make them less appealing to families with young children.
Hard money lenders will almost never lend 100% of purchase and rehab. Most will go up to 80% of purchase price and 100% of rehab costs, not to exceed 70% of ARV. The rehab costs will be released in draws after you've provided proof of the rehab work done. Getting the maximum from a hard money lender will be tough given your age and lack of experience rehabbing houses.
Flood houses are tough because of the stigma they carry makes them very difficult to exit via sale. I’d pass on it as a first deal.
@Emanuel Morales I have some experience here. I am In the Beaumont area and got smoked in Harvey and Imelda got some of
Our areas good. The big thing is to
Buy right. Have to get the price for our areas down around $35/foot. From there you will be able to do the proper rehab. Make sure you know the construction process though! A flooded rehab is a major rehab. Make sure you know the construction world well!
Good answers above. As a hard money loan officer I can tell you the most common misconception I get from potential clients is that they'll get 100% financing on purchase and rehab with draws up front and no closing costs on their first deal. While the lending market is competitive now, it's not so competitive that lenders are willing to take such risks as they'd be out of business fast. You'll need funds through some means or another to handle closing costs, down payment, and your initial rehab in most cases.