Flipping in a Flood Zone (New Jersey)

[Kevin Manafi]

To all my New Jersey flippers out there--what has your experience been with flipping homes that are in a flood zone? Do they sit on the market longer, are prospective buyers more hesitant, etc.? I think in the past maybe it might not have been too bad depending on the classification, but with the new Risk Rating 2.0 system driving flood insurance premium prices up exponentially, I'm wondering if anyone has firsthand experience that they can speak to.

[Vaughn Smith]

@Kevin Manafi Yes homes in flood zones sit longer than non flood homes especially now that the buying frenzy of the past few years is pretty much over. People fear flood zones largely because of the lack of education around them. You should also consider that flood insurance rates are higher for FHA buyers so if you are flipping in an area with a lot of FHA buyers you could be really limiting your options. If you must flip in a flood zone here are some things you should do/know

1) Find out where in the flood zone the property is located and the last time it flooded

2) Ask the seller for the elevation certificate and see in any preventative work has been done to stop flooding or reduce the insurance rate 

3) Review your ARV number, make sure its extremely conservative as the flood zone will probably result in a lower than average price (also make sure the comps you run are in the same flood zone if possible)

4) If you take on the flip make sure you provide extra info about the status of the flood insurance and provide written flood insurance quotes for potential buyers

5) Water proof the home if it makes sense to

6) Host open houses often, don't trust agents to break down flood insurance and the risks associated to potential buyers, it won't happen.

Those few steps should help, know your numbers and if they don't make sense don't be afraid to pass on this one, remember no deal is better than a bad deal.