Is flood plain ALWAYS deal breaker? (halfplex BRRRR)

[Brett Mach]

I'm a new investor looking for an off-market advantage and am analyzing a lead on a flood plain property (fsbo) ten minutes from my primary residence. 

Short version: IF numbers are still strong when accounting for required flood insurance (and potential basement floods are a known-quantity for myself and potential tenants) should the flood plain be a deal-breaker? Many say NEVER mess w flood plain.

Long version: I'm in the running for a low price because most are steering clear of the property. Wondering if I can be a perfect match at the right price, or if this is just a very bad idea. Owner currently has a tenant in the property, who could leave w sale. Seems like it could definitely rent as-is, but a really good candidate for a cosmetic BRRRR inside, plus new roof (also pretty old HVAC).

Cash flow is extremely hard to come by around here (everywhere right now), but these numbers look pretty decent ($250-300 "pure" CF, depending how you cut it), even after accounting for $900/yr. in flood insurance (owner currently pays $800). 

Floods "about every five years" in the basement, as property backs up to a small river. The basement is all concrete; just an exterior access; it sounds like it was built to flood every so often; the floor drain drains back to the river. The owner, who lived there for 15 years prior to tenant, says you just have to power wash the basement after floods. 

It will need Cap-Ex sooner or later, so BRRRR would be the ideal approach here; I'm approved for a conventional loan, but could start applying in earnest for a bank loan, or possibly pursue an option I have to partner up to make a cash offer (this deal is right around that 100k mark where my lender would only reluctantly do such a small conventional loan...another reason BRRRR is appealing). My reservation with BRRRR is that the flood plain would throw off a future appraisal (knock it down from a non-floodplain comp...10k? 30k?). I could still account for this, but it just throws a lot of extra unknown into an ARV estimate.

SO... should I pursue slightly more creative financing to make a winning offer and pursue this in earnest?

Or should I run for the hills?

And how much would a flood-plain designation (midwest rivervine--not coastal floodplain) drag down an appraisal?

Any thoughts sure are appreciated!

[Dave E.]

@Brett Mach

For me it’s a deal breaker because it is a headache waiting to happen and it’s generally a problem that you can’t solve. Insurance helps, but you still have to deal with the mess.