What will come from Texas Artic Vortex

[Robert Freeborn]

I’m sure we’ve all seen many videos of ceilings collapsing, pipes bursting, and flooded floors coming out of Texas.

Considering the uncertainty with the power grid, climate change, and likelihood or unlikelihood of the energy grid being prepared for future weather events, do you intend to start investing or continuing investing in Texas? Do you intend to sell? What kid of opportunities do you see in the future?

[John Dean]

Originally posted by @Jim Thorpe:

Turned the water off to the rehab, checked all the rentals for wrapped exterior pipes. Fingers crossed and waiting for the thaw. 

Wrapped exterior pipes didn't hold up in my case. Pex will burst at the joint whether it's shark bite or clamp or shutoff, and copper is even worse. When you have no power for a few days and sub 10 degree weather there's absolutely no way to prevent this. So many people have lines as well has hot water heaters running through uninsulated attic spaces. Someone else posted about contacting supply houses for plumbing parts, HD and Lowe's are all sold out. Hopefully you bled the pressure out of that main line after you shut it off or you could be replacing it.

[Carlos Ptriawan]

Do you mean stopping the water line prior to the incident will not prevent the pipe burst?

[Jim K.]

Originally posted by @Erik B.:

@Steve K.

Its just what I read so I don't know the real truth or problem. Which is half the problem nowadays with so much misinformation going around you can read and watch for hours and still be conflicted.

 Completeiy agree, Erik. I've learned a lot reading this thread. Maybe it's the sort of properties I have the luxury of investing in here in the Rust Belt, but it's hard to get over how frequently people buy crap-made crapboxes because the numbers in their spreadsheet look good, trust the maintenance to some schmuck property manager who is willing to pretend to work for peanuts but who doesn't know beans about how houses work, and only find out when the metal meets the meat that they bought a crapbox managed by an incompetent that can't survive something like a major winter event.

Like the weather's been highly predictable for the last fifty years and our politicians have routinely demonstrated excellence in disaster prevention and mitigation.

I buy old houses up here in Pittsburgh, built during a golden age of pride in building. The places I buy are pretty much fortresses. Water supply lines down 8-10 feet underground in the poured concrete basements. Short sewer lines straight out to streets with no intervening trees. Brick veneer, roof systems originally built for slate and massive wet snowfalls. These are a few of my favorite things. They exist here and because not all investors understand quality building, these places are not in extremely high demand when they're sols compared to crapshacks "with good numbers."

I buy these places because Pittsburgh has magnificently bad weather and my business model requires that I keep them in the portfolio and running for years.

Perhaps what this disaster in Texas reveals most about rental real estate investors as a group is our over-reliance on housing inspectors who tell us very little about the suitability of buildings to bear up under harsh conditions, our over-reliance on numbers analysis and ignorance of basic construction fundamentals, our over-reliance on long-distance investing business models that leave us practically helpless when things really go bad for our properties and our tenants. Basically the stuff I'm always writing about here.

[John Dean]

Originally posted by @Carlos Ptriawan:

Do you mean stopping the water line prior to the incident will not prevent the pipe burst?

The water line has to be stopped before it freezes as well as depressurized or it will still burst. You also need to turn the water lines off as the temperature heats up or your house will probably flood if you didn't have power for a few days. I think Jeff from Homerenovision was on the podcast and he has an youtube episode out for Texans to help mitigate damage - search homerenovision keep your house from flooding on youtube.

[Doug Spence]

Originally posted by @Joshua McMillion:

@Robert Freeborn

In the military, we have a saying; the enemy always gets a vote. I have a rental property in Louisiana, and that property is newer with outstanding tenants and cash flows nicely. However, there have been about 4 to 5 hurricanes or tropical storms that come with it. That being said, investing in real estate has an inherent risk level, which is why it is always important to invest from a position of strength. Ensure you have the finances and property insurance beforehand. Texas will continue to pull high-paying jobs and remain a great investment opportunity for the future. 

Sincerely, 

Josh 

Well said @joshua mcmillion. Most real estate investing is all about making money in the long term (unless you're a flipper/wholesaler). There will be ups and downs along the way (like natural disasters, problem tenants, recessions, bad property management, etc) but if you can keep pushing through all these obstacles and keep your eye on the horizon that seems very far away, you're likely going to make money in the long run. This is why its so important to ensure your personal finances are stable, you have cash reserves, and you buy the right properties! 

[Rob Lee]

While most will recover and move on, those individuals without the financial resources to make the necessary repairs might be motivated to sell. At the same time, more damaged homes equals a greater reduction in inventory. Lower inventory would further drive up housing costs. I don't foresee many deals for those in the under $300k price range.

Rob

[Bonnie Low]

I think as property owners we have to be prepared for severe events, whether that's snowstorms, flooding, hurricanes, tornadoes, hail damage or wildfires. I haven't seen any nationwide stats on this, but it's hard to come up with a region off the top of my head that consistently has no severe weather-related events. This is where our cap ex cushion for every property comes in to play and also good property insurance. Since wildfires have become more severe and more frequent where we live and invest, we're looking closely at areas that insurers are trying to drop or are raising rates heavily because that factors into our potential cashflow. It's just part of doing business.

