buying in a flood zone?

Foreclosures, Short Sales, Tax Foreclosures
1

Hi, I posted this in Financing/Hard Money. Thought it might be more appropriate here…

I have a property that looks like a good deal for a flip or even renting. Asking 75k.
The property is in a (“low to moderate” risk) flood zone. I’d be paying cash but I’m thinking about resale and the buyer requiring flood insurance. I got a flood insurance quote of about $1,300 per year (although this will vary depending on deductible and elevation certificate). I’m factoring this into a max offer.

Wondering if anyone has experience with this.

2

Flood zone affect people in different ways.

You are looking to sell for a profit.

Ask yourself if you would buy and live in a flood zone.

Like you said insurance cost depends on elevation and risk factors. If you have a DFIM available for your area, check that. (Digital Flood Insurance Map)…most areas prone to flooding have this.

3

Thanks. I know the area well. No flodding in last 15 years since I’ve been there (including hurricane Irene - this is in NJ) but I guess that doesnd make a difference to the insurance companies.
I’ll check out the DFIM.
Nick

4

Here’s my experience w/ flood zone properties:

We own two sfh rentals which are classified as being in a flood zone. Couldn’t tell you if it’s 100 yr or whatever, but it’s similar to your low to moderate risk classification. Our houses are insured around 30k or so for flood and I think the insurance costs a couple hundred a year. One of these houses caused an issue with one of our banks because it was on a loan with another house not in a flood zone. That particular bank had a policy that if any property on a loan was in a flood zone, the entire amount of the loan had to have flood insurance. So we got that house released so we didn’t have to pay flood insurance on both houses on that loan.

Those two rentals in the flood zone rent just fine. We haven’t had any problems filling them.

For the house we are buying for ourselves, we are buying flood insurance for it because there is a creek across the street a couple hundred yards away and we’ll be in a hurricane prone area. We are purchasing the max amount thru the federal gov’t ($250,000). That policy costs $414 per year. When we bought the insurance, the agent said things were basically classified as either high-risk or everything else. Not sure if that’s the new way everything is classified or not.

5

One way to gauge the market is to see what other properties have recently sold in your area that are in the same flood zone. Now compare them against non-flood zone properties. This will give you a general idea is there is a difference in the price and by how much.

If you want a more exact number, then befriend a real estate appraiser and run your scenario past him or her. They should have a better idea of an exact percentage of change.