Natural disasters are inevitable, but these days, they seem to occur more frequently and with increasing fury. Even areas of the country that haven’t seen natural disasters for decades have been hit.
On the news, you see reports of devastating floods, fires, tornadoes, earthquakes, snowstorms, sinkholes, mudslides — you name it. Everything people have spent their lifetime building and accumulating is wiped out in the blink of an eye.
Although you can’t stop the destruction — or the emotional toll — of these horrific disasters, you can (and should) take every precaution to protect your investments to the best of your ability.
Calculate Your Risk
First, you need to accept the fact that it could happen to you. No property is immune to natural disasters.
Next, here are a few more factors you should consider:
1. LOCATION — Consider the risks associated with certain regions. Properties on the West Coast, for example, are vulnerable to mudslides, while properties in the middle of the country are more prone to tornado damage.
Properties located near oceans, rivers, streams and creeks are susceptible to flooding and possible wind damage from severe storms and hurricanes. You’ll pay a premium on insurance in these areas because of the close proximity to water, but don’t skimp on coverage.
Remember that you also need to consider the area around your property. I own property in North Carolina, and although my property didn’t sustain any damage during Hurricane Matthew, the bridge and the road leading to the property were closed due to flooding.
One of my daughters lives in South Carolina. A few years ago, she experienced the 100-year flood in her area. The flooding was caused by heavy downpours north and northwest of where she lives. The rivers and streams were overflowing, which caused serious flood damage to the surrounding areas as the water made its way to the ocean.
2. WATER DAMAGE — If you live in close proximity to where you’ve invested, I recommend driving by the property to look for water lines on the side of the house, garage doors and door frames. (But don’t make the mistake I made by sticking your face in the window of a house that looks vacant. That was exciting.)
If you are ever in doubt about the flood risk in a specific area, you can always talk to the neighbors or check with a realtor who is more familiar with the region.
3. ELEVATION — This is a helpful indicator of a property’s susceptibility to flooding. If you don’t know the elevation of your investment property, there are two ways to find out.
Most individual counties have websites that show the flood areas within the county. If a parcel of property is located in a flood zone, the county is required to make it known. Reference numbers for a flood zone may vary from county to county, but when you look at a map, it’s rather evident where flooding is most likely to occur.
For example, take a look at the map of Miami-Dade County, Florida:
As you might have guessed, much of the area in this photo is located in a flood zone, designated by the color purple. It is Florida, after all, and nearly the whole state is surrounded by water.
Another way to search is to type in the address of a property at the top of the page and see where it is located on the flood map.
FEMA provides an alternate site you can use: https://msc.fema.gov/portal. Once again, you can enter a specific address or the coordinates (longitude and latitude) of a specific property and find the information you need.
But the easiest method — and my favorite — is to simply Google the individual county and state and add the term “flood zone” to your search parameters.
The Land Is Your Safety Net
When you research potential investment properties, you always want to consider the value of the land — regardless of the type of building on it.
You can find out this information through the property appraiser’s office, where the land value will be listed separately from the building value.
No matter how valuable a single-family residence, duplex, quadruplex or commercial building is, if it’s on a risky piece of land, it might not be a wise investment.
Remember, you want the land value to be higher than the amount of the tax lien. The greater the value of the land compared with the face value of the tax lien — the better.
Should the property be destroyed by a hurricane, tornado, fire or flood, the value of the land will be your investment security blanket. Even if the building is demolished, you will still have a profitable investment.
Personally, I’ve never known anyone who has had their investment property destroyed, but that doesn’t mean it has not happened or could never happen.
The name of the game is to be smart, keep it simple and protect your investment.
Expect the best,
Mark R. Walter
P.S. Mark has invested tens of thousands of dollars in tax liens all around the country. He’s got years and years of experience in this space — so much that he quit his previous job decades ago to focus entirely on investing in tax liens. On top of that, he’s a natural teacher. Indeed, he taught me everything I know. If you want to learn tax lien investing from the best, check out Mark’s program here.