Thoughts on properties in AE Flood zone

[Daniel Younger]

Anyone ever considered investing in a commercial property located in a FEMA designated AE Flood zone?  I've got an opportunity to invest in one now and I'm not sure I want to take the risk.  The seller said the Floor insurance costs them $5,371/year and it has flooded one time in the last 5 years.  Anyone have any experience investing in properties in flood zones that could offer some thoughts on this?

FYI - The flood risk is a creek that runs along the side of the property that has been known to flood into the property on occasion.

[Charles Keener Jr,]

Floodzone AE is a nuanced issue. A property can carry a floodzone AE designation even if the floodplain slightly clips the property corner and has zero impact on existing structures. Insurance is a federal mandate, and flood insurance rates can vary depending on the level on inundation a property could incur during a flooding event. For example, if the structures MLOE (minimum lowest opening elevation) is higher the the known flooding depth, the property owner can prepare a FEMA "Elevation Certificate". This document can be presented to your insurance carrier to help reduce flood insurance rates.

There are larger risks with floodzone AE investments if the property is planned to be developed in the future.