Flipping Harvey flood houses, any success stories out there?

Question

I found a house in west Houston that has potential for investment opportunity. It was flooded by Harvey and is already gutted. I believe that the ARV will be significantly higher than the purchase price and rehab. The average time on market is 60 days in the last 3 months. The information is verifiable but there is not a lot of deals being done yet in this area.

I guess my question: does anyone have experience with Harvey flooded flips? What was your experience with buyers at time of resale? Did the fact that it was a 100 year flood hurt you significantly?

Cody L. · Answer

never flipped a harvy home but did turn around a harvy complex. bought for $2.3m. Got a loan for 80%. Put in about $400k. Appraised at $4.1m. Refinanced with a new 80% loan and got every penny back (and more). Now have a cash flowing property with less than $0 down.

So I'd look at these as BURRR ops vs. flip ops as it's not hard to refi to get all your cash out and do the final "R"

Cody L. · Answer

There are always going to be freak floods.  When it floods, you fix it.  Either out of pocket or with insurance.  Just like if there is an earthquake in San Diego.  You just factor that risk and possible cost in.   While I don't want a flood to hurt my property/properties, if it does, I fix it and continue on.   It doesn't play into my exit unless you're talking about future investors having that same worry.  Those people just won't be your future buyers.  Future buyer will be someone like me that realizes that all properties have pros/cons and you just have to make sure the cost takes it all into account.

Daniel J Dominguez · Answer

Hey Jeremythere are so many flooded homes that haven't even hit the market yet. Interesting to see what will happen. However Houstonians have a short memory. In due time people will forget what neighborhoods got flooded and will start buying there again. No one knows when that time will be but The best schools always dictate the best neighborhoods. i haven't dealt with rehabbing a flooded home due to the reluctance of lending and even in some cases insuring the property.

As for the end-buyers, they will ask if it flooded and by law you must disclose or/and they will found out anyway during the inspection. It will be an added challenge to sell however on the flip side, it shouldn't be as difficult to lease it out. Take for example the neighborhood: Bear Creek which flooded. You cant find anymore homes under 140K there. So the point is, if its in a good school district, in your case Katy, and you didnt skim on the rehab, then you should be able to sell it. However be prepared for possible high Days On Market or even the possibility of holding and leasing.

Andrew Durosola · Answer

Memory in Houston about which neighborhoods flooded is not that short.  And a neighborhood that flooded once will probably flood again

David Olson · Answer

@Luke Hadden my call with Singapore was work related (oil & gas) not real estate related. Sorry for the confusion. I was telling Jeremy that's why I couldn't make it to the meetup here in Houston.

@Jeremy Gengenbach that's great! I will shoot to make the next meeting but with our weekly call on Tuesday nights it really just comes down to whether or not its my turn to take the call for the team. Either way, if this gets in the way we can get together for lunch or have a quick chat on the phone sometime.

Jeremy Gengenbach · Answer

@Cody L. thats actually pretty genius view of the situation. But my hesitation is the inevitable question, what is the exit strategy for when it floods again?

@David Olson it was a good meet up. We discussed a couple of current projects that others are working on, financing, exit strategies, and house hacks. I would say that the networking and just knowing the local investor community was the best part. It was good to meet other people out there getting started and learning as they go, and sharing what they have learned.

Luke Hadden · Answer

@David Olson

Let me know if have contacts keen to join the meetup in Singapore.

Thanks!

Luke

David Olson · Answer

@Jeremy Gengenbach how was the meeting last night? I was on a call with Singapore from 7 - 9 so I was unable to attend.

@Cody L. Makes total sense and yet I haven't even thought of that approach with flooded properties.

Ellie H. · Answer

I have not done any flips,  however I live in the area , if you do flip make sure you do comps for houses that actually flooded, in my neighborhood houses that did not flood are going faster and are going  on average  for 10-20% more than houses that flooded even on the same street.

David Olson · Answer

@Jeremy Gengenbach I plan to attend but might be pulled into a teleconference at work tomorrow evening with our client in Singapore. Either way, I’d love to discuss the rehab or any other questions your might have.

Flipping Harvey flood houses, any success stories out there?

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