Some real estate executives in Texas are hoping to get rich quick with homes damaged by Hurricane Harvey.
Longtime investor Ray Sasser detailed the strategy at a real estate conference in Houston this month: Buy up to 50 flooded homes for a fraction of what they’re worth, fix them and flip them for a hefty profit, Reuters reported.
He said he first tried the strategy after Tropical Storm Allison flooded the city in 2001 — purchasing homes for almost half of their pre-storm value, spending about 15 percent on repairs, and selling many of them at full value a year later.
The quick success of the plan was actually surprising to him, according to the outlet.
“This can’t be true,” Sasser said.
While Harvey-hit homes in the Houston area may be a riskier investment than houses damaged by Allison, investors are nevertheless rushing in to snatch up the flooded homes.
A Houston market manager for brokerage and online listings firm Redfin said agents are getting about four times the number of calls they usually get from investors.
“You have people with millions of dollars to work with,” Tara Waggoner said.
“They want to go in, pay cash, get the discount and fix it up to sell.”
She said the calls range from individuals looking to buy homes or groups of 10 or more people pooling their money and going on a home-buying shopping spree.
Investor Brandyn Cottingham believes Harvey brought a world of opportunity to his business.
“In this business, you look for distressed property, and we’ve got tons of that right now,” Cottingham said.
While it may just look like a money-making opportunity for cavalier investors, long-time foreclosure broker Linda Muscarello warned investors on how to properly speak to flood victims about their destroyed homes.
She said it’s very important to nod and listen when talking to these owners and help them understand in a non-predatory way they may have unrealistic notions about keeping their home if they didn’t have flood insurance or their businesses were damaged.
If homeowners don’t expect to have a steady, long-term income, real estate experts suggest it’s better to just give the keys to someone else.