When you consider buying a Harveyflood-damaged home to remodel for yourself and your family, to resell or rent, there are some serious issues you need to look at before you buy. One significant issue that can’t get renovated, remodeled, or remediated is the stigma attached to a home that has been flood-damaged. The only thing that will remove that stigma is time; one thing an investor does not want is a house that sits on the market for a long time. Interest and anxiety will continue to mount as it sits.
Another primary concern is the after-repair value (ARV). Many appraisers are going to look at a flood-damaged property differently than a property that just needs an update or upgrades because of age or decline. When you need to borrow money to make a renovation, the amount of money you will be able to borrow is based on the ARV. Most hard money lenders will let you borrow a certain percentage of the ARV, usually 70 percent or more, but a low ARV will limit the amount you can get.
Concerns with Flood-Damaged Harvey Homes
#1 – Flood Insurance
Flood insurance is likely mandatory and very expensive in the flood area. Even a buyer who is enamored with the renovated home might balk at the prospect of paying a costly flood insurance policy and decide to move on to another property.
#2 – Mold
Mold and fungus in flood-damaged homes can cause respiratory problems for residents and damage to a structure, if not dealt with promptly and efficiently. Before investing in any home in the flood-damaged area, be sure to get an air quality test, even if there is no visible mildew. It is advisable to use a hand-held device to check moisture levels as well. Mold can hide in walls, carpets, basements, and insulation. Even if you plan on tearing it all out, it can be costly to remediate, and you will need to check with the local building authorities to determine what testing and remediation are necessary.
#3 – Electric
Once again, the damage may not be apparent. There is no way of knowing how long the circuit panels, outlets and wiring were under water, necessitating replacement. The insulation could be degraded, plus corrosion and mold is likely present. You will, again, need to check with building authorities to find out if any new requirements for these flooded areas exists.
#4 – Air Conditioning(A/C) Compressor or Heat Pump
A/C or heat pumps that were under water might not work or may need a new motor. Even if it looks fine, you should put replacement costs in your estimate of work. You should also figure in the price of getting the ducts cleaned, especially if there are high mildew levels.
Full Disclosure Laws
Even when a house has been fully reconditioned or renovated, if it has been through a flood, you must disclose that fact to prospective buyers. As we stated earlier, the only method to fix the stigma of a flood-damaged home in time. There are far better deals in the Houston area than those that have been flood-damaged. You would have to get a terrific deal to make it worthwhile, and you might still wait a long time to sell.
Since Hurricane Harvey, the housing in Houston has been at a premium, both rentals, and home sales. Therefore, you should come and see us, and let us give you a few suggestions about investment homes.
Ask Red Door Funding About Homes in Houston
Contact Red Door Funding at (832) 539-1099 for expert advice in choosing Houston-area investment properties. Red Door Funding can arrange a loan that will allow you to renovate and resell or rent a property that just needs some loving care or an upgrade, but a wise investor will forego a Harvey flood-damaged home for a while.
Justfill out a credit application hereif you need money to renovate a property. Send us an email if you want us to suggest a property or if you have questions, dwilliams@reddoorfunding.com.