In November 2017, Hurricane Harvey tore through the Houston area, leaving devastation in its wake, killing 68 residents and causing $125 billion in damages. Despite all this damage, though, a year later the housing market is largely stabilized, particularly the multifamily market.
Occupancy rates are up and multifamily rents are up 4.5% – but that doesn’t mean everything has returned to normal. In fact, if you’re a property owner looking to sell, you’ll have to make a few adjustments. The majority of buyers right now are home flippers seeking to make a profit, and as a seller, you need to adjust to what these investors are seeking.
Selling Damaged Homes
Though Houston is well on its way to recovery, there are still countless damaged houses throughout the city, and these properties are attractive prospects for home flippers – but remember, these are savvy investors. As the saying goes, investors want a house with good bones, so you’ll want to assess the severity of the water damage to the underlying structure. In fact, go ahead and tear out damaged materials before you go to market so that potential buyers can see what there is to work with before they buy. This will allow them to better assess how much repairs will cost.
So what happens if you tear out the building’s interior only to find foundation or roof problems? In that case, you may be better off selling the structure to developers who just want the land. Investors are prepared to pour money into quality properties, but they won’t pay for a structure they can’t rehabilitate.
Make Location An Advantage
If you talk to Houston area housing investors who have flipped homes in the last 15 to 20 years of record flooding, you’ll hear a common refrain about recovery in the region – it’s shockingly quick. In 2001, for example, following Hurricane Allison, Ray Sasser bought up damaged homes at about 30-40% of their pre-storm cost, invested another 15% of their value, and, within a year, offloaded them at their full pre-storm sales price. But Sasser couldn’t figure out how this was happening. What was behind Houston’s rapid real estate recovery?
The basic answer is that, despite continued flooding risk, the Houston economy is rich and varied and people are drawn to their area for work. When selling a home, even a damaged one, then, use your location to your advantage. The fact is, when the home itself isn’t a selling point, the surrounding amenities and potential of the property need to take center stage.
Be Open About New Requirements
Houston may be thriving when it comes to post-hurricane revitalization, but the city, state, and even FEMA are realistic about the city’s future. Flooding will continue, and likely get worse, as a result of climate change and urbanization, and it would be unreasonable to keep building homes right in the middle of flood zones. One solution? Raise the structures. Unfortunately, that’s a costly way to address the situation, with some Hurricane Harvey victims facing six-figure costs to elevate their homes. It’s unsurprising some would rather sell.
If you’re facing new elevation requirements, such as those affecting Harris County, the area that surrounds Houston, be upfront about this with potential buyers. Though savvy investors will, of course, perform their due diligence in this regard, the more forthright you are about these requirements and related concerns, the better your relationships with buyers will be. Elevated houses are the new standard in many flooding-prone areas, so investors working in these regions won’t be surprised – or discouraged – by such requirements. In fact, they may be glad to hear the area is taking steps to prevent serious damage to structures in the future since it will protect their investments.
Will They Sell?
Ultimately, whether or not investors will be able to sell, or rent, revitalized properties aren’t your concern as a seller, but it’s an interesting question. Even with a strong economy and plenty of educational opportunities, will people want to live in Houston? Investors are confident. As Corey Boyer, an investor from Cypress, Texas, explains, it all comes down to price. People will move just about anywhere if the price is right, and compared to many other urban areas, Houston is relatively affordable. Particularly for young buyers looking to purchase their first home, an at-risk region and a rehabilitated property could represent an opportunity.
As for sellers who want to offload a damaged property, investors are offering them opportunities too. If you have a home that was ruined by the hurricane, you’re likely paying double for housing – paying your mortgage and taxes on your ruined home and rent and utilities for the place you live now. That’s not a sustainable option, and it won’t allow you to save the money necessary to rehabilitate your own home. In fact, by escaping the financial responsibilities connected to your old home, you’re more likely to be able to afford a better housing option for yourself and your family, maybe even in a newly rehabilitated – and elevated – home somewhere else in Houston.
A Changing Landscape
Houston isn’t the only region under pressure from natural disasters and rising waters, but rather the city is part of a larger changing landscape that all homeowners need to grapple with – and that landlords must address with their tenants. If you’re ready to move forward in this new marketplace, though, rest assured that you needn’t go it alone. With help from Green Residential, you can make better decisions about your property based on decades of experience.
At Green Residential, we’ve been providing property management support for over thirty years, and we’ve watched this city change, and it’s given us valuable insight into the real estate market. We can help you prepare your home for tenants, assist with maintenance and inspections, and, if disaster strikes, we’ll support you in making the right decision for your family and your property.
For more information on our services, contact Green Residential today. Houston may be changing, but our city always finds new ways to thrive despite adversity.