Sinkhole Property Investment Experience?

Question

Does anyone have any experience dealing with sinkhole properties, either repaired or unrepaired?  I'm new to Florida (about a year and a half), and I moved to Hernando County, not really knowing anything about the area prior to moving here.  All I knew was that it was far enough away from Tampa to not have to pay Tampa prices or deal with Tampa traffic, and close enough that I could pop down there whenever I needed.  I'd heard the term "sinkhole" floating around here and there before.  Having lived in NJ for my entire life beforehand, sinkholes just weren't a problem and not something that people really ever had to think about.  So now I'm here in Hernando Co. and I'm starting to get into real estate.  So I start looking at properties in my town, and I start to pull cards of houses that are going pretty cheap.  Well there's a reason for that.  These sinkholes are freakin' everywhere.  Apparently Hernando and Pasco counties are the sinkhole capitolof the world.  Am I right to be terrified about trying to invest in properties in these counties?  Should I break the rule of trying to keep investment properties close to where I live and look further away in areas that have less of a risk of the ground just opening up one day and swallowing a house?  Or am I just making way too big of a deal about this, and I can get a lot for my money on these properties?   Thoughts?  Experience?

Patricia Steiner · Answer

I'm glad you've heard some good experiences regarding sinkholes.  But I don't recommend investing in those properties whether "fixed" or not.  Resale will be ugly...these properties stay on the market longer, sell for less, and are definitely harder to finance and insure.  Florida's subsidized insurance provider, Citizen's Property Insurance, is the provider for sinkhole properties - and you'll be limited to that source; the cost will be higher.  Specifically:

"Under Florida law, Citizens may write a new insurance policy only for property that meets one of the following eligibility criteria:

• Coverage is not available from a Florida-authorized insurance company
• Premiums for coverage from Florida-authorized insurance companies are more than 15 percent higher than the premiums for comparable coverage from Citizens"

The entire state has the potential for sinkholes due to our geology (limestone is not our friend).  Real Estate Investing has enough moving parts without going this route. You'll hear that the property has been "pinned and has a lifetime guarantee."  That guarantee is only as good as that contractor.  As a broker and investor, these properties pose financial issues that are not in keeping with a solid ROI.

Account Closed · Answer

Ask an insurance agent if they will provide insurance on a sinkhole property and how much it will cost. If they won't provide insurance or it is more than $500 - $600 a year, it's a risky bet.

Michael Goldsmith · Answer

Oh.  You're right down the road from me.  We should grab a coffee and talk shop sometime.  I'm really new too.  It would be nice to have someone to talk to about REI, bounce ideas off of etc.  I try to talk to my gf, but she just looks at me like I have 3 heads.

Michael Goldsmith · Answer

I don't know how much insurance costs, but it has to be at least available.  There are thousands of houses in this county and if you look at the county sinkhole map it looks like the entirety of central Florida will just get swallowed up one day.  If insurance was impossible, how could the entire county survive?

Scott Griffin · Answer

I'm brand new to real estate investing. I sold my previous single family home that we'd fixed up, but at that time didn't even think about doing any form of long term investing with it. Kinda kicking myself now, but it allowed us to afford the home we're in now.I live in Trillium closer to Brooksville.Insurance isn't too high here. It's more expensive if you live on the other side of 19 closer to the Gulf. Also it's not bad for sinkhole repaired homes either. My brother owns a repaired home. He had no problems getting insurance at a good rate. Their certified and supposedly stronger then they were before. Makes sense since they poor concrete in the hole.For my first purchase I've been looking at keeping it local to Hernando, Pasco, and Citrus.

Michael Goldsmith · Answer

That's kind of why I started this thread to find out if someone had any experience dealing with this issue, and whether this was a bad place to invest in.

On one hand, property values are pretty low here, which could net a pretty good ROI on rentals.  On the other hand, if the insurance is ridiculous here (I currently rent, so I really don't know), and/ or if a property is uninsurable, well that just pulls the rug out from under that idea.  I do keep seeing new buildings being put up in my town, so at least someone's not afraid.  Scott, where do you invest, given that you live in the same county as me?  Also, may I ask what town you're in?  I'm always up for making new friends in the area with like minded interests.  I'm in Spring Hill.

Scott Griffin · Answer

I live in Hernando County as well. Born and raised in this area. You're right we have lots of sinkholes. We always have as far as I remember. With that, sinkhole repair is big business here. They fill the holes with concrete so they say its actually stronger then it was before. Most are insurable after the repair. Now from an investment standpoint I'm not sure on that one. I know I haven't heard much about people investing in them.

Sinkhole Property Investment Experience?

Most Popular Reply