Central New Jersey - new to BP

[William Garcia]

Greetings all, and especially my NJ colleagues.

I'm new to the RE Investor world and actively looking for our first rental income prop. My initial focus is Monmouth and Middlesex counties.

I'm seeing some Single family homes that would fit nicely for section 8, but a number of them are in AE flood zones.  My question to any of you, do you avoid these, or do you indeed have flood insurance, and if so, what is the avg. annual premium so I can plug into the calculator.

And lastly, do those premiums generally go up every year or are the premiums reliable (stable)?

I welcome networking with those in the business and fairly local.

Thanks for any feedback all - glads to be part of the BP family.

[Robert Webb]

Good Morning!

As an investor and a realtor, Would heavily caution about flood zones. Especially early on in your investing career, I would even flat out avoid them. They can potentially break a deal in the future, like you mentioned, if rates go up. While you should of course account for that in your numbers with your purchase (just like taxes will go up over time, and you can increase rent to compensate) flood zones tend to be less desirable areas and that includes for the tenant population as well. While they might not care that you have to pay flood insurance and that your basement floods, they do care about their stuff and their safety. 

Basement floods - is there mold? Does it need to be professionally cleaned out? that's expensive. Did it ruin an HVAC? thats expensive. Sure, maybe FEMA money can help, but then do premiums sky rocket once that money is taken? Is it quick and easy? Are you making money on the property while rehab is going on?

I personally would take a less of an ROI deal over a flood zone deal.

Not to mention, one of the main 4 pillars of real estate investing is appreciation, and while property will appreciate all across town, there is going to be a slower increase in appreciation and less of an increase than a non flood zone property (I would say this is excluding beach properties where this is expected and throughout the entire town)

Hope this helps - I am in Somerset County! So not too far! Best of luck.

Robert Webb