[Julie DeWolfe Arroyo]

@Robert Freeborn jump in, investors. Be the guy/gal who does the better Brrrr, uses higher standards in rehabs, and maybe wire up for backup generator (renter/buyer can purchase, plug in, flip breaker, and turn on to run limited necessities). These are already being done in the north, so it's not reinventing the wheel. Good attic insulation, no icicles. Be the leader, the problem solver, the standard.

[Brent Lowry]

In the short run, some cash strapped homeowners that can't pay for repairs may be willing to sell at a discount for homes that require substantial CAPEX. I don't see valuations changing that much due to the thaw.

The more interesting question to me is the long run, and whether events like this are tied to climate change.  With climate change these "once in a century" events will become far more frequent.  Investments to improve the grid and adapt to a changing environment will be made, and costs of living will necessarily rise to pay for it.  It's worth considering how that will change affordability and desirability in 20-30 years time for extreme colds and heats.  

If climate change is a thing, and it does cause human migration on a large scale, what is very cheap now that won't be in the future?  Cleveland, Detroit, Duluth and the whole upper Mid West have access to fresh water and won't have the same humidity heat events as the growing SE US.  With a view towards the long term, I'm very interested in a strategy that can generate yield today in some of those markets, with opportunity for generational wealth levels of appreciation in 20-30 years.

[Rachel H.]

Originally posted by @Erik B.:

I think many are underestimating the repair bills by a lot although it is likely to affect the real estate market as a whole.

When it warms up this week and water lines start to defrost there is going to be leaks and floods everywhere causing further damage.

Most pools that were not drained or winterized will have broken plumbing underneath concrete, pavers, decking patios etc.

Definitely not a $300 event. Wouldn't be surprised if fema steps in and this becomes a major insurance disaster.

It's already happening. Texas needs help. And I'm glad the federal government (as well as representatives from other states who have actually taken the time to make a fund and raise money for Texans) has stepped in: 

https://thehill.com/homenews/a...

I'm amazed how others from other states are donating and helping all of us Texans. Hope everyone here in TX is doing OK. Hang in there! :) 

[David Ivy]

Originally posted by @Trevor M.:

I currently have a live-in-flip I am working on in Round Rock and we thankfully never lost power this entire time. I will definitely be including that as a selling point when I put the place up for rent. I am glad I spent the last few months air sealing the place, adding insulation, and replacing leaky ductwork. I am just wondering if there is anything we can put in leases to try and prevent property damage and and keep the tenants safe. Example - Tenant must drip all outside spigots when temperatures drop below 28 degrees.

You can definitely insert whatever you'd like in the contract related to protecting the property during cold weather. However, in practice, there are much more effective things you can do.

For example, when a new tenant moves in, show them exactly where the water shutoff is located, how to operate it, and when to use it. Even better, have them use the shutoff themselves while you're there to confirm. Periodically check to make sure the water shutoff hasn't been covered by grass, dirt, or debris. You also want to point out to the tenant the location of the main electric shutoff and show them how to access it.

Before a severe weather event impacts the property, it's smart to call your tenants and follow up in writing to tell them specifically what you'd like them to do and why it benefits them to comply (e.g., it prevents a burst pipe from ruining their personal possessions). Remind them what to do if they have a water leak. If possible, you may even visit the property to install faucet covers or perform any other weatherization required.

[Courtney Duong]

Originally posted by @Joe Splitrock:

Originally posted by @Krystyna Fennelly:

@Trevor M.

I’m adding to my to-do list to make sure the tenants know where the shut off value is.

A client of mine had one of his tenants leave the house Monday without tell him, when they got home water was pouring out of the ceiling, they didn’t know how to shut it, cell service was crap so took some time for the call to go through to landlord and all he heard when he answered was water!

He’ll be filing through insurance, and says lesson learned. But some things we think ‘everyone should know that’; some just don’t.

 To prevent freezing, you want the main shut off and the lines drained. That means opening all the faucets after shutting water off. 

One final pro tip. Replacing copper pipes with PEX will give you freeze protection. The PEX pipes will expand without bursting.

 Opening all faucets all the way or just a slight opening is good enough?  Thanks.

[Joe Splitrock]

Originally posted by @Courtney Duong:

Originally posted by @Joe Splitrock:

Originally posted by @Krystyna Fennelly:

@Trevor M.

I’m adding to my to-do list to make sure the tenants know where the shut off value is.

A client of mine had one of his tenants leave the house Monday without tell him, when they got home water was pouring out of the ceiling, they didn’t know how to shut it, cell service was crap so took some time for the call to go through to landlord and all he heard when he answered was water!

He’ll be filing through insurance, and says lesson learned. But some things we think ‘everyone should know that’; some just don’t.

 To prevent freezing, you want the main shut off and the lines drained. That means opening all the faucets after shutting water off. 

One final pro tip. Replacing copper pipes with PEX will give you freeze protection. The PEX pipes will expand without bursting.

 Opening all faucets all the way or just a slight opening is good enough?  Thanks.

 With the water shut off, you want the faucets open all the way. Turn down the hot water heater. The faucet at the lowest location will drip until the water is out of the lines. Even if some water is left in the lines, with most gone, it gives room for remaining to expand without bursting pipes.