FEMA 50% Rule

[Doug Smith]

Hi All, 

I know I haven't been on here for a while, but I've honestly been too busy to log on and interact. I'm a Tampa-based lender as well as an investor. That being said, I'm getting a lot of inquiries from unseasoned investors about the "flood" (pun intended) of new opportunities on Florida's West Coast. Early in my career, this really bit me in the tush and I am seeing many investors walking right into the same trap. If you don't know about the FEMA 50% Rule, please look into before you buy and try to rehab a home in a flood zone. Google is your friend.

The FEMA 50% Rule is a little-known rule that limits rehab budgets on homes in a flood zone to only 50% of the value of the STRUCTURE. In Hillsborough County, FL (Tampa), the structure value is deemed to be the Tax Assessed Value with the County Property Appraiser. The value of the dirt is NOT included in the calculation. In other words, let's say you buy a property where the total value is $200,000 and, of that, the structure value is $80,000 and the dirt is $120K, then you are only allowed to rehab the property for no more than $40,000 (50% of the $80K). Otherwise, you have to tear it all down and build a new home to current codes and elevations. That is overly-simplified and there are other rules and exceptions to that, but it's something that newer investors need to be aware of before you start chasing "flooded homes" for rehab.

In the aftermaths of Hurricanes Helene and Milton, I've gotten tons of inquiries for these types of homes. I simply thought putting it out there in the Forum might keep someone from unknowingly buying something that might leave you out to dry. Happy Investing Everybody!!!