Looking at a property to buy & hold in a flood plain

[Ben Skove]

Hi folks,

I'm looking at a 3/1 REO going for $14K, rent comps around $700. I won't know the repairs until getting in today, but it appears in reasonable shape, probably no more than $15K.

It's mapped into FEMA's high-risk flood zone. The property is located in an area protected by a levee; unfortunately, FEMA has stated that they don't believe the levee would protect against a 100-year flood, and thus is still considered high-risk.

Given the house was built in 1875 and apparently survived the area's worst flood in 1937, as well as others, and given that the levee apparently protects against all but the worst floods, I'm thinking of simply skipping flood insurance. I don't need to worry about it being unmortgageable, since it'd be a cash purchase. It would likely prevent selling to anyone but an investor in the future, though.

In the event of a flood, I'd build up enough cash reserves from the property to either repair or demolish. I'd either strongly encourage or require renters to carry renters insurance for flooding.

Thoughts?