Will you buy a flood zone house?

Question

Assuming that you are purchasing a SFR as a buy and hold, and you're financing it with a conventional mortgage, would you even consider properties for which flood insurance will be required by the mortgage company?

We're in the Houston area, so lots of homes are in flood zones. I really don't even want to consider them since there is no cap on the amount that the insurance can be increased.  What about you?

Colleen F. · Answer

You can see some old discussions on this but flood insurance is in flux at the moment and federal subsidies are being dropped. That means that the insurance can go up significantly in areas that have flooded. Your base flood elevation plays into it. That being said not every property requiring flood insurance is a property that floods. You really need to consider both the potential cost of flood insurance and the potential for flood. Having experienced a flooded house several times over I would not have a buy and hold that actually floods. I would consider a house that requires insurance that is without history of flooding but that really would be something I would wait on until I see where the cost of insurance is going. Also flood insurance is a cost like any other cost so you need to weigh the actual number against the potential value. If you need to pay  $2000-3000 on a modest 2 family like we did then no I would not buy it.

Sharon Tzib · Answer

And while the home is flooded and you are repairing, you have the cost of placing the tenants somewhere else until they can either move back in or find suitable alternate housing. You do have some obligation to them still in the event of an act of nature. Too many risks and costs for my taste.

Mike D'Arrigo · Answer

@Colleen F. is absolutely right. It may be 100 years since an area has flooded but it is still designated a flood area. The problem isn't always the risk of flood. It's the cost of the insurance which HUD is going to stop subsidizing. Once that happens, flood insurance will double and cut in to cash flow. The other thing to consider is resale ability.

Anthony Gayden · Answer

No.

Ok, I guess I will elaborate. I grew up in Kansas City which is located at the intersection of the Missouri and Kansas rivers. Once every 10 years or so there is a pretty significant flood in the area. I remember the Missouri being nearly a mile wide during the flood of 1993. Hundreds of people lost their homes. Being a Buy and Hold investor, I want to own a property that will still be there 20-30 years from now. I have no guarantees ever, but I am greatly increasing the odds of failure buying in a flood zone. Add to that the cost of flood insurance, and the lower overall property values in a flood zone and you have a total losing situation.

Account Closed · Answer

My last four houses have been in flood zones and it had no effect on the sale of the properties.If you think I am on a coast somewhere the properties were actually in the desert  of Palm Springs, Indio area, The flood zones were classified as once in a 100 year flood zone, Also to mitigate the insurance requirements you just have to submit a elevation report some on file with county some had to pay for.

Sandra Gibson · Answer

In 2009 FEMA was bankrupt and was extending the flood insurance coverage by a nation emergency order, monthly.

Several months ago homes, apartments and lots of vehicles were a total loss.

Samantha Hiscock · Answer

I'm not sure this is accurate information, atleast not in Vermont where I own property. 4 years ago my property flooded and my tenants were displaced for 12 days, I consulted both a lawyer and the folks doing the disaster relief and they agreed that I was in no way responsible for the cost of putting them up in a hotel. 2 weeks ago there was another significant flood event and my tenants were again displaced. At no point was it requested/demanded by the housing authority or the tenant to cover the cost of their temporary relocation. My only obligation to them was to get my property back in working order and be deemed habitable by the local fire marshal.

Leigh Ann Smith · Answer

this is a FEMA map showing of the most recent home we were looking at:

The house is the one just above the word "Annual_Chance" in blue.  Homeowner said flood insurance was required, so wholesaler called an insurance agent who said it's not required on this property.  It seems to me that if the mortgage company is the one who will require it, they are the ones we'd need to get the yea or nay from.  Is that correct?  We plan to buy with cash then finance after the fact, so we want to be sure about this before buying.  We're probably going to take a pass on this particular house, but I'm trying to learn something from it.

Jeff B. · Answer

Leigh Ann you already answered your own question "Houston area, so lots of homes are in flood zones. I really don't even  want to consider them since there is no cap on the amount that the  insurance can be increased."

It sounds like you are already aware of that Harris County has Flood insurance rates have been increasing and due to the "Homeowner Flood Insurance Affordability Act of 2014"  the subsidies are being fazed out.

This is an investment like any other and you need to find a "Risk, Reward" balance you are comfortable.  Using the Houston Flood Zone Map I am sure with some work you can target some areas that are Not in a Flood Zone or look at the surrounding cities with solid rent rates and growth for investment potential.

Rob Brautigam · Answer

Just like how you can always find a great market to invest in within an hour or two from where you live, you can always find higher ground. I will not buy a house in a flood zone just given the extra insurance required and liabilities...especially if your plan is to buy and hold.

Even if there has never been history of flooding, there is always a chance. A flooded basement with just 1 inch of water is enough to cause a lot of destruction.

Will you buy a flood zone house?

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