Earthquake damage + uninsurable = profit?

[James Scholz]

Not sure if this is the right forum - these aren't exactly foreclosure properties, but are basically handled the same way, just by private sellers.

The back story: A few years ago there was a massive earthquake (or two) in Christchurch, New Zealand and thousands of homes were damaged. Insurers are only now starting to pay out, and a lot of homeowners weren't insured for enough to repair/rebuild their houses. So are walking away.

There are a lot of homes selling 'As is, where is', basically for slightly more than the cost of the land itself, and come with various issues from minor cosmetic issues to major structural ones.

The reason these caught my eye is because they're selling for 40-50 cents on the dollar compared to 'sound' properties in the area, but are being tenanted at the same rate. So the cashflow on them is really good. And the city is rebuilding, and demand is quite high for rentals, and probably will be for a good few years yet.

The issues are: You cant get insurance on the house itself, and the bank want any lending secured on another property.

So my question is: What are everyones thoughts on these sorts of places? Its a fairly high risk purchase, but as it goes - high risk, high return.

Thanks for your help!