Storm damaged residential real estate seems like the perfect fix and flip opportunity. The premise of repairing the storm damage and flipping the house may seem straightforward. As anyone experienced in renovations can testify there is nothing straightforward about this aspect of the real estate investment business.
Find The Right Fix and Flip Investment Opportunity
Storm damage is typically covered by homeowners insurance. The owner has little to no financial incentive to sell a house simply because it has been damaged by a storm. Homeowners policies even cover loss-of-use. This means an owner who cannot live in the house can receive reimbursement for staying at a hotel while repairs are being made. This limits the fix and flip opportunity to homes that are already owned by a bank or some other atypical owner.
Those houses may or may not have been good fix and flip opportunities before the storm damage happened. The storm damage has certainly made a bad situation worse. The question of economics that applies to all real estate investments still applies to storm damaged properties. Will the eventual sale price cover the cost of all the necessary repairs and renovations? Will it provide an acceptable return on investment for the time involved?
Have Available Contractors to Repair The Real Estate Investment
If the answer to that question is yes, the real estate still may not qualify for a fix and flip investment. Homes that have suffered storm damage are very likely located in storm damaged areas. Heavily storm damaged areas mean contractors in those areas are in high demand. Contractors have their pick of jobs to accept. Even an established relationship with a contractor is no guarantee they will be available at the right price following a major storm.
Fix and flip investors who typically do their own work may find that storm damaged homes present a challenge beyond their ability. Roof repairs generally require professionals. Many times the problem may be much worse than just missing shingles. Siding that has blown off requires specialized tools and expertise to repair effectively.
Protect the Investment Property From Future Storms
If contractors are not readily available to do the work at the right price, it is absolutely critical to secure the property to prevent further damage. More storms may be on the way. Storm damaged homes are weakened in some way. Another high wind can pick up on those weaknesses and create extensive damage. The cost of these emergency repairs has to be included in the economic calculation.
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There are other problems with storm damaged real estate as an investment, but these three alone may give the fix and flip investor reason enough to avoid the property. However, this real estate segment is not for the faint-of-heart in the first place. Tackling significant problems is how investors profit in this sector.