BLOG

Buying an Investment Property After a Natural Disaster: Houston Real Estate + Hurricane Harvey

According to multiple reports, Hurricane Harvey damaged a quarter of Houston’s real estate.   As Houston rebuilds after the historic and unprecedented flooding, real estate will be bought and sold.  Just as we saw with Hurricane Katrina and more recently Superstorm Sandy, flood-damaged properties sell at considerably lower prices.  If you are considering expanding your real estate portfolio, the prices after flooding like Harvey can be enticing.  You should be wary of the risks and expenses connected with purchasing a water damaged property; however, if you ask the right questions, complete thorough inspections and account for the additional expense, it can be a winning situation for all parties.

Ask the Right Questions

Floods are unpredictable natural disasters; flooding can vary neighborhood by neighborhood, street by street, or even house by house.  Once the flood waters recede, it difficult to tell exactly how much water there was, and how long it was there for.  The floodwaters leave behind dirt, debris, and even pests but not too much information.  Asking the right questions of the homeowner can eliminate unwanted (and expensive) surprises down the road.

Ask the Following Questions Before Purchasing:

  • How much water came into the home?
  • How long was the home “underwater” for?
  • Was any of the water damage fixed?

While the dirt and debris a flood leaves behind are easy to see, the real damage can be difficult to spot on the surface.  Corrosion, mold, and rot are the long-term consequences of water damage and all three take place behind the walls.  Since a home inspector can’t take the walls apart, there is no real way to know what is going on back there.  Knowing if the damage was fixed, how much water was present and for how long will allow you to take a calculated risk.  Even though an inspector can only address what is visible, it is still important to hire an experienced home inspector before you purchase a water damaged property.

 

Complete a Thorough Inspection

Hiring an experienced home inspector, especially one who has worked with flood-damaged properties before, is a must!  While a home inspector can’t take down any walls, they might be able to make other, important observations.  Some home inspectors also offer airborne mold tests.  Mold is difficult and expensive to remedy, so knowing if your potential investment has mold damage is very important.  In addition to the home inspector, you will want to see the property yourself.  Be prepared for the inspection, with this list from the American Red Cross Disaster Guide.

What to Bring When Inspecting a Flood-Damaged Property

  • Flashlight
  • Waterproof boots or waders
  • Safety clothing, such as a hard hat and gloves
  • Boots or shoes with hard soles
  • Dust mask
  • Camera or video camera to record damage
  • Tools: crowbar, hammer, saw, pliers, crescent wrench, screwdrivers, etc.
  • Drinking water
  • Trash bags
  • A wooden stick for turning things over, scaring away snakes and small animals, and moving electrical wires
  • Cleaning supplies

As an investor, you need to know the condition of the property you are buying.  Since you are ultimately trying to make a profit, the condition of the home is a very important in calculating your repair and monthly expenses.

Factor in Additional Expenses

Positive monthly cash flow is the most number in any real estate investment property.  Ensure that you don’t end up in the red, by factoring in all the additional expenses associated with a flood-damaged property.

  • Mold Remediation: Mold remediation often requires the skills of an environmental hygienist.  If mold is found, the home may have to be stripped to the studs to remedy the mold fully.
  • Corrosive Salt Water Damage: Salt water is extremely corrosive, it can eat away at metal elements inside the walls of a home.  Most of the damage from Hurricane Harvey in Houston was caused by rain + wind, so salt water corrosion isn’t as much of a concern.
  • Rot + Structural Damage: Dry rot fungus can eat away at the structure of a home, causing potentially catastrophic structural damage.
  • Flood Insurance: After a hurricane, zoning laws can be adjusted, and the property may now require flood insurance.  Flood insurance is expensive and can eat away at your monthly positive cash flow.

While these potential issues sound daunting, if the numbers add up, a hurricane-damaged home can be a good long-term investment.

Investing in Real Estate After Harvey

If you are considering investing in real estate after a natural disaster like Harvey, it is important to make use of all the information available.  Don’t get pulled in by the low sales price, do your research and ensure that the property is a good long-term investment for your real estate business. For additional information or assistance please contact Precision Realty & Management, LLC. At Precision, we are honest and will tell you, good or bad, our opinion about a future purchase, especially under the recent circumstances. There are so many variables to consider besides potential damages due to weather such as sales price point, potential rental rates, and location. Want to speak with us now, call 281-866-7400.