If a property is not in a high-risk flood zone, but it’s either in a moderate to low-risk flood zone or just outside the border of a flood zone and you want a quote for how much insurance will cost, it's a good idea to reach out to your local insurance agent for a quote. So, the purchasing of flood insurance will need to be taken care of prior to close in that case. If a property is in a high-risk flood zone, it will require flood insurance before a lender will close on the loan. It must be purchased separately, and you can only buy flood insurance through an insurance agent. In other words, plan for flood insurance the same way you do for other expenses, like maintenance, property taxes and vacancy.ĭamage from flooding is not covered under your basic homeowners’ or renters’ insurance. If the addition of the monthly expense results in a financial return that’s outside your investment goals, you need to pass up on the deal or investigate ways to increase income or decrease expenses elsewhere. So, to determine if a property in a flood zone is a good investment, it is vital to account for the cost of flood insurance during the underwriting process. According to Cincinnati Insurance board director Ron Eveligh, a flood policy with $250,000 in coverage will run you about $500 a year for a residential building. The amount reaches over six figures if the flooding is a few feet or more.Ĭontrast that to the typical cost of flood insurance. A study conducted by FEMA found that just one inch of interior flooding can result in nearly $27,000 in damage. And when in doubt, contact a local insurance agent to determine if the property is at risk for flooding.Ĭompared to the economic burden placed on those without flood insurance, it’s relatively inexpensive. This tool allows you to enter an address or area to obtain the most up-to-date flood map. Therefore, if an investment property is on the border of a flood plane, you may still want to consider buying flood insurance.įor information on flood hazards and official flood maps, use the FEMA Flood Map Service Center. According to FEMA, more than 20% of flood claims come from properties not located in high-risk flood zones. Since flood insurance wasn’t required, many families will have to bear the tremendous financial burden themselves. However, with Hurricane Harvey, neighborhoods not considered flood zones were impacted. However, it will require additional upfront due diligence on your part so that if a hurricane or flooding occurs, you have your bases covered and your investment isn’t negatively affected.įor a property that is in an area designated a high risk for flooding and will be purchased with a mortgage, it is required by federal law to have flood insurance.
A property located in a flood zone by no means automatically disqualifies a potential investment. Therefore, as real estate investors, we must take the possibility of flood damage into account when considering an investment.
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