All Forum Posts by: Brett Mach

I am a newbie and no expert, but I agree with everyone here; not perfect, but refi-able, and unless you're looking to exit in a few years, sounds like a reliable CF generator in a great area for that. We just went under contract with a BRRRR property in Smithville, north of KC. Some similarities to what you describe, though ARV may be 10-15k lower than yours.

It may be that the current market is forcing investors like us to be open to big-problem, decent-opportunity properties (like foundation problem-BRRRRs) that we otherwise wouldn't consider. Our deal has plenty of issues too (AE floodplain and more), which make the price right for a BRRRR in a B neighborhood and scared away juuust enough competitors for us to be in the running (just barely, for us!).

My guess is that B+ renters and investors have been, and will continue to grow in number and seek suburbs like Blue Springs, nicer parts of Independence, much of the Northland, and mid-to-western WYCO around KC. I think it's unfortunate (for investors like me wanting to buy), but responsible, to plan for these prices and high competition to stick around a long time. 

If you have the stomach for it, you might even get comfortable with bad foundation problems and encourage your GC to shop broadly and carefully partner w a foundation pro to feel out who is a good fit for your team. You could look for a similar situation in the future--it may be one of few viable strategies for accumulating B+ rentals on a (relative) budget.

Really good info--I had heard that NFIA sounds less sustainable (solvent?) for the long-haul as their rates could shoot up, but worth investigating. I will return some calls today and start collecting bids to get a picture of flood ins. costs--thanks for the good advice. 

As for the flood plain tolerance levels between investors vs. primary residence owners, that makes sense, to a degree, of course...I know there could be some reluctance from renters as well, which I need to account for. If I pursue this, the flood plain status would also something I would be up front about with tenant candidates (the river's right there--the basement's basically designed to be flooded). I think it's less an issue for renters; would include in the lease that they can't store things in basement, etc.

Anyone have thoughts on how a flood plain designation might affect a future appraisal? I know it will be just as much a re-sale consideration in a decade as it is for me currently, but since I see this as a long-term buy-and-hold, the more immediate concern is determining ARV and what it would appraise for when the time comes to back into a conforming mortgage after seasoning (BRRRR style).

I'm a new investor looking for an off-market advantage and am analyzing a lead on a flood plain property (fsbo) ten minutes from my primary residence. 

Short version: IF numbers are still strong when accounting for required flood insurance (and potential basement floods are a known-quantity for myself and potential tenants) should the flood plain be a deal-breaker? Many say NEVER mess w flood plain.

Long version: I'm in the running for a low price because most are steering clear of the property. Wondering if I can be a perfect match at the right price, or if this is just a very bad idea. Owner currently has a tenant in the property, who could leave w sale. Seems like it could definitely rent as-is, but a really good candidate for a cosmetic BRRRR inside, plus new roof (also pretty old HVAC).

Cash flow is extremely hard to come by around here (everywhere right now), but these numbers look pretty decent ($250-300 "pure" CF, depending how you cut it), even after accounting for $900/yr. in flood insurance (owner currently pays $800). 

Floods "about every five years" in the basement, as property backs up to a small river. The basement is all concrete; just an exterior access; it sounds like it was built to flood every so often; the floor drain drains back to the river. The owner, who lived there for 15 years prior to tenant, says you just have to power wash the basement after floods. 

It will need Cap-Ex sooner or later, so BRRRR would be the ideal approach here; I'm approved for a conventional loan, but could start applying in earnest for a bank loan, or possibly pursue an option I have to partner up to make a cash offer (this deal is right around that 100k mark where my lender would only reluctantly do such a small conventional loan...another reason BRRRR is appealing). My reservation with BRRRR is that the flood plain would throw off a future appraisal (knock it down from a non-floodplain comp...10k? 30k?). I could still account for this, but it just throws a lot of extra unknown into an ARV estimate.

SO... should I pursue slightly more creative financing to make a winning offer and pursue this in earnest?

Or should I run for the hills?

And how much would a flood-plain designation (midwest rivervine--not coastal floodplain) drag down an appraisal?

Any thoughts sure are appreciated!