Flipping Hurricane Sandy Homes In NY

[Stephen Dispensa]

Hey Guys,

I'm a Realtor based on Long Island and I have a good amount of experience working on homes affected by Hurricane Sandy. There seems to be a lot of confusion for investors regarding these properties, so I thought I'd try to help out with some information.

After the storm, in which thousands of homes along NY's shorelines were affected, a number of strategies were taken to rebuild. Many homeowners repaired their own homes with money from insurance settlements, or with their own money. In other cases, contractors completed repairs for the homeowners but were never paid. 

In many of these cases, the homeowners participated in the NYS Acquisition for Redevelopment utilizing funds appropriated by both NYS and FEMA. Through this plan, NYS paid homeowners the full pre-storm value of their home, allowing them to move on with their lives. The state then took control of these properties and auctioned them off at a significant discount. The only caveat being that the houses needed to comply with FEMA Elevation Restrictions within 3 years, otherwise control of these properties would revert back to NYS. This was done through a Reversionary Instrument placed on the deed to the homes.

Many of the investors who purchased these properties, especially at the early auctions in May and November of 2015, received incredible deals. I've seen houses that the state paid over 700k for sell for 150k. And these aren't homes that are gutted shells. Many of them are in excellent condition. Unfortunately, in order to receive a CO on these properties they need to be lifted. Quite often I see the original investors selling these houses off rather than complete the work themselves. 

So the trend throughout the shoreline, particularly the south shore of Long Island, is to jack these houses up in the air, and build a new, higher foundation below them. There are a number of construction standards that must be met, but once the house is raised the reversionary instrument goes away. The investor can then sell the home. The best part is, once the houses are raised above the FEMA flood levels, the flood insurance rates plummet, making the houses far more valuable.

I hope some of you thinking of investing on Long Island find this information useful. If you have any questions, feel free to contact me here on Bigger Pockets.

Steve