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Updated 14 days ago, 12/19/2024

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Sam Dunlop
Pro Member
1
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Purchasing a fix and flip in flood zone

Sam Dunlop
Pro Member
Posted

Hey everyone, I wanted to get the opinion of someone with more experience than I have. I am looking to purchase a fix and flip in Daytona Beach, Fl. The deal makes sense financially however the house is in a flood zone A and flooded during this past hurricane season. This is the first time this area has flooded in years. With hurricane season now over and the house would (hopefully) be sold well before the next one I am curious if anyone has any seen any change/decrease in sales with areas that have flooded recently? Thanks!

  • Sam Dunlop
  • User Stats

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    Jonathan Greene
    Professional Services
    Pro Member
    #4 All Forums Contributor
    • Real Estate Consultant
    • Mendham, NJ
    7,416
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    Jonathan Greene
    Professional Services
    Pro Member
    #4 All Forums Contributor
    • Real Estate Consultant
    • Mendham, NJ
    Replied

    Buying in a flood zone, especially A, in Florida, where it recently flooded would be a terrible purchase to me unless they are giving it away. I mean, giving it away. Why do you think this will do well when you make it look nice on the open market and disclose it's in a flood zone and flooded in the past year? It's like buying a house next to a bus depot. House is good, locational significance is not. There is a price for everything, but flippers make the mistake of thinking they can still get market value on a locational error.

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    User Stats

    97
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    84
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    Chad Shultz
    Agent
    • Real Estate Agent
    • East Central Florida
    84
    Votes |
    97
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    Chad Shultz
    Agent
    • Real Estate Agent
    • East Central Florida
    Replied
    Quote from @Sam Dunlop:

    Hey everyone, I wanted to get the opinion of someone with more experience than I have. I am looking to purchase a fix and flip in Daytona Beach, Fl. The deal makes sense financially however the house is in a flood zone A and flooded during this past hurricane season. This is the first time this area has flooded in years. With hurricane season now over and the house would (hopefully) be sold well before the next one I am curious if anyone has any seen any change/decrease in sales with areas that have flooded recently? Thanks!

    Hey Sam: Daytona Beach is a great area, with a few exceptions.  I do many projects in this area and I’d be happy to discuss yours with you.  I bought a Zone A house at auction last year and everyone said I was wrong, or the value was not there.  Home sold in about a month, during hurricane season, above list and $40k more than the “nay sayers” thought it would.  It depends so much on the type of Reno you do.  Reach out via PM and we can exchange info, if you like.  I would be happy to go over pros an cons with you.
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    Wyatt Ferm
    Pro Member
    • Lender
    • Minneapolis, Phoenix
    4
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    6
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    Wyatt Ferm
    Pro Member
    • Lender
    • Minneapolis, Phoenix
    Replied
    Quote from @Sam Dunlop:

    Hey everyone, I wanted to get the opinion of someone with more experience than I have. I am looking to purchase a fix and flip in Daytona Beach, Fl. The deal makes sense financially however the house is in a flood zone A and flooded during this past hurricane season. This is the first time this area has flooded in years. With hurricane season now over and the house would (hopefully) be sold well before the next one I am curious if anyone has any seen any change/decrease in sales with areas that have flooded recently? Thanks!

    Hey Sam! Doing a Fix and Flip in a flood zone is totally fine, but there is obviously added risk on the exit. You'll need to make sure the ROI spread is large enough that you can still turn a healthy profit if you have to sell under what your projecting for ARV. I work for a hard money lender called Backflip and we have members/investors do flips in flood zones all the time. The only real difference is you'll need to purchase flood insurance on the property during the project and all good lenders will make you do this to insure your risk is mitigated. 
  • Wyatt Ferm
  • wyatt@backflip.com
  • (952) 522-7206
  • User Stats

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    Paul Pratt
    • Real Estate Agent
    78
    Votes |
    89
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    Paul Pratt
    • Real Estate Agent
    Replied

    Yep, are there some people who will buy in a flood zone? Sure. But More people will buy in a Zone X. It's the first question I ask buyers/sellers. Most of my buying pool won't touch flood zone properties. 

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    Mike Klarman
    • Specialist
    • New Jersey
    394
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    906
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    Mike Klarman
    • Specialist
    • New Jersey
    Replied

    I've done deals in flood zones and flood insurance is not cheap.  You'll need to figure that in to your numbers.

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    Carlos Moncada
    • Investor
    • St. Petersburg, FL
    0
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    4
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    Carlos Moncada
    • Investor
    • St. Petersburg, FL
    Replied

    I stay away from flooded properties and those in flood zones. For many of the reasons already stated. Your goal is to reach as many potential buyers as possible, and right off the bat you're limiting your pool of buyers. I think many people are going to avoid buying in flood zones, especially after the back-to-back hurricanes we had. Fixing and flipping in Florida is hard enough these days without making it even tougher on yourself.

    User Stats

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    Chad Shultz
    Agent
    • Real Estate Agent
    • East Central Florida
    84
    Votes |
    97
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    Chad Shultz
    Agent
    • Real Estate Agent
    • East Central Florida
    Replied

    @Mike Klarman:  Can you quantify what "not cheap" is?  I purchased flood insurance on a Zone A property in July this past year on a house that had previously flooded.  A 12-month policy was only ~$900

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    Zachary Deal
    Pro Member
    #2 Rehabbing & House Flipping Contributor
    • Lender
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    324
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    Zachary Deal
    Pro Member
    #2 Rehabbing & House Flipping Contributor
    • Lender
    Replied

    I think it depends on the area and insurance costs. I would get an opinion and recent comps in Flood Zone a from a few different agents to make sure you are doing your due diligence on the resale market in that flood zone, especially with the recent hurricanes