Should I Fix and Flip a Flood-Damaged Home?
With many homes deserted in the wake of recent natural disasters, investors wonder if there’s hope for flood-damaged properties. Should you invest in flood-damaged homes? This week, we focus on flood-affected and water-damaged properties, investigating whether or not a rehab is possible.
Believe it or not, you can rehab and resell flood-damaged properties!
In fact, one investor named Ray Sasser turned it into a profitable business. Sasser first looked into investing in flood-damaged homes after Tropical Storm Allison tore through Southeast Texas in June 2001. According to Reuters.com, “He bought homes for 30 to 40 percent of their pre-storm value, spent another 15 percent on repairs and sold many a year later – at full value.”
Though Hurricane Harvey produced devastating effects, investors still believe flood-damaged homes can turn a profit. This is due to the economical strength of Houston itself. The city boasts a rare combination of lucrative job opportunities, low cost of living and phenomenal population growth. In spite of the storms, the Texas real estate market holds strong. In fact, fix-and-flip properties pop up now more than ever. Investors could find themselves with not only one potentially profitable house to flip, but ten or twenty!
The most important element affecting the profitability of these homes is seller motivation. Many sellers want to offload their damaged property as soon as possible. Others want to quickly move out of the state. Most have been through multiple tropical storms and had enough.
Buyers Beware: Things to Consider When Purchasing Flood or Water-Damaged Homes
Though you can take advantage of many investment opportunities in flooded areas, you need to consider some important facts first.
You should not invest in water-damaged properties if the following criteria applies:
- The Property Is Located in a FEMA Area – FEMA stands for the Federal Emergency Management Agency. This government agency determines natural disaster or FEMA areas. Most hard money lenders (including Do Hard Money) will not lend in FEMA areas due to high flood insurance premiums and high risk factors.
- The Property Has Foundation, Well or Septic Tank Issues – Flooding can cause a great deal of damage. If a storm happened to impact the foundation, you may be out of luck. It all depends on the cost-to-cure price. If remediation for septic tank, well or foundation problems is $5k or less, many lenders will still work with you. Hard money lenders are understandably wary of issues which take a great deal of time and money to resolve. You many also need an engineer’s report verifying the cost-to-cure to obtain fix-and-flip funding.
- The Property Has Extensive Mold, Electrical or A/C Problems – Water damage and mold go hand-in-hand. You will definitely want to test for mold, as it may be difficult to detect with the naked eye. If you do detect mold on the property, fear not. You may still get funding to rehab the property. If cost-to-cure is less than $5k with a remediation bid, you can still obtain funding. Also, keep in mind the electrical systems. If outlets or wiring have been under water, there’s a good chance you will need to replace them. The same goes for an A/C unit. If that has been under water, it will most likely need a new motor. Regardless, you should factor a unit replacement into your budget, just to be on the safe side.
In spite of some risks, flooded homes are great fix-and-flip opportunities for real estate investors. In many storm-affected areas, you can find them in abundance going for a severely discounted price. And the best part is, investing in rehabbing these homes makes you an active player in helping rebuild damaged communities. Do Hard Money can help you get started today! Whether you’re a flipping expert or have never done a flip in your life, we can help you! Do Hard Money provides funding, tools, resources and individual support so you’re successful with every step.
To start earning profit right away, click on this link to schedule an appointment with our investment associates. We’re here to help you achieve your financial goals, whether you want to get out of debt, save for the future or build a lucrative fix-and-flip empire. You can schedule a time at your convenience to chat with us and discuss your goals.
If you already have a property you want to secure under contract, you can obtain funding today! Just click on the yellow ‘Get Prequalified’ box in the upper right corner!
The timing has never been better to get invested in your financial future. Click here to schedule your appointment or call us directly at 801.948.9774.