Thoughts on Flood Zone Properties

Deep in talks with an owner on a property in a major metro in the northeast, but the property is in a flood zone. The property has huge upside and shouldn’t be that hard to fill, so the only concern I have is the flood zone. Are flood zone properties selling and what cap rate would you pay for a flood zone park with lots of upside in a great metro?

I’ve had a tough time getting a “rule of thumb” answer for expected increase in insurance costs to insure a park in a flood plain. Would love to hear back from those on the forum who own in one.

The cap rate for a park in a flood zone ZERO!!! We HAD a MHP in a partial flood zone and when it happens the people lost all their possessions and YOU knew it would flood how do you response to them. At the time of refill we had to sell one of our best parks as a package to get rid of the flood zone property. At the time of buying the park had little prior damaged and we thought not a problem. We tried selling it to the county but was not interested but since a recent major flood the property was put in a wet land program and NO more mobile homes or RVs allowed!!! The property was in Mo. on Bull Creek—never again see the anguish of good people–the property became a curse!!!

That sounds terrible, very sorry to hear that. Was that property in a 100 year flood plain or something more frequent?

Some 40 years ago the flooding at that property was just about 1 foot of flood water at the max and thus we had no concern for the future and not listed as a 100 year flood plain. As watersheds experience more development areas flood today that 40 years had NO problems and in the mid west we are experiencing much greater rainfall in a short amount of time. The last time the mobiles had water water up to the electrical wall plugs and and HUD condemned then but the sharks came to rehabilitate the damaged homes from over 500 miles for resale–??? ethical??? would they tell future owners the homes were condemned and were once flooded???
Areas that presently flood will become more of a hazard–beware!!! Why knowing buy TROUBLE!!!

I have owned commercial non MHP property in a flood zone and had a really hard time exiting. It just creates a ton of headaches and risk you cannot control.

If you can bulkhead 20 feet around the park on grade maybe that’s an answer if they’re giving the thing away, otherwise I’m staying far away.

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What type of engineer would make the most sense to contract with to get an estimate for how to mitigate the flood zone concerns? Environmental Engineer? Know anyone who has gotten the flood zone scarlet letter removed through successful mitigation?

A geologist or engineer who’s specialty is fluvial geomorphology. Many jurisdictions have strict guidelines on what can be done in floodplains. Many require a no-rise certification for any development in the flood plain as a prerequisite to any development. The basic idea is that your activity must have zero impact to upstream and downstream flood levels. A dike or berm or any other filling activity by its very nature cant meet this criteria. The ability to build dikes, berms and fill in the flood way is going the way of the dodo bird. This old way of doing flood control was a game of ping pong ball and requires all parties to manage and maintain all their dike and flood control structures. Doing this simply shifts the problem downstream or upstream to someone else. That is the real risk in a floodplain if anyone changes or fails to maintain their structures all parties are impacted in an uncontrolled and unpredictable way. Every floodplain is different and there are vast differences between them. Its really hard to make a blanket statement about investing or not investing from a risk perspective but the simple designation as floodplain by fema makes your life more difficult in terms of insurance, mortgages, building permits and resale.


We used a hydraulic engineer who had to model the flow of water during an event to calculate the extent to which we had to have detention, foundation type (for commercial construction), and calculate the net impact of water by any of that construction was zero.

This was $5,000, and does not address the civil engineering components that would facilitate the dirt moving to be correct.

City of Houston required this before they would give a construction permit. We did not seek a LOMA or LOMR afterwards as the result of the analysis torpedoed the feasibility. Lesson learned.

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If you’ve got only a few homes in a park below the 100 year flood plain elevation, you could consider having each raised. The other alternative is loss of income insurance including flood as a covered peril. It generally costs 4 - 5% of annual revenue - or about 10x the cost of loss of income coverage for wind, hail, and most other perils. So the ownership cost and risk are higher for flood zone parks.

I’ve yet to see a park located in a flood zone where the seller disclosed the cost of loss of income coverage including flood - most likely none have it due to the cost.

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@KurtKelley Where would you recommend to start on getting a flood zone property evaluated by a professional, and getting the insurance company the information needed to write up a thorough policy? The FEMA maps are not very detailed, and I think a lot of us investors have a hard time knowing where to start in terms of assessing possible long terms impact and what our insurance cost multiplier might be for having a flood plain property